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Boom Bust and Blame

Crisis A-Z

F

Faber, David:
An Emmy, Peabody, and Dupont award winner, David Faber has anchored and co-produced several of CNBC's acclaimed original documentaries and long-form programs as well as appearing daily on CNBC's "Squawk on the Street" (M-F, 9-11 a.m. ET) and blogging for cnbc.com.

During the day, Faber breaks news and provides in-depth analysis on a range of business topics during the "Faber Report." In his 16 years at CNBC, Faber has broken many big financial stories including the massive fraud at WorldCom, the bailout of the hedge fund Long Term Capital Management, and Rupert Murdoch's unsolicited bid for Dow Jones.

In February of 2009, Faber's latest two hour documentary "House of Cards" provided the definitive look at the origins of the worldwide economic crisis. The program debuted to record ratings and rave reviews.

Faber was the chief correspondent for CNBC's "Business Nation" a monthly, one-hour newsmagazine, which featured the stories behind the business headlines. In December 2007, "Business Nation" received an Emmy for its piece, "Prescription....and Pay-offs," and in December 2008 for, "Field of Dreams," both reported by Faber.

In November 2006, Faber presented the Emmy award-winning, original documentary "Big Brother, Big Business," which investigated the increasing number of ways ordinary Americans are monitored and affected by the encroaching world of surveillance and how this covert spying has become big business. "Big Brother, Big Business" received an Emmy in the category of Outstanding Documentary on a Business Topic.

Faber received the two most prestigious awards in broadcast journalism in 2005 when CNBC's two-hour documentary, "The Age of Wal-Mart," garnered both a Peabody Award and the Alfred I. duPont-Columbia University Award for Broadcast Journalism. It was the first time CNBC won a Peabody Award or a DuPont Award.

Faber launched the network's long-form, original documentaries in 2003 with the Maxwell Award-winning and Emmy-nominated "The Big Heist: How AOL Took Time Warner." Faber followed "The Big Heist" with the acclaimed "The Big Lie: Inside the Rise and Fraud of WorldCom." "The Big Lie" received a National Headliner Award and was used by the prosecution in the trial of WorldCom's Former CEO Bernard Ebbers.

Faber joined CNBC in 1993 after seven years at Institutional Investor, where he covered corporate finance and global equity markets. His book, "The Faber Report," was published by Little, Brown in Spring 2002. Faber's latest book, "And Then the Roof Caved In", was published in 2009 by John Wiley.

He holds a bachelor's degree in English from Tufts University.

Fannie Mae (see also Freddie Mac):
Created by the federal government to make homeownership affordable for low- and middle-income people. Fannie Mae pumps money into the nearly $11 trillion home-loan market by buying blocks of mortgages from lenders and then packaging them into securities for sale to investors.

Fannie Mae and its younger brother Freddie Mac are America's two largest mortgage companies, together holding or guaranteeing about $5 trillion in debt. Fannie is actually the Federal National Mortgage Association and is based in Washington, and Freddie is the Federal Home Loan Mortgage Corporation, based in Virginia.

At the height of the Great Depression, banks found themselves strapped for cash as borrowers defaulted on their home loans. Then, in 1938, President Franklin D. Roosevelt worked with Congress to create Fannie Mae to buy mortgages and free-up capital that could be used by other borrowers. But by 1968, with America at war in Vietnam and the national budget bursting, President Lyndon Johnson decided to take Fannie Mae's debt portfolio off the government balance sheet. Fannie Mae was privatized, becoming a publicly traded company owned by investors. Freddie Mac was launched in 1970, primarily to keep Fannie Mae from functioning as a monopoly. Nearly 20 years later, Freddie Mac went public, too.

Fannie and Freddie raise cash to buy mortgages from a variety of sources, including pension funds, mutual funds and foreign governments. But the collapse of the subprime market led both institutions to post $150 billion in losses beginning with the third quarter of 2007. Those losses resulted in the government taking control of both Fannie Mae and Freddie Mac in September 2008; under the Obama rescue plan, they have been directed to modify millions of home loans and provide up to 5 million loan refinancings. Profitability, says the treasury department, may be one to two years away.

Leland Brendsel, the former president and chief executive of Freddie Mac resigned amid a multi-billion dollar accounting scandal in June 2003. Congressional regulators accused Brendsel and another executive of hiding fraudulent record-keeping from the company's board, investors and regulators by omitting and deleting information from reports. Brendsel reached a $16.4 million settlement over his role in the scandal in 2004, agreeing to pay $2.5 million in fines to the government, give back $10.5 million in salary and bonuses and to waive claims against Freddie Mac for compensation worth $3.4 million.

