Earnings Drop At Fannie Mae AmidstMuddled Accounting

WASHINGTON - (11/17/04) -- Fannie Mae reported net incomedropped 9% for its third quarter to $2.4 billion, or $2.45 a share,from the same period last year, as the company continues tostruggle to resolve major accounting issues with its regulator.Third quarter earnings were hurt by a $634 million decrease in netinterest income, from 156 basis points to 125 bps. Net income forthe first three quarters declined 5% to $5.4 billion, or $5.46 ashare, compared to the first nine months last year. Still, thesecondary mortgage market giant said it was awaiting word from theSecurities and Exchange Commission on a dispute with the Office ofFederal Housing Enterprise Oversight over its accounting forderivatives the past three years. An adverse ruling by the SECcould result in a charge of as much as $9 billion for the periodand a major reduction in its regulatory capital, Fanniesaid.