GregNews

[Ed Morrissey] Now ABC reports that Obama’s new chief of staff, Rahm Emanuel, sat on the board of Freddie Mac during the critical period:

President-elect Barack Obama’s newly appointed chief of staff, Rahm Emanuel, served on the board of directors of the federal mortgage firm Freddie Mac at a time when scandal was brewing at the troubled agency and the board failed to spot “red flags,” according to government reports reviewed by ABCNews.com.

According to a complaint later filed by the Securities and Exchange Commission, Freddie Mac, known formally as the Federal Home Loan Mortgage Corporation, misreported profits by billions of dollars in order to deceive investors between the years 2000 and 2002.

Emanuel was not named in the SEC complaint (click here to read) but the entire board was later accused by the Office of Federal Housing Enterprise Oversight (OFHEO) (click here to read) of having “failed in its duty to follow up on matters brought to its attention.”

Emanuel’s action, or lack of it, came during a time when the SEC says Freddie Mac misrepresented its income to investors in order to maintain its price.  In other words, they committed fraud.  The SEC specifically notes that Freddie did this in 2000, 2001, and 2002, and Emanuel sat on the board in 2000-2001.

This is no small matter.  Had this happened when Sarbanes-Oxley was in effect, Emanuel would have had to sign off on those numbers under penalty of perjury.  He could be liable for criminal prosecution.  As it is, his actions and omissions as a board member may still result in civil and criminal liability, if the SEC discovers that he had a hand in the fraud committed at Freddie Mac, or if Emanuel knew about it and failed to act to stop it.

For an incoming administration that ran on cleaning up the greed on Wall Street, the selection of Emanuel speaks a lot louder than any campaign promises.  One might think that anyone who sat on the boards of Fannie Mae and Freddie Mac while the two GSEs cooked the books and set the stage for global financial collapse should at least be considered political poison for any appointment, let alone one as significant as White House Chief of Staff — if nothing else, then at least on the basis of competence.  Instead, it looks like Obama is bringing the Chicago Way to Pennsylvania Avenue.

Hope and change, indeed.