FDIC – Federal Deposit Insurance Corporation:
Insures deposits in banks and thrift institutions for at least $250,000. The FDIC also identifies, monitors and addresses risks to the deposit insurance funds and limits the effect on the economy and the financial system when a bank or thrift institution fails.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.

The FDIC receives no Congressional appropriations; it is funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $17.3 billion, the FDIC insures more than $4 trillion of deposits in virtually every bank and thrift in the country.

Federal Reserve Bank – aka The Fed:
Central bank of the United States. In its role as a central bank, the Fed is a bank for other banks and a bank for the federal government. It was created to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded.

The Federal Reserve System is a network of 12 Federal Reserve Banks and a number of branches under the general oversight of the Board of Governors. The seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms.

The primary responsibility of the Board members is the formulation of monetary policy. The seven Board members constitute a majority of the Federal Open Market Committee aka FOMC, the group that makes the key decisions affecting the cost and availability of money and credit in the economy. Another five are Reserve Bank presidents.

Federal Funds Rate:
The interest rate at which depository institutions lend balances to each other overnight. The Federal Open Market Committee establishes the target rate for trading in the federal funds market. By trading government securities, the New York Federal Reserve Bank has an impact on the federal funds rate, but does not actually "set" the interest rate. In fact, the Federal Open Market Committee aka FOMC sets a target for this rate, and not the rate itself, because it is determined by the open market. The New York Fed discontinued publication of period-to-date and month-to-date average values as of August 21, 2006.

FirstPlus Financial Group:
Bankrupt subprime lender in the U.S. and Great Britain. The Federal Trade Commission settled charges against FirstPlus that the lender engaged in deceptive advertising and marketing of "debt consolidation" loans, including high loan-to-value loans. According to the FTC's complaint, FirstPlus's advertisements in the 1990's featuring football legend Dan Marino violated the prohibition in the Federal Trade Commission Act against deceptive practices by misleading consumers about the amount they would save through a debt consolidation loan.

The complaint also alleges that FirstPlus violated requirements that an advertisement that shows certain "trigger" terms, such as the monthly payment, also show the other major terms of the loan, such as the annual percentage rate and the length of the loan. Under the proposed settlement, FirstPlus would be prohibited from, among other things, misrepresenting the savings or benefits of a debt consolidating loan and violating the trigger term rules. Of particular note is the FTC's apparent position that it is deceptive to assert that a consumer will save on monthly payments if he or she will pay more over time than under the existing debts that are being refinanced.

Fitch, Stephen Joynt:
Chief Executive Officer of the Fitch Group, the parent company of Fitch Ratings. He is also the President and CEO of Algorithmics Inc. and Fitch Ratings and has been part of the company since 1989. Joynt attended the University of Arizona, where he earned a Bachelor of Science degree in Business Administration. He has served as President and as member of the board of directors of Fitch Investors Service since 1994. In 1997, he was appointed as the firm's Chief Operating Officer. He rose to the position of President and CEO of Fitch in December 2001, replacing Robin Monro-Davies, who retired after more than 25 years in the company.

Fons, Jerome:
Managing Director of Credit Policy at Moody's Investor Service from 2001 to 2007. He had been with the company since 1990 and was the Chair of Moody's Fundamental Credit Committee, and a member of the Moody's Credit Policy and Country Risk Committees. He moved on from Moody's to start his own firm – Fons Risk Solutions – in August 2007.

Fons holds a Ph.D. in Economics from the University of California, San Diego and an A.B. also in Economics from San Diego State University.

Frank, Barney:
Democratic Representative from Massachusetts's fourth congressional district and the Chairman of the Financial Services Committee. He is a member of the Democratic Party and has been a member of congress since 1981.

Rep. Frank was born on March 31, 1940 in Bayonne, New Jersey. He graduated from Bayonne High School in 1957 and went on to study government at Harvard University, where he received a bachelor's degree in 1962.

Rep. Frank entered the political arena in 1972 when he was elected to the Massachusetts House of Representatives and served for eight years. During this time, Frank taught undergraduate classes at Harvard University and published numerous articles on politics. He became Chief Assistant for Boston Mayor Kevin White and worked with him until 1971. He then became an administrative assistant to Congressman Michael J. Harrington for the following year. In 1977, he earned a Juris Doctor degree from Harvard Law School.

In 1980, Frank ran for the United States House of Representatives in the fourth congressional district and defeated his nearest opponent, Arthur J. Clark, in the Democratic primary. He was elected on November 4, 1980. In 1987, he became the second openly gay member of the House of Representatives after Gerry Studds.

