The Steven Rattner Scandal And The Obama White House

It appears the man the Obama White House put in charge of the takeover of Chrysler and GM was already up to his hips in seriously unethical dealings with public pension funds.

It's a convoluted story, but at heart it was a 'pay-to-play' scheme, in which it is alleged Rattner obtained a $100 million dollar public pension fund investment for his firm by unethical means. He made a series of unrelated deals on behalf of people who made the decision to steer the investment in his direction. Wanna bet he landed a handsome bonus at year's end for his efforts?

He then went on to be put in charge of the 'rescue' of two dead auto firms, which by the way, are still....not viable. But tens of billions of dollars changed hands in the process, and deal after deal after deal were made along the way. That's what the man does, you know, make deals. It's his way of life, how he makes his living.

The obvious question has to be raised:  What sorts of deals were made, and what small slices of those tens of billions ended up flowing in his direction? It all happened very quickly, all very confused, lots of smoke and mirrors, and massive skirting of bankruptcy law occurred, if memory serves.

Another obvious question: Before assigning him to the task, didn't the Obama White House vet this guy? Or did the fact that he was a major Democrat fund-raiser help them decide? Did these things matter, or did they hire him because of who he was, knowing the manner of the man?

In the meantime, back to this week's account:

"Mr. Rattner does not agree with the characterization of events released today, including those contained in Quadrangle's statement," said Jamie S. Gorelick, an attorney for Rattner. "He looks forward to the full resolution of this matter."

Standard lawyer boilerplate. But the name of the lawyer rings a bell! Why, OS scratches his gray head in wonder? Where has he encountered the name of Jamie S. Gorelick?


Here's one place.  From the Washington Post, April 6, 2005:

Fannie Mae employees falsified signatures on accounting transactions that helped the company meet earnings targets for 1998, a "manipulation" that triggered multimillion-dollar bonuses for top executives, a federal regulator said yesterday.
 
Armando Falcon Jr., director of the Office of Federal Housing Enterprise Oversight, said the entries were related to the movement of $200 million in expenses from 1998 to later periods. The result of the changes was an increase in Fannie Mae's 1998 earnings per share and the release of a $27.1 million bonus pool for senior executives.

Fannie Mae reported paying the following executive bonuses in 1998: chairman and chief executive James A. Johnson received $1.932 million; Franklin D. Raines, chairman-designate, received $1.11 million; Chief Operating Officer Lawrence M. Small received $1.108 million; Vice Chairman Jamie S. Gorelick received $779,625; Chief Financial Officer J. Timothy Howard received $493,750; and Robert J. Levin, an executive vice president, received $493,750. 

That's one reference...there are more, not difficult to find.  

OS does not believe in conspiracy theories. No one was passing envelopes of cash to the President, or wiring vast sums to his offshore accounts. But the best thing one can say about having Rattner on board is that the White House staff were reckless and gullible.

This is not another Watergate.  But it is indicative of attitudes. And as businesses and families struggle through The Great Recession, stories like this are demoralizing.