Thursday, November 10, 2005

Fannie May Need ACCT 201

Government-sponsored mortgage lender Fannie Mae, which recently replaced its CFO and COO, announced new accounting errors on top of the $11 billion previously reported. Recently-hired Robert Blakely, just off attempting to clean up MCI from its WorldCom days, walks in to an organization which has not met SEC filing deadlines for the past year and indicated that correcting previously-announced errors won't be fully corrected until the middle of 2006. The new errors appear to center around mortgage losses, mortgage insurance costs and tax credits associated with low-income housing. Additional problems faced by Fannie May are investigations by the SEC and the Office of Federal Housing Enterprise Oversight, complaints of an excessive mortgage portfolio and the potential of delisting by the New York Stock Exchange.

Fannie May, though legally independent of the Federal Government, was created by Congress and can be considered a cautionary tale that for all the imperfections of private capitalism, businesses owned by governments or primarily operated to accomplish governmental goals may have bigger problems in regard to effciency and effectiveness.


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