Freddie Mac – see also Fannie Mae:
Created by the federal government to make homeownership affordable for low- and middle-income people. Freddie Mac pumps money into the nearly $11 trillion home-loan market by buying blocks of mortgages from lenders and then packaging them into securities for sale to investors.

Freddie Mac and its older sister Fannie Mae are America's two largest mortgage companies, together holding or guaranteeing about $5 trillion in debt. Fannie is actually the Federal National Mortgage Association and is based in Washington, and Freddie is the Federal Home Loan Mortgage Corporation, based in Virginia.

In 1968, with America at war in Vietnam and the national budget bursting, President Lyndon Johnson decided to take Fannie Mae's debt portfolio off the government balance sheet for the first time in the 30 years since FDR created Fannie Mae. It was privatized, becoming a publicly traded company owned by investors. Freddie Mac was launched in 1970, primarily to keep Fannie Mae from functioning as a monopoly. Nearly 20 years later, Freddie Mac went public, too.

Fannie and Freddie raise cash to buy mortgages from a variety of sources, including pension funds, mutual funds and foreign governments. But the collapse of the subprime market led both institutions to post $150 billion in losses beginning with the third quarter of 2007. Those losses resulted in the government taking control of both Fannie Mae and Freddie Mac in September 2008; under the Obama rescue plan, they have been directed to modify millions of home loans and provide up to 5 million loan refinancings. Profitability, says the treasury department, may be one to two years away.

The government pledged up to $200 billion to both Freddie and Fannie, and has invested nearly $60 billion in their preferred shares since September 2008.

Both agencies have said they may need more help. In March 2009, Freddie announced a fourth-quarter loss of $23.9 billion. It has received about $45 billion in federal aid.

In addition, the Justice Department and the Securities and Exchange Commission have been investigating accounting, disclosure and corporate governance issues at Freddie since late last year. The SEC issued subpoenas for certain Freddie Mac documents in January and February, the company said in recent securities filings.

Although not reported to be a target, Freddie Mac CFO David Kellermann since the government took over Freddie and Fannie in September 2008, was found hanged to death in an apparent suicide at his Virginia home in April 2009. Both institutions have lost the CEOs the government installed last fall and have seen other high-level executive departures.

Freemont Mortgage:
Labeled by the Boston Herald "America's most notorious subprime-mortgage firm" agreed in June 2009 to pay $10 million to settle claims that it wrote 15,000 Massachusetts home loans that courts later found were often "doomed to foreclosure."

Under the deal, Fremont will pay $8 million in consumer relief, a $1 million civil penalty and $1 million in court costs and state legal expenses. Fremont, which the subprime-mortgage market's collapse drove into Chapter 11 bankruptcy, was based in Santa Monica, California. The firm did not admit any wrongdoing as part of the settlement.

"Froth":
A word then-Federal Reserve Chairman Alan Greenspan used in 2005, twice, to contrast the view that there was a housing "bubble" in danger of bursting.

Greenspan said "the apparent froth in housing markets may have spilled over into the mortgage markets" and that "certain elements of froth are clearly developing in local markets."

He continued, in prepared remarks, to say that "although a 'bubble' in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels."

As chairman, Greenspan was famous for his unusual phrasing and the ambiguous terms that filled his reports on the economy, which often turned up or down upon his pronouncements. Perhaps the most famous of Greenspan's quotations was his 1996 phrase "irrational exuberance," a line borrowed from Yale professor Robert Shiller, to describe what could possibly be the cause of stock market frenzy.

Fuld, Richard (Dick):
The last Chairman and Chief Executive Officer of Lehman Brothers Holdings Inc. before the company filed for bankruptcy on September 15, 2008. Fuld became Chairman and CEO in April 1994, after the firm spun off from American Express and gained its independence.

Fuld was born on April 26, 1946 in New York City. He earned a bachelor's degree from the University of Colorado in 1969 to then attend New York University Stern School of Business, where he obtained a Master of Business Administration in 1973. He started working at Lehman in 1969 as a commercial-paper trader and grew within the company going from holding trading positions to managerial ones. Eventually Fuld became a supervisor who oversaw all trading at Lehman Brothers.

Fuld was one of the main players in the 1984 acquisition of the firm by American Express and by 1990, Fuld had become co-CEO of the Lehman Brothers division. He rose to the position of Chairman and CEO four years later after the firm separated from American Express. He left the firm when Lehman's major operations were sold to a variety of parties, including Barclays Bank.

Dick Fuld is married to Kathleen Ann Bailey and they have three children.