Facing the Facts at Fannie Mae

Editor's note: The Fannie Mae (FNM) accounting storm has taken its toll on Wall Street, but RealMoney readers were prepared.

Last week, the financial services giant's regulator issued a scathing report criticizing Fannie's bookkeeping. The document zeroed in on the company's accounting for derivatives and suggested that, in at least one case, the Washington-based mortgage giant may have boosted earnings to fatten executive bonuses.

On Monday, Congress said it would hold hearings on the matter, just after Fannie Mae reached an agreement with its regulator that could force the company to raise billions of dollars in new capital. Some observers wonder if CEO Franklin Raines can survive the latest episode questioning his leadership.

The developments have shocked investors, knocking Fannie's stock down 15% over the past week. But readers of RealMoney.com's Peter Eavis are far from surprised.

Eavis has been predicting for more than a year that accounting troubles would bubble to the surface at Fannie Mae. The very trouble spots that he has focused on -- derivatives accounting, executive bonuses, capital reserves -- are at the center of the current crisis.

The stories below show how Eavis gave RealMoney readers a heads-up on the problems plaguing Fannie long before they came to the attention of most investors.

Executive Pay
Fannie Flap Points to Options Grants
April 6, 2004: The company sought to avoid taking losses on certain assets -- possibly in a bid to ensure senior execs got to cash in their options.

Regulatory Scrutiny
A New Reason to Fret About Fannie
April 1, 2004: A regulator raises the possibility of accounting adjustments -- almost unheard of unless it suspects there are grounds for a restatement.

Capital Requirements
Freddie Books Highlight Fannie Flaw
Jan. 30, 2004: Freddie's solid capitalization draws a sharp contrast with Fannie, which wouldn't have enough capital on hand to meet the same standard.

Political Pressure
Capital Idea: Stronger Fannie Oversight
Oct. 21, 2003: Congress takes a look at stricter regulation, which could force the company to reduce its risk-taking and thus hit earnings growth.

Derivatives Dare
Testing Fannie Mae's Tattered Balance Sheet
March 25, 2003: The company has long been unforthcoming in its explanation of huge swings in balance sheet value.

This is a special bonus column for TheStreet.com readers. Peter Eavis' commentary regularly appears on RealMoney.com. To sign up for RealMoney, where you can read his commentary every day, please click here for a free trial.

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