Former Clinton Official Paid $26 Million by Fannie Mae Before Taxpayer Bailout Now on Obama Shortlist to Run FBI

Chris Neefus | March 23, 2011 | 5:00am EDT
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Former Clinton Administration official Jamie Gorelick. (AP Photo)

( – Jamie Gorelick, a former Clinton administration official who reportedly has made the Obama administration's short list to become the next director of the Federal Bureau of Investigation (FBI), was paid more than $26 million in total compensation as a top executive at Fannie Mae--before taxpayers had to bail out the mortgage giant.

Gorelick, who left the Clinton Justice Department in 1997 to work for Fannie Mae CEO Franklin Raines, was paid $26,466,834 in salary, bonuses, performance pay and stock options from 1998 to 2003, according to the Report of the Special Examination of Fannie Mae (2006), conducted by the Office of Federal Housing Enterprise Oversight.

Gorelick served as vice chairman of the Federal National Mortgage Association (Fannie Mae) when the government-sponsored enterprise was bundling subprime loans into securitized financial instruments. Prior to that, she served as deputy attorney general in the Clinton Justice Department under then-Attorney General Janet Reno from 1994 to 1997.

Raines had served as Clinton's budget director before assuming the top post at Fannie Mae.

In 2001, Gorelick announced that Fannie was buying subprime loans encouraged by the Community Reinvestment Act (CRA) and bundling them as securitized financial instruments. Securities made from bundles of guaranteed mortgages were to contribute to the banking crisis later in the decade.

“Fannie Mae will buy CRA loans from lenders' portfolios; we'll package them into securities; we'll purchase CRA mortgages at the point of origination; and we'll create customized CRA-targeted securities,” she said in 2001. “This expanded approach has improved liquidity in the secondary market for CRA product, and has helped our lenders leverage even more CRA lending. Lenders now have the flexibility to use their own, customized loan products.”

In remarks before the American Bankers Association on Oct. 30, 2000, Gorelick explicitly how the procress would work and what Fannie Mae would do to make it feasible for banks to lend to low-income applicants.

“We will take CRA loans off your hands--we will buy them from your portfolios, or package them into securities--so you have fresh cash to make more CRA loans,” she said. “Some people have assumed we don't buy tough loans. Let me correct that misimpression right now. We want your CRA loans because they help us meet our housing goals.”

By 2008, securities containing subprime loans were causing problems for financial institutions that had them on their balance sheets. Ultimately the federal government bailed out banks with the Troubled Asset Relief Program (TARP). Fannie and Freddie were taken under direct conservatorship by the federal government when Congress passed the Housing and Economic Recovery Act of 2008. In exchange for injecting $100 billion of liquidity into each government-sponsored enterprise, the government took an ownership stake of 79 percent in each, leaving the taxpayer with an unknown liability dependent upon future performance.

Gorelick left Fannie Mae in 2003.

Gorelick was named in a story in the Wall Street Journal as someone being considered for nomination as the next FBI director.

In a 1995 Justice Department memo, written when she was deputy attorney general, Kagan prescribed a policy for limiting the flow of information between intelligence gatherers and criminal investigators within the Justice Department.

In the memo, “Instructions on Separation of Certain Foreign Counterintelligence and Criminal Investigations,” Gorelick set out guidelines for concurrent investigations into the 1993 World Trade Center bombing by both criminal investigators and intelligence officers within the Department of Justice.

Rules stemming from the Foreign Intelligence Surveillance Act (FISA), under which the intelligence community was operating as part of its investigation, stipulates that information may only be gathered by way of surveillance for the primary purpose of intelligence, not to contribute to a criminal case under which defendants have more constitutional protections.

FBI Director Robert Mueller waits to testify on Capitol Hill in Washington, Wednesday, Sept. 22, 2010, before the Senate Homeland Security and Government Affairs Committee hearing to examine nine years after 9/11, focusing on confronting the terrorist threat to the homeland. (AP Photo/Manuel Balce Ceneta)

Gorelick sought to make clear in her memo that investigators of both stripes were adhering to FISA precedent and not misappropriating the authority to undermine the rights of any defendant.

“These procedures, which go beyond what is legally required, will prevent any risk of creating an unwarranted appearance that FISA is being used to avoid procedural safeguards which would apply in a criminal investigation,” Gorelick wrote.

Bush Attorney General John Ashcroft later testified before the 9/11 Commission that Gorelick’s “wall” was a “structural cause” in the attacks on Sept. 11, 2001 being allowed to occur.

In his prepared testimony, he said, “In 1995 the Justice Department, imposing a series of restrictions on the FBI that went beyond what the law required. … The single greatest structural cause for September 11 was the wall that segregated criminal investigators and intelligence agents. Government erected this wall. Government buttressed this wall. And before September 11, government was blinded by this wall.” 

After Ashcroft’s commission testimony, Gorelick published a commentary in The Washington Post saying that his accusations were false, and that the “wall” predated her tenure by decades.

"I did not invent the ‘wall,’ which is not a wall but a set of procedures implementing a 1978 statute (the Foreign Intelligence Surveillance Act, or FISA) and federal court decisions interpreting it,” she wrote.

Gorelick made no mention in the commentary of her statement in the 1995 memo that she was going “beyond what [was] legally required” in her prescriptions for handling the cases related to the 1993 bombings.

However, in the months leading up to 9/11, Ashscroft’s Justice Department also did not dismantle the rules or challenge the more general culture in the department that information should be partitioned.

Gorelick’s name appears on the shortlist along with counterintelligence experts such as former Bush Deputy Attorney General James Comey; former Assistant Attorney General Kenneth Wainstein; U.S. Attorney Patrick Fitzgerald; and D.C. Appeals Court Judge Merrick Garland, whom President Obama also reportedly considered for a Supreme Court appointment. She has lobbied on behalf of beleaguered British Petroleum (BP) in congressional inquiries and White House meetings.

Current FBI Director Robert Mueller’s 10-year term expires in September of this year.

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