Washington, DC - James B. Lockhart, Acting Director of the Office of Federal Housing Enterprise Oversight (OFHEO), today released its Report of the Special Examination of Fannie Mae. The report details an arrogant and unethical corporate culture where Fannie Mae employees manipulated accounting and earnings to trigger bonuses for senior executives from 1998 to 2004. The report also prescribes corrective actions to ensure the safety and soundness of the company.
‚“The image of Fannie Mae as one of the lowest-risk and 'best in class' ’ institutions was a facade," said Lockhart. “Our examination found an environment where the ends justified the means. Senior management manipulated accounting; reaped maximum, undeserved bonuses; and prevented the rest of the world from knowing. They co-opted their internal auditors. They stonewalled OFHEO" Lockhart said.
“Fannie Mae's executives were precisely managing earnings to the one-hundredth of a penny to maximize their bonuses while neglecting investments in systems internal controls and risk management," Lockhart said. “The combination of earnings manipulation, mismanagement and unconstrained growth resulted in an estimated $10.6 billion of losses, well over a billion dollars in expenses to fix the problems, and ill-gotten bonuses in the hundreds of millions of dollars."
OFHEO's report on Fannie Mae's accounting procedures is chilling. Larger parts of the housing industrial complex iceberg have now been uncovered.
As we posted this morning, Mortgage giant Fannie Mae will announce today that it has agreed to pay more than $400 million as part of a settlement with the government to resolve allegations of accounting misdeeds. (WSJ Law Blog)It is encouraging to see the government beggining to reign in the housing industrial complex. However, it is too little, too late. :-(
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WOW!
ReplyDeleteGlad to hear the gov't is going after these crooks. The unethical corporate culture at Fannie Mae is definitly no surprise. I sometimes wonder if CEOs are doing more harm to the USA than Al-Quida and other terrorist groups. I eagerly wait to see what else OFHEO will uncover from Fannie Mae and other companies involved in this mess.
"The housing industrial complex"?
ReplyDeletePaging Mulder and Scully!
Holy cow!
ReplyDelete"As we posted this morning, Mortgage giant Fannie Mae will announce today that it has agreed to pay more than $400 million as part of a settlement with the government to resolve allegations of accounting misdeeds"
ReplyDeleteThis raises several questions:
1. How much of that $400 million will come from the executives wallets? (DUH!)
2. When increased rates kick in on ARMS whole alot of mortgages will default. How will Fannie Mae fork over $400 million?
3. Who gets the $400 million and what will they do with this money?
4. Why doesn't the prosecuters go after the executives?
5. Are the Fannie Mae executives buddies with George W.
"It is encouraging to see the government beggining to reign in the housing industrial complex. However, it is too little, too late. :-("
RIGHT ON!
The executives have all left Fannie Mae. They are not affiliated with the Bush Administration. Actually they were all very connected with the Clinton Administration.
ReplyDeleteFrank Raines, the former Fannie Mae CEO, was close buddies with the Clintons. He has a very nice house in upper NW DC.
ReplyDeleteGreed knows no political affiliation.
ReplyDeleteNOVA Fence Sitter
Hello,
ReplyDeleteOn ZipReality.com I saw houses that sold for $10.00 Why would that be?
Thanks
"On ZipReality.com I saw houses that sold for $10.00 Why would that be?"
ReplyDeleteIt probably means that someone who bought a home with an interest-only ARM was not able to make their monthly payments when they were required to start making payments on both the principal and the interest.
So the bank likely foreclosed, on the house, evicting the owner. Rather than carry the house for an indeterminent period of time (houses are sitting on the market longer and longer these days), the bank decided to auction the house off to the highest bidder and cut their losses. The highest bidders in these cases were the 10.00 bidders.
The lesson here is to be sure to attend foreclosure auctions. Properties can now be found for less than 100 dollars; a trend that is likely to continue for years as the bubble deflates.
There may be other costs involved in the purchase that did not show up on the "sale". Also, in some states the deed is recorded as "for $10 and other consideration" so maybe that is why the price is shown as $10.
ReplyDeleteI dunno, but I doubt that the auction will bring much less than what the property is really worth.
What a stupid answer by Anonymous at 8:41 PM above. It is absolutely assinine to think that banks are selling foreclosures for $10. In all likelihood, $10 was simply what the government recorder put in as consideration b/c perhaps the deed did not specify the amount.
ReplyDeleteAnyone that thinks you can buy actually inhabitable houses for $10 at foreclosure auctions is in desperate need of a reality check.
fritz,
ReplyDeleteI actually agree with you. :-)
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ReplyDelete