(2005-04-20) Fannie Mae Scandal

Essay on FannieMae (Mortgage Debt) scandal. Analysts are predicting that Fannie Mae will have to compensate for $11 billion in accounting errors. To put this in perspective, Enron overstated its earnings by $567 million: 5 percent of Fannie Mae's fiasco... The company announced on March 17, 2005 that it would miss the deadline for filing its 2004 financial report. According to the Wall St. Journal, Fannie Mae still hasn't filed its third-quarter report, which was due in November... Although broadcast news offered wall-to-wall coverage of the endless commas and zeros behind the Enron collapse, Fannie Mae's staggering problems and the resignation of six top executives, including the CEO and chief financial officer, received almost no TV news attention. The Executive Compensation packages of Enron executives like Andy Fastow were similar to former Fannie Mae CEO FranklinRaines's exorbitant bonuses. While Fastow raked in $37 million, a Jan. 22, 2005, article in The New York Times reported that "Mr. Raines made $14 million in salary and bonuses and received $25.6 million in incentive pay, including stock options." In a Jan. 24, 2005, article, Business Week confirmed that "Fannie had paid its 20 top executives a combined $245 million in bonuses."... Former Chief Executive Officer FranklinRaines and former Vice Chairman Jamie Gorelick were both instrumental figures in the Bill Clinton administration... According to a September 2003 report by a GSE watchdog group, FannieMaePolicyFocus, Fannie lags far behind the market in facilitating housing for minority and first-time buyers. As a matter of fact, the GSEs buy less than 10 percent of private sector loans to first-time African American and Hispanic purchasers. Moreover, Fannie and Freddie acquired "more loans made to absentee landlords, vacation homes, and second mortgages than first-time homebuyer loans," according to the report.