Apr 19, 2007

The Mess Won’t Stop At Fannie Mae

In a Washington Business Journal article by Staff Reporter Jeff Clabaugh FannieMae will be attempting to trim $200 million from its annual operating budget. There has been no statement made on where those cuts are to come from but $200 million equates to a lot of jobs.

The article states that FannieMae employs 6,500 with 1,000 of these staffers being hired from 2004 to 2006. That hiring window opened when The Office of Federal Housing Enterprise Oversight released a report on September 17, 2004 alleging widespread accounting errors, including shifting of losses so senior executives could earn bonuses from making earnings targets. Fannie Mae was then ordered to “uncook” their books for the previous 3 ½ years.

From the article:

“In December, the company (NYSE: FNM) announced a restatement of financial results from 2001 through mid-2004 that erased $6.3 billion in previously reported profits.”
Since the blame for this fiasco was directed at booted Chairman and CEO Franklin Raines, some have directed at him:

NLPC Says Stop Franklin Raines’ Rape of Fannie Mae — and Taxpayers
As usual politics make things worse not better:

Carl F. Horowitz is director of the Organized Labor Accountability Project of the National Legal and Policy Center, a nonpartisan foundation promoting ethics in public life wrote in a 2005 article:

“Chairman Michael Oxley, R-Ohio, is the prime mover behind a requirement to force the GSEs to devote 5 percent of after-tax profits to a proposed affordable-housing fund…”

“…That makes them vulnerable to shakedowns, especially by nonprofits that operate on a nationwide scale.”