The Mortgage Giant Fannie Mae Accused of Deception and Mismanagement

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• JIM LEHRER:

  Now, the continuing tale of alleged deception and mismanagement at mortgage giant Fannie Mae. Jeffrey Brown has our story.

• JEFFREY BROWN:

  A $400 million dollar fine and a scathing report on a, quote, "arrogant and unethical corporate culture." Today was a bad day for Fannie Mae, the publicly-traded company that also has a government charter and plays a huge role in the nation's home mortgage-lending market.

  The company's accounting practices have been under investigation and have already led to the resignation of several top managers. The latest salvo comes from the Office of Federal Housing Enterprise Oversight, a government regulator. Its acting director, James Lockhart, joins me now.

  Welcome to you.

  JAMES LOCKHART, Office of Federal Housing Enterprise Oversight: Good evening, Jeff.

• JEFFREY BROWN:

  Before we begin on today's charges, this is an important but little understood company. Tell us briefly: What is Fannie Mae and what does it do?

• JAMES LOCKHART:

  Well, Fanny Mae and its cousin, Freddie Mac, basically buy mortgages from banks and other mortgage originators, guarantees them, and then on-sells them to investors around the world. Between these two companies, they represent about 40 percent of the mortgage market in the United States.

• JEFFREY BROWN:

  And it is a strange hybrid, is it not, a publicly-traded company but with a government charter and oversight from folks — you?

• JAMES LOCKHART:

  Right. They're probably two of the largest financial institutions in the world. Yes, they're public companies, but they also have a government charter, and we regulate them in a way to try to promote safety and soundness.