“Jane Hamsher, Grover Norquist Call for Rahm Emanuel’s Resignation”

Yves here. This is a cross post from Jane Hamsher at FireDogLake. The fact that Jane and Grover Norquist are on the same page is noteworthy. More important, they call for an investigation (hear, hear!) and below the text of a letter to the Attorney General, provide a link to a petition. If you agree, please take a minute to sign it.

Today, Grover Norquist and I are calling for an investigation into Rahm Emanuel’s activities at Freddie Mac, and the White House’s blocking of an Inspector General who would look into it. The letter follows:

December 23, 2009

Attorney General of the United States of America
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001

Dear Attorney General Holder:

We write to demand an immediate investigation into the activities of White House Chief of Staff Rahm Emanuel. We believe there is an abundant public record which establishes that the actions of the White House have blocked any investigation into his activities while on the board of Freddie Mac from 2000-2001, and facilitated the cover up of potential malfeasance until the 10-year statute of limitations has run out.

The purpose of this letter is to connect the dots to establish both the conduct of Mr. Emanuel and those working with him to thwart inquiry, and to support your acting speedily so that the statute of limitations does not run out before the Justice Department is able to empanel a grand jury.

The New York Times reports that the administration is negotiating to double the commitments to Fannie and Freddie for a total of $800 billion by December 31, in order to avoid the congressional approval that would be needed after that date. But there currently is no Inspector General exercising independent oversight of these entities. Acting Inspector General Ed Kelly was stripped of his authority earlier this year by the Justice Department, relying on a loophole in a bill Mr. Emanuel cosponsored and pushed through Congress shortly before he left for the White House. This effectively ended Mr. Kelly’s investigation into what happened at Fannie and Freddie.

Since that time, despite multiple warnings by Congress that having no independent Inspector General for a federal agency that oversees $6 trillion in mortgages is a serious oversight, the White House has not appointed one.

We recognize that these are extremely serious accusations, but the stonewalling by Mr. Emanuel and the White House has left us with no other redress. A 2003 report by Freddie Mac’s regulator indicated that Freddie Mac executives had informed the board of their intention to misstate the earnings to insure their own bonuses during the time Mr. Emanuel was a director. But the White House refused to comply with a Freedom of Information Act request from the Chicago Tribune for those board minutes on the grounds that Freddie Mac was a “commercial” entity, even though it was wholly owned by the government at the time the request was made.

If the Treasury approves the $800 billion commitment to Fannie and Freddie by the end of the year, it will mean that under the influence of Rahm Emanuel, the White House is moving a trillion-dollar slush fund into corruption-riddled companies with no oversight in place. This will allow Fannie and Freddie to continue to purchase more toxic assets from banks, acting as a back-door increase of the TARP without congressional approval.

Before the White House commits any more money to Fannie and Freddie, we call on the Public Integrity Section in the Justice Department to begin an investigation into the cause of Fannie and Freddie’s conservatorship, into Rahm Emanuel’s activities on the board of Freddie Mac (including any violations of his fiduciary duties to shareholders), into the decision-making behind the continued vacancy of Fannie and Freddie’s Inspector General post, and into potential public corruption by Rahm Emanuel in connection with his time in Congress, in the White House, and on the board of Freddie Mac.

We also call for the immediate appointment of an Inspector General with a complete remit to go after this information.

We both come from differing political ideologies. One of us is the conservative head of a transparency foundation, and the other is the publisher of a liberal political blog. But we make common cause today out of grave concern for the future of our country in the wake of corruption-riddled bailouts. These bailouts continue to rob Main Street to benefit Wall Street, and, because of that, we together demand the resignation of Mr. Emanuel, a man who has steadfastly worked to obstruct both oversight and inquiry into the matter. Rahm Emanuel’s conflicts of interest render him far too compromised to serve as gatekeeper to the President of the United States.

We will lay out the details further below, and are available at your earliest convenience to meet with you directly.


Sign our petition to AG Holder: investigate Rahm Emanuel.

