SEC Opens Formal Inquiry of Fannie Mae

WASHINGTON – In a not so surprising move, the Securities and Exchange Commission is proceeding with a formal inquiry of housing Government Sponsored Enterprise Fannie Mae into allegations of accounting irregularities by the mortgage giant. Fannie Mae filed a Form 8K on Oct. 19 with the SEC that acknowledged the company had been informed by the agency of the formal order of investigation. The SEC had previously been conducting an informal investigation of Fannie Mae, and the now-formal inquiry means federal regulators can subpoena documents from the company as well as require the testimony of company employees and executives. Fannie Mae said it intends to “fully cooperate with the SEC’s ongoing investigation.” Earlier this month, at a hearing called by Rep. Richard Baker