Franklin Delano Raines
January 14, 1949
First African-American CEO of a Fortune 500 company Fannie Mae
Life and Career
Franklin Delano Raines was born on January 14, 1949, in Seattle, Washington, to humble beginnings as the son of a janitor. He embarked on an extraordinary journey that would lead him to influential roles in both business and government.
Education: Raines pursued higher education at prestigious institutions. He graduated from Harvard College, followed by Harvard Law School. His academic achievements also included studying at Magdalen College, Oxford University, as a Rhodes Scholar.
Career Highlights: Raines entered the national political arena in 1969, working on a report for the Nixon administration concerning youth unrest related to the Vietnam War. He then served in the Carter Administration in various roles, including associate director for economics and government in the Office of Management and Budget and assistant director of the White House Domestic Policy Staff.
Following his government service, Raines joined Lazard Freres and Co., where he excelled, becoming a general partner. In 1991, he assumed the role of vice chairman at Fannie Mae, leaving in 1996 to join the Clinton Administration as the director of the U.S. Office of Management and Budget, where he served until 1998. His significant contributions led to his return to Fannie Mae as CEO in 1999.
Accounting Controversy: Raines’ tenure at Fannie Mae was marked by controversy. In December 2004, he accepted “early retirement” amid investigations by the U.S. Securities and Exchange Commission into alleged accounting irregularities. He faced accusations of abetting accounting errors, including shifting losses to enable senior executives to earn large bonuses.
The Office of Federal Housing Enterprise Oversight (OFHEO) filed civil charges against Raines and two other former executives, seeking penalties and returned bonuses totaling $225 million. However, a settlement in 2008 saw Raines, along with the other executives, deny the charges but pay fines of about $3 million, covered by insurance policies. Raines also donated the proceeds from the sale of his Fannie Mae stock and gave up stock options.
Legacy and Controversy: Raines’ legacy is intertwined with his leadership at Fannie Mae, a period during which he implemented policies aimed at expanding home ownership, particularly among underserved communities. His role in the subprime mortgage crisis remains a subject of debate, with differing opinions on the extent of the Government-Sponsored Enterprises (GSEs) contribution to the 2008 financial crisis. Some view his efforts to ease credit requirements as a contributing factor, while others highlight that Fannie Mae’s delinquency rates were lower than non-GSE securitized mortgages.
Raines and Obama Connection: Raines’ name surfaced in connection with Barack Obama’s presidential campaign in 2008, with reports that he had provided advice on mortgage and housing policies. However, both Raines and the Obama campaign later denied any advisory role. Despite the controversies, Raines’ career saw substantial financial success. In 2003, his compensation exceeded $20 million.
Franklin Delano Raines’ life and career are marked by both significant achievements and controversies, making him a prominent figure in the realms of finance and politics.