(Additional background information after the jump.)

Background information:

Rahm Emanuel was appointed to the board of Freddie Mac in February of 2000 by Bill Clinton, after serving as White House political director where he was a vocal defender of Mr. Clinton during the Monica Lewinski matter. He served there until leaving to run for Congress in 2001, which qualified him for $380,000 in stock and options and a $20,000 annual fee.

According to the Chicago Tribune, during his tenure the board was notified by executives of their plans to misstate the earnings of Freddie Mac: “On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.” (3/5/2009)

The Tribune further reported that “during his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.”

In December 2003, a report (PDF) was written by Armando Falcon Jr., head of the entity charged with oversight of Freddie Mac, the Office of Federal Housing Enterprise Oversight (OFHEO). The report asserts that company executives “demanded whatever level of earnings management was necessary to achieve steady rapid growth in Enterprise profits.” It also “provided evidence that non-executive members of the Board were aware, and supportive of, management in this regard, including the use of derivatives to improperly manage the earnings of Freddie Mac,” citing notes from a June 2, 2000 meeting of the Board of Directors (p. 24).

The OFHEO report concluded that board had “failed in its duty to follow up on matters brought to its attention.” The SEC filed a complaint (PDF) saying that Freddie Mac had “misreported profits by billions of dollars in order to deceive investors between the years of 2000 and 2002,” per ABC News.

In Congress, Rahm Emanuel worked to pass a bailout of Fannie and Freddie, cosponsoring the Housing and Economic Recovery Act of 2008, which also dissolved OFHEO. It moved their regulatory authority to the Federal Housing Finance Agency (FHFA), which took Fannie and Freddie under conservatorship in September 2008. The same act abolished the Federal Housing Finance Board (FHFB) and replaced it with the FHFA.

After Mr. Emanuel was named Chief of Staff, the White House denied a Chicago Tribune Freedom of Information Act request for information on his Freddie Mac activities: “The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel’s time as a director. The documents, obtained by Falcon for his investigation, were “commercial information” exempt from disclosure, according to a lawyer for the Federal Housing Finance Agency.” However, at the time of the request Freddie Mac was no longer a “commercial” enterprise, having been taken over by the government in September of 2008.

According to ABC News, the Justice Department is in possession of these records, yet no indictments have been forthcoming: “Freddie Mac records have been subpoenaed by the Justice Department as part of its investigation of the suspect accounting procedures” they reported in November 2008.

When the OFHEO and the FHFB were abolished, FHFB employees were automatically transferred to the FHFA and retained their “same status, tenure, grade, and pay.” Ed Kelly, who had been the Inspector General for the FHFB, was looking into the wrongdoing of Fannie and Freddie at the FHFB when the Justice Department, using the authority of the 2008 law Emanuel cosponsored, stripped him of Inspector General authority and removed him from oversight of Fannie and Freddie.

The Huffington Post obtained copies of an internal memo (PDF) on the ruling by the Justice Department’s Office of Legal Counsel. They report that “the ruling came in response to a request from the Federal Housing Finance Agency itself — which means that a federal agency essentially succeeded in getting rid of its own inspector general.”

The memo states that “Congress did not intend for the FHFA to have an Acting or interim IG pending the confirmation of a PAS IG.” But according to the Huffington Post, “the chairmen of the House and Senate banking committees, Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.), both told HuffPost that Congress had no intention whatsoever of revoking Kelley’s authority to operate as an IG.”

According to Neil Barofsky, the Special Inspector General overseeing the TARP bank bailout: “It’s a serious gap in oversight,” Barofsky told HuffPost of Ed Kelley’s loss. “It does impact what we do. Ed was a member of our TARP IG council and a partner in our investigative work.” Barofsky said he still investigates areas of FHFA, but his mandate only covers “a sliver of what they do.”

