The House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises will hold a hearing on accounting problems and management issues at Fannie Mae on Oct. 6, the subcommittee announced today.
The hearing, entitled “The OFHEO Report: Allegations of Accounting and Management Failure at Fannie Mae,” will focus on the “Report of Findings to Date, Special Examination of Fannie Mae.” The hearing will begin at 10 a.m. in room 2128 of the Rayburn Building.
“The outrageous conduct outlined in OFHEO’s report suggests that for too long Fannie Mae has acted as if it were somehow above the law while arrogantly flouting all accountability to the Congress, and that must come to an end,” said Rep. Richard Baker (R-La.), chairman of the subcommittee. “We could not tolerate such behavior from Enron, but the stakes are higher and the betrayal all the more egregious when we’re talking about a company, with almost $1 trillion in debt tied to taxpayers, that was created by and massively subsidized through Congress to serve a public mission. Lawmakers deserve straight answers to tough questions so we can proceed toward reforms to make sure something like this or far worse never happens again.”
Last week, Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), released partial findings of its review of Fannie Mae’s “accounting policies, internal controls, and financial reporting processes.” OFHEO’s examination found lax policies in the accounting areas of deferred price adjustments, and derivatives and hedging accounting. OFHEO’s report concludes that the accounting was intentionally manipulated in order to generate stable, upward earnings.
House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) said, “OFHEO’s findings contain serious allegations and once again point to the need to strengthen regulatory oversight of the government sponsored enterprises. While OFHEO and the Securities and Exchange Commission further evaluate these difficult questions, it’s time for us in Congress to renew our efforts to ensure that Fannie Mae and Freddie Mac have a first-rate regulator, with all necessary powers and resources. This Committee will continue its extensive oversight in this area to make sure that the GSEs are operated safely and soundly.”
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