WASHINGTON – If what goes up must come down, then maybe it was inevitable that Franklin Raines’ rise through the worlds of business and politics had to end.
But few who know the soft-spoken Seattle native envisioned the abrupt landing Raines made just days before Christmas when he resigned under pressure as Fannie Mae’s chairman and chief executive officer in the midst of an accounting scandal at the mortgage lender.
“He’s a guy who operates with a great deal of integrity,” said Leon Panetta, who was chief of staff in the Clinton administration when Raines headed the budget office. “I can’t imagine that he would try to play games with something that important.”
Raines’ ouster, just two months after he swore to Congress that Fannie Mae’s accounting practices were beyond reproach, could be a career-ender for someone who all his life excelled in academia and on Wall Street, in government and politics.
In 1999, Raines became the first black CEO of a Fortune 500 company when he took over at Fannie Mae. This year, he was mentioned as a candidate for Treasury secretary in a Democratic administration.
“I previously stated that I would hold myself accountable if the SEC determined that significant mistakes were made in the company’s accounting,” Raines said Dec. 21 in his final statement as head of Fannie Mae. “By my early retirement, I have held myself accountable.”
Fannie Mae’s accounting practices remain under investigation by its regulator, the Office of Federal Housing Enterprise Oversight, the Justice Department and the Securities and Exchange Commission.
Securities regulators said this month that the company had violated accounting rules and would have to restate its earnings, possibly erasing some $9 billion in past profit.
Some blame politics for Raines’ misfortune.
In a government controlled by Republicans, he was a visible Democratic holdover from the previous administration, running a major quasigovernmental corporation. And for some time, the banking industry – a traditionally Republican constituency – has wanted a larger share of the mortgage market dominated by Fannie Mae, which finances one of every five mortgage loans in the country.
“I expected that the politics would eventually force him out,” said Ron Walters, a longtime political observer who teaches at the University of Maryland.
Given his past, friends don’t expect Raines to stay down for long.
“I would be shocked if he didn’t get another job and wasn’t doing something important and worthwhile,” said Steven Pruzan, a Seattle attorney and childhood friend.
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