The Huffington Post further reports that it is the White House’s failure to appoint an Inspector General that has stalled the process: “Federal Housing Finance Agency officials insist[] that they notified Congress about the problem and pressed the Obama administration “multiple times” to appoint someone to the position tasked with rooting out wrongdoing at Fannie Mae, Freddie Mac and the Federal Home Loan Bank,” they report.

I addition to his role as White House Chief of Staff, Mr. Emanuel is heavily involved in decisions made by the Treasury Department . The Wall Street Journal reported in May that “Rahm wants it” has become an unofficial mantra in the Department. It is therefore of grave concern that the New York Times reports the Treasury is negotiating to increase their commitment to Fannie and Freddie, in the absence of independent oversight: “Fannie Mae and Freddie Mac, which buy and resell mortgages, have used $112 billion — including $15 billion for Fannie in November — of a total $400 billion pledge from the Treasury. Now, according to people close to the talks, officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it. Company and government officials declined to comment.”

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  1. i on the ball patriot

    Ah yes … Rahm Emanuel …


    “CounterPunch Diary
    Hail to the Chief of Staff


    The first trumpet blast of change ushers in Rahm Emanuel as Obama’s chief of staff and gate keeper. This is the man who arranges his schedule, staffs out the agenda, includes, excludes. It’s certainly as sinister an appointment as, say, Carter’s installation of arch cold-warrior Zbigniev Brzezinski as his National Security Advisor at the dawn of his “change is here” administration in 1977.

    Emanuel, as Ralph Nader points out in my interview with him below, represents the worst of the Clinton years. His profile as regards Israel is explored well on this site by lawyer John Whitbeck. He’s a former Israeli citizen, who volunteered to serve in Israel in 1991 and who made brisk millions in Wall Street. He is a super-Likudnik hawk, whose father was in the fascist Irgun in the late Forties, responsible for cold-blooded massacres of Palestinians. Dad’s unreconstructed ethnic outlook has been memorably embodied in his recent remark to the Ma’ariv newspaper that “Obviously he [Rahm] will influence the president to be pro-Israel… Why wouldn’t he be [influential]? What is he, an Arab? He’s not going to clean the floors of the White House.””

    More here …


    Deception is the strongest political force on the planet.

  2. attempter

    Another political step, even if it’s headed down the balck hole of Gonzalez/Holder’s lawless DOJ.

    Yet more proof: Corporatism corrupts completely and irrevocably.

    Yet way too many people still just flat out refuse to see that about this rotten crew. It’s as corrupt as the Bush administration, because it’s the same kind of criminals.

    And the same is true of fundamentally corrupt things like the health insurance racketeering bill, another Emanuel quid pro quo. Corporatism is corrupt, by definition.

    It’s really becoming clear who opposed Bush based on his policies, and who had no problem at all with Bush policies, who actually liked them, but only objected out of Democrat hack partisanship and personal hatred of Bush.

    It’s reflected in their Bush-follower style flat earth arguments (check out Krugman’s cognitive-dissonant entrenching and Moonie-style chanting about the racketeering bill at his blog) and their worship of the Obama cult of personality.

  3. Len Franciscus

    What’s noteworthy is that everyone is not condemning Hamsher for such a ridiculous tactic that cannot in any imaginable way aid her cause, her allies. Just remarkable. She must be going crazy because Obama didn’t use his magical persuasion powers to singlehandedly institute single payer and cure all forms of human suffering. If only Obama would try, he could do that, you know. Groan.

    1. Tao Jonesing

      I disagree. I think what Jane is doing actually provides her and progressives like her (i.e., not all progressives/liberals but those like her) the opportunity to speak to like-minded conservatives and actually be heard instead of ignored. Populism is growing on both sides of the political divide, and that populism may prove useful in forging a new way of doing politics. I’d much prefer to see Jane finding a way to work with Norquist over continuing to widen the divide between left and right.

