Fannie Restatement Ordered
The staff of the Securities and Exchange
Commission has ordered Fannie Mae
The decision comes as a huge blow to the nation's biggest mortgage company, whose bookkeeping has come under increasing fire in recent months. The company and its top officers, including CEO Franklin Raines, have repeatedly defended Fannie's accounting practices.
SEC Chief Accountant Donald Nicolaisen, in a statement released late Wednesday, said the government-sponsored company's accounting for 2001 through mid-2004 "did not comply in material respects" with accounting rules for derivatives, financial instruments used to hedge against interest rate swings, and for some transactions related to loans, The Associated Press reported.
Fannie said this fall that a restatement could force it to report after-tax losses on its derivatives transactions of as much as $9 billion. The losses could cause the company to become severely undercapitalized, an event that potentially could force it to sell stock or assets to raise money.The SEC findings come on top of a scathing report filed this fall by Fannie's regulator, the Office of Federal Housing Enterprise Oversight. OFHEO contended Fannie Mae deliberately violated accounting rules in an effort to smooth out quarterly earnings, meet financial projections and boost bonuses for its top executives. A Fannie spokesman indicated the company would comply with the SEC ruling, according to news reports. Fannie shares rose 30 cents Wednesday to $70.69.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV