Friday, October 15, 2010

Franklin Raines On CNBC This Morning

It's difficult to decide which was more surreal this morning- CNBC for inviting disgraced former Fannie Mae CEO Franklin Raines as a guest, or Raines, with his inaccurate, self-serving comments.

There's little doubt the CNBC management made a significant error by lending credibility to Raines via his appearance this morning. By allowing Carlos Whathisname, the morning program's raging liberal, to begin the interview with Raines, a tone of fawning deference was set right off the bat.

Carlos earnestly asked Raines what should be done about the mortgage foreclosure process faux-issue, and whether major banks could be hurt by it. Of course, Raines wouldn't have any special knowledge, having been gone from Fannie Mae for six years. But that didn't stop him from pontificating on the situation while ignoring facts.

For example, Raines alleged that you need Fannie Mae because no private conduits are willing to securitize mortgages.

That's a lie, of course. The truth is that Fannie and Freddie pressed for ever-higher mortgage value ceilings to be eligible for them to buy and securitize, thus crowding out most private mortgage securitizers.

Of course nobody bothered to ask Raines if he's yet complied with the federal court order to return his $90MM bonus payments from his days as Fannie's CEO. Bonuses found later to be unwarranted and unearned, because Fannie engaged, under Raines, in questionable accounting, and overrreached itself, resulting in subsequent losses and, now, 'conservatorship,' a federal equivalent of Chapter 11.

When the more conservative Joe Kernen took his turn with Raines, things got more surreal.

Kernen didn't touch the bonus issue, either, to my regret and disgust, but he did at least challenge Raines on his management of Fannie and its subsequent failure. Raines then said something that you'd have to actually hear to fully comprehend.

He first took credit for Fannie's role, as a former CEO, then, when accused of having set it up to fail, defended himself as only 'one of thousands of employees.'

Pricelessly arrogant.

Raines then went on to declare that, flawed and ruined as Fannie may well be, since all competitors had vanished, the US had to support it now, because there is no alternative. To further the inanity of his responses, he impugned one of Kernen's questions by implying that the co-anchor was misstating the facts. A surefire tactic to attempt to discredit uncomfortable allegations.

All pretty bold and brazen words from the guy who almost single-handedly wrecked the nation's mortgage industry.

Oh, and somewhere in all the questions, Raines naturally tarred the country's commercial and investment banks as the real culprits, contending that they all threw caution to the winds for profit. Technically, his statement is true, but grossly out of context. Fannie and Freddie started the party by buying, guaranteeing and securitizing questionable mortgages to begin with.

To add insult to injury, retiring Indiana Democratic Senator Evan Bayh continued the charade, feeding Raines softball questions to advance their mutually-embraced liberal agendas.

Sadly, this entire episode conferred unwarranted credibility on Raines. The CNBC co-anchors' bowing and scraping to this charlatan only reinforced the impression that he was somehow blameless for starting the mortgage-related excesses that led to the financial sector meltdown of 2007-08.

It provides yet another example of how one must be very wary of what one sees on CNBC as having much resemblance to the truth.

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