The Mortgage Wars: Inside Fannie Mae, Big-Money Politics, and the Collapse of the American Dream

CHAPTER 14Allegations of Fraud: The Special Examination

IN THE FALL OF 2002, FRANK RAINES AND I RECEIVED IDENTICAL anonymous letters containing allegations of serious accounting, financial reporting, and internal control irregularities at Freddie Mac between 1999 and 2001. We turned them over to our general counsel, Ann Kappler, who faxed a copy of the letter Raines received to Freddie Mac’s chairman and CEO, Leland Brendsel. This seemingly innocuous action began a lengthy and complex chain of events that became entangled in the mortgage wars, intensified the mortgage crisis, and ultimately led to the demise of both Freddie Mac and Fannie Mae as public companies.

Freddie Mac Stumbles

Brendsel informed his board of directors of the letter, and ...