WASHINGTON Fannie Mae chairman and chief executive officer Frank Raines went on the defensive Wednesday, promising voluntary disclosures about his stock trades and those of fellow insiders.
The government-sponsored enterprise and other companies with special legal privileges came under fire on Capitol Hill.
Reps. Christopher Shays, R-Conn., and Edward J. Markey, D-Mass., introduced bipartisan legislation that would force Fannie and Freddie Mac to disclose more information to the Securities and Exchange Commission. Though details were unavailable, current law exempts the two companies from registering their securities and filing quarterly insider trading forms.
Theres no way I know of to defend the special privilege for the two GSEs that other publicly traded companies do not get, Rep. Shays said.
Mr. Raines said legislation to require stock registration would be unnecessary then later in the day offered to make the new disclosures.
Fannie Mae has some of the best disclosure of any financial company in the world, so unless something would be made better, I dont think the committee would want to make changes, he told American Banker before testifying at a House Financial Services Committee hearing on a major accounting reform bill. I havent heard of anything that would make it better.
Congress looked at this issue in 1992 and decided that they liked the disclosure methodology we had then, and its only gotten better since, Mr. Raines said. I dont see any reason why we should change something that seems to be working so well.
Those remarks came after Securities and Exchange Commission Chairman Harvey Pitt told the committee that he does not think government-sponsored enterprises should be exempt from the disclosure requirements of other public companies. At least that portion has to be removed. I do believe disclosure is critical for the GSEs and other public companies.
But when Mr. Raines was questioned near the end of the hearing on whether Fannie should disclose insider trades, he told lawmakers that Fannie will post them on its Web site a day or two after they occur. He also said the company developed the plan after Mr. Pitt called on all companies two months ago to start making contemporaneous disclosures.
By statute, Fannie executives and other insiders are barred from selling stock except during certain open periods immediately following an earnings release, Mr. Raines said. Starting next month, after the next open period, the company will publish all insider trades made during that time, he said.
Chairman Pitt suggested this idea of contemporaneous disclosures on securities trades, so we said, Why dont we do that? Mr. Raines told reporters after the hearing. We have the ability to do it. We dont have to wait until there is a rule to do it. Maybe we will be a pioneer.
Meanwhile, in testimony before the Senate Governmental Affairs Committee, SEC Commissioner Isaac C. Hunt Jr. said that, given their increasing importance, the commission has undertaken a thorough examination of the role the three nationally recognized statistical rating organizations play in the financial markets, including an assessment of the SECs current regulatory regime.
The three agencies Moodys Investors Service, Standard & Poors, and Fitch Ratings perform an ever more important role in our securities market so we thought it was time to take a look at where we are and where we ought to go, he said.
In response to a question from committee Chairman Joseph I. Lieberman, D-Conn., Mr. Hunt said: We could do a lot through rulemaking. Our hearings might show whether and to what extent we may need more legislation.
His comments about increased regulation of ratings firms came during the second half of the latest installment of the committees series of hearings on Enron Corp.s collapse. In the first half lawmakers blasted the agencies themselves for failing to downgrade Enrons debt to junk status until four days before its bankruptcy.
The three firms are the countrys only nationally recognized statistical rating organizations. That distinction, granted by the SEC, means that public companies can use debt rated by one of them to fulfill the SECs net capital requirement.
Other regulatory agencies follow the SECs lead by pegging certain rules and requirements to debt ratings issued by the same firms.
Though they claimed to have been misled by Enron executives, the representatives of the three agencies were browbeaten by senators from both parties.
Sen. Jim Bunning, R-Ky., blasted the witnesses for their companies failure to investigate Enrons finances more closely. It was your duty to get beyond the words coming out of the corporate mouths.
Rob Blackwell contributed to this article.
