Peter Eavis Digs Into Fannie Mae

Editor's note: On Monday night, TSC's Peter Eavis received the 2005 Gerald Loeb Award for Commentary, recognizing his outstanding work uncovering and explaining accounting problems at Fannie Mae. Judges in the country's top annual awards for business journalism said Eavis "spelled out the accounting troubles at Fannie Mae long before any findings of wrongdoing were raised and dug into Fannie's financial statements finding numerous areas of concern, even going so far as to tell federal regulators where to look." Below, in chronological order, are five key columns Eavis wrote on Fannie last year.

Jan. 30, 2004: "Freddie Flap Highlights Fannie Flaw"

It became sorely apparent Thursday that there is no way that Fannie Mae (FNM) could survive the ordeal that its sibling Freddie Mac (FRE) is going through.

Freddie has fessed up to a range of accounting missteps over the past six months but still hasn't released financial statements for any period in 2003. Because of the failure to provide 2003 numbers, Freddie's regulator told the company Thursday that it must hold capital that is 30% in excess of its statutory minimum capital requirement. Freddie almost certainly already has enough capital on its books to meet the extra 30% requirement.

But if Fannie were forced to do the same, it would be in dire straits, because it wouldn't have enough capital. In fact, it would have to issue at least $7 billion in stock to pad out its capital number, which, at current levels, looks precariously low. Defenders of Fannie would argue that Fannie isn't going to find itself in trouble with its regulator, the Office of Federal Housing Enterprise Oversight, because it hasn't got into any trouble over its accounting. But in the midst of the Freddie revelations, OFHEO decided it might be a good idea to conduct a probe of Fannie's accounts to see whether it was also up to no good. ...