      1. andrelee

        If past actions are the futures progeny in wait, then I don’t want the bad-judgement-influenced actions of Grover Norquist and/or Jane Hamsher having anything to do with my future. ‘Populism’, ‘a movement’, is what got Obama in the White House. I sure do wish people would have had the appropriate ‘movement’ to stay wise and realize where Ms. Hamsher and Mr. Norquists’ focus has been and still is so we can avoid their wisdom and good intentions.

        1. Tao Jonesing

          “Populism” like “socialism” is a word often used but poorly understood. I use both terms as they were historically understood, i.e., the correct way.

          Obama ran on vague promises. I don’t view that as being “populist.”

    2. sglover

      “What’s noteworthy is that everyone is not condemning Hamsher for such a ridiculous tactic that cannot in any imaginable way aid her cause, her allies.”

      I have to admit that I’m leery of allying with somebody like Norquist, who’s just about as slimy as they come. On the other hand, for the last year it’s become very, very hard to maintain the fiction that the new administration is a “friend” of anything that progressives endorse. And dear Rahm in particular is every bit as slimy as Norquist.

  4. S Brennan

    I agree with Len Franciscus above. Jane is part of the problem, she’s just running to the front the mob to claim leadership…look for her to “cut and run” if a profitable offer is made.

    Why does the left have so many self-serving invertebrates?

    1. Dave Raithel

      To complement those on the Right, but of course. The appearance of the difference is for the ease of being both Right and Self-serving at the same time, but Left and so is not so. The former assumes that people are, but the latter has some guilt about it …

  5. Hu Flung Pu

    I seriously doubt Rahmbo had a deep enough grasp of Freddie’s business to engage in deception – which should be a crime in and of itself – but I digress. Of course, I bet that applies to at least half of Freddie’s then-board of directors. I’m not defending the guy – he may be a complete dirtbag – but his mere presence on Freddie’s board when the books were cooked doesn’t prove much to me – other than the fact that most people who serve on boards don’t know a damn thing about the companies they are overseeing.

    Yeah, yeah, I know the guy made millions in a couple of years at Wasserstein. But I’m sure he was being paid for his connections, not his deal savvy. I doubt his grasp of finance is deep enough to understand the machinations at Freddie Mac. Of course, that applies to most folks.

  6. Doug Terpstra

    After Obama’s FISA immunity vote and violating his campaign funding pledge, Rahm’s appointment was one of the earliest clues that Obama was a fraud, that the so-called Mideast peace process was dead, and Wall Street banksters ruled.

    But what an odd couple. I can’t quite bring myself to sign on to anything from Grover Norquist without a closer look.

    1. HrWest

      I’ve been reading Hammett lately and you’re absolutely right that “Poisonville” is an apt simulacrum for our society. The Glass Key and Red Harvest are exceptional in their diagnoses of power politics and the maladies (fatal?) they produce. Great blog and commenters, BTW, and Happy Holidays to all.

    2. Yves Smith Post author


      Can’t agree more re your sentiments re Norquist. But an interesting thought: Norquist fans have to be a flummoxed as folks are on the left by this joint campaign.

  7. enemy of my enemy

    Very clever. Like in Hammett’s Red Harvest: the whole town is hopelessly corrupt? Then destabilize the town.

    Not a fucking thing matters but reform. And at this point only careerists and imbeciles maintain that falling in with DLC Dems promotes reform. In fact, it’s starting to look like the only way to get reform is to rip this administration limb from limb. So if Obama continues to cover up the crimes of the past decade, hell, I wanna get a couple drumsticks off him for myself, by conniving with the right, by conniving with the New World Order, by conniving with Hitler’s thawed-out snowflake babies, I do not give a shit. Maybe you voted for him but the bankers, insurers, and mercenaries bought him fair and square.

      1. enemy of my enemy

        Yeah, I think those Hammett stories are terrific illustrations of some of the insights that came to be organized as the theory of complex systems. Dash coulda worked for RAND if he wasn’t such a souse. Now you’ve got people who weigh all the counterpoised forces, like Jane Hamsher, like Simon Johnson, like our fearless leader Yves, and they are going to be opposed by people, left and right, who can only think in terms of their affiliation.

