Wednesday, May 24, 2006

Fannie Mae takes a $400 Million Penalty Hit

The Office of Federal Enterprise Housing Oversight (OFEHO) and the Securities and Exchange Commission jointly announced a penalty of $400 million for the Federal National Mortgage Association for poor accounting procedures which misled the market and triggered unjustified bonuses to executives. The report blamed both management malfeasance and board carelessness for the flawed accounting. OFEHO and the SEC called for stronger accounting controls and more resources for conducting the audit.

Two things to hope for here: [1] New CEO Daniel Mudd means it when he says that Fannie Mae has learned some lessons in hubris and humility, [2] the taxpayers do not end up bailing out Fannie Mae.


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