Fannie Mae Execs Get a $25B Grilling On Capitol Hill
Thursday, June 15, 2006SUSIE GHARIB: On Capitol Hill today, the top brass of Fannie Mae were in the hot seat. Lawmakers heard from the company`s executives and government regulators getting details on the accounting scandal at the mortgage giant and how shareholders lost out on $25 billion. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Senators say they could not believe Fannie Mae`s now-CEO Daniel Mudd was unaware of the massive accounting manipulations that were going on at the mortgage lender.
SEN. RICHARD SHELBY, CHAIRMAN, SENATE BANKING COMMITTEE: As chief operating officer of the company during this time, how is that you were not aware of any of these practices?
DHUE: But Mudd says he didn`t fully understand the situation until the Securities and Exchange Commission forced the firm to restate its earnings in late 2004.
DANIEL MUDD, CEO, FANNIE MAE: I was not responsible for financial accounting. I was not responsible for the mortgage portfolio. I was not responsible for internal audit and I was as shocked as anyone in the company, or anyone in Congress or anyone in the market when these issues were uncovered and came to light.
DHUE: Stephen Ashley has been on Fannie Mae`s board for 13 years and is now its chairman. He says he too was unaware of the problems because former CEO Franklin Raines painted a far different picture of the company than what regulators uncovered.
STEPHEN ASHLEY, CHAIRMAN OF THE BOARD, FANNIE MAE: I cannot express to you the deep disappointment and anger that I as a member of the board and I know this is shared by my colleagues on the board, feel at this moment in time when a company and a management and people that we put our trust in was broken, not just broken, but shattered.
DHUE: Raines was invited to testify, but declined on advice of his lawyer. Some lawmakers want to use this scandal to toughen oversight of Fannie Mae and its sister firm Freddie Mac. They want to overhaul supervision of both the government-sponsored entities and limit the size of their portfolios.
SEN. CHUCK HAGEL (R) NEBRASKA: When you`re dealing with this massive amount of fraud and mismanagement, something has to be done.
DHUE: And something soon may be done with Fannie Mae. The SEC has asked the New York Stock exchange to put an end to Fannie`s exemption from listing standards. That exemption keeps the firm from being de-listed as it works through its $11 billion restatement. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