  8. Robin

    This marriage is going over like a lead balloon over at DailyKos. Loads of diaries! Plenty of hair on fire! Fascinating stuff. (PS- I am a fan of DKos)

    1. Yves Smith Post author

      There are two sayings I particularly like that apply to politics. One is Japanese, “Teki no teki wa mikata,” which is “Enemy of enemy is friend.” The second is Israeli, “Love your enemy, for you will become him.”

      Never thought I might see both operate at the same time.

  9. Dave Raithel

    You realize, of course, we have to shoot them all. There can be no witnesses, no bystanders, no lookers-on, no “I was mistaken, I thought they meant well” pleas to flee the killing floor – they all go down, or we do nothing.

  10. PatR

    The reaction to this pinpointing of a problem person in the White House by a bipartisan pair of activists is interesting. Most people are more invested in the Dem-Rep theater put on for their entertainment and distraction, actually believing the characters and story lines to be real, than they are in rooting out the bipartisan group of politicians and members of FIRE that loots the common weal at will behind the scenes.

    People like Paulson, Frank, Bernanke, Geithner, Summers, Emanuel, Blankfein, Dodd have a lot more in common with each other than with you and me. There is some competition, no doubt, but when the chips are down they will help each other as much as they can. The general public is collateral damage, mere cows for the milking.

  11. killben

    It is a done deal!

    What do you think people should do with such malfeasance in the Government … probably take to the streets and show them what people can do when aroused!!

  12. bob goodwin

    disclosure: I am a republican and a libertarian.

    As much as I want to see more of sociopaths prosecuted, and for all I know Rahm could be as guilty as Fuld, Rahm is more of a political operative than a financial one. As a politico, he should be prosecuted for corruption only, and not for bad judgement or bad associations.

    If he took patronage and enriched himself, and there was a political quid-pro-quo, that is corruption.

    If not, then this whole thing looks just like a political hack job. Obama is not good for America, but he is our president, and Rahm is his chief of staff. It looks disingenuous to go after the people in power when the biggest sins may have occured elsewhere (Paulson? Fuld?)

    1. JTFaraday

      Certainly. Go after political operatives for corruption. What better time to go after Democrats on whom one can make a case, than when they are in power?

      Next adminsitration, we’ll do it again.

      Paulson and Fuld, on the other hand, DO NOT BELONG IN GOVERNMENT. The catastrophic criminality in the financial sector is a separate issue, but not one that will be addressed by a catastrophically corrupt government.

  13. Svend

    The comments on this subject over at FDL (my first visit to the site) are quite sad. It seems, like with the Republicans during the Bush years, there is a solid group of people who will defend their leader no matter how terrible he behaves. They use ad homonyms and guilt by association as the primary means of argumentation.

    Partisanship corrupts the mind. We’ll never fix this.

  14. Rhoda

    This is completely disingenuous. This was investigated three times under the Bush administration. Rahm didn’t cover himself in glory; but he didn’t committ any criminal actions. I highly doubt the Bush administration would have spared the headlines a Clinton appointee involved in graft.

    I would truly hope that you go back and read the articles you linked to carefully and you will find there is nothing that Rahm did that demands an investigation. The wrongdoing at Freddie and Fannie weren’t stopped by the board; but he wasn’t involved. There is no conspiracy.

    It’s appaling that in your desire w/Hamsher to destroy the administration you don’t stop and consider the consequences. This entire thing is incredibly Naderesque.

  15. enemy of my enemy

    Spared the headlines, don’t be ridiculous, real-estate graft is Bush family bread & butter. The only crime was interefering with it, then you got the domestic-surveillance fullcourt press till you get caught with a bignosed Jersey whore, in socks.

    But it’s comforting to think Rahm was just a helpless simpleton gaping slack-jawed at uncontrolled looting and bankruptcy-for-profit.

    Consequences… omigod, Rahm might have to get a real job like his brothers – unthinkable.

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