WASHINGTON (AP) — Federal regulators have found evidence suggesting that mortgage giant Fannie Mae (FNM) manipulated earnings, possibly to facilitate bigger bonuses to executives, according to a lawmaker familiar with the findings.
In an eight-month investigation, the agency that supervises Fannie Mae found a pattern of manipulation aimed at smoothing out volatility in profits from quarter to quarter, similar to what occurred at rival Freddie Mac — whose understatement of billions in profits prompted a management shake-up and a $125 million government fine. The agency, the Office of Federal Housing Enterprise Oversight, was presenting its report criticizing Fannie Mae's accounting practices to the board of the government-sponsored company Monday.
Rep. Richard Baker, R-La., has been briefed on the OFHEO report, which provides "a strong indication that Fannie Mae manipulated earnings in a way that appears to be smoothing," said Baker spokesman Michael DiResto.
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Fannie Mae and Freddie Mac were created by Congress to pump money into the home mortgage market by buying home loans from lenders and packaging them as securities for sale on Wall Street. They have grown explosively in recent years and now stand behind $4 trillion of home mortgages, representing more than three-fourths of the single-family mortgages in the country.
http://www.usatoday.com/money/companies/earnings/2004-09-20-fannie-mae_x.htm
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