Fannie Mae Cooked The Books

WASHINGTON - (05/24/06) -- Senior managements at secondarymortgage market giant Fannie Mae manipulated accounting to collectmillions of dollars in bonuses and deceive investors, according toa report issued Wednesday by the company's chief federal regulator,the Office of Federal Housing Enterprise Oversight. Separately,Fannie Mae said it has agreed to pay a $400 million fine to settlecharges of accounting manipulation. The OFHEO report said from 1998to mid-2004, the smooth growth in profits and precisely-hitearnings targets each quarter reported by Fannie Mae were"illusions" deliberately created by senior management using faultyaccounting. The accounting manipulation tied to executives' bonusesoccurred from 1998 to 2004, according to the report, a much longerperiod than was previously known. OFHEO had earlier said thatFannie Mae in 1998 improperly put off accounting for $200 millionin expenses to future periods so executives could collect $27million in bonuses. Both Fannie Mae and its sister secondary marketgiant Freddie Mac are closely tied to the credit union industrywith the two companies buying as much as half of all single familymortgages made by credit unions. In addition, credit unions owntens of billions of dollars of debt issued by the twocompanies.