The more I think about it, the more ticked off I get!
The New York Times reports:
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.1
And John McCain addressed the Senate on May 25, 2006:
Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.
The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.2
1 The New York Times http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63 (accessed Oct 26, 2008)
2 GovTrack.us. S. 190–109th Congress (2005): Federal Housing Enterprise Regulatory Reform Act of 2005, GovTrack.us (database of federal legislation) http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190 (accessed Oct 27, 2008)
3 GovTrack.us. S. 190–109th Congress (2005): Federal Housing Enterprise Regulatory Reform Act of 2005, GovTrack.us (database of federal legislation) http://www.govtrack.us/congress/bill.xpd?bill=s109-190 (accessed Oct 26, 2008)