The Five Dumbest Things on Wall Street This Week

4. Fannie Covering

Fannie Mae (FNM Quote) got slapped around again this week.

The mortgage giant agreed to pay $400 million to settle a long-running investigation of its accounting. Regulators at the Office of Federal Housing Enterprise Oversight (OFHEO) issued a 348-page report accusing the company of having an "arrogant and unethical corporate culture."

Fannie, which had commissioned a more mealy mouthed report, assures investors the arrogance is now behind it. "We have all learned some powerful lessons here about getting things right and about hubris and humility," CEO Daniel Mudd said in a statement Tuesday. "We are a much different company than before. But we also recognize that we have a long road ahead of us."

Just how long that road might be came out in a New York Times piece on the Fannie mess. The OFHEO report said that as operating chief under former CEO Frank Raines, Mudd "listened as employees expressed concerns about Fannie Mae's accounting practices during an informal 2003 meeting, but in the view of the regulator, did not adequately follow them up," the Times reported Wednesday.

"I absolutely wish I had handled it differently," Mudd told the Times in an interview.

That's more than you can say for Raines. He was finally forced out of Fannie in December 2004 after the Securities and Exchange Commission ruled once and for all that the company's accounting was wrongheaded. But to this day, Raines sees himself as one of the good guys.

Raines "promised in October of 2004 that he would hold himself accountable if it was determined that Fannie Mae misapplied accounting rules," thunders a Tuesday afternoon statement from his lawyer. "When the SEC made that determination in December of 2004, he made good on his promise, retiring early and ending his long career at Fannie Mae."

Not a moment too soon, obviously.

Dumb-o-Meter score: 85. Ah, Frank Raines: Promises, promises.