The Securities and Exchange Commission has launched an informal inquiry into Fannie Mae after a federal report suggested the mortgage giant may have manipulated earnings and used improper accounting techniques. Fannie's federal regulator, the Office of Federal Housing Enterprise Oversight, publicly released a 211-page report late Wednesday that outlines misapplications of Generally Accepted Accounting Principles, or GAAP for short. Those missteps are not limited occurrences, "but are pervasive and are reinforced by management," according to the report. The report, presented to Fannie Mae's board of directors earlier this week, found that the company had used improper "cookie jar" reserve accounting – setting aside large cash reserves to reduce revenues in some years so they can be u...
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