SEC Cites Fannie Mae For AccountingImproprieties

WASHINGTON - (12/16/04) -- The Securities and ExchangeCommission said Wednesday that Fannie Mae had violated accountingrules and ordered the secondary mortgage market giant to go backand restate earnings for the last four years. The SEC, echoingfinding of Fannie Mae's chief regulator, the Office of FederalHousing Enterprise Oversight, said the company did not properlyaccount for its massive portfolio of financial derivatives, used tohedge interest rate swings. Earlier, Fannie officials said if ithad to go back and restate the value of its derivatives for thatperiod it could force the company to show a loss of as much as $9billion for the third quarter of this year and could significantlydiminish the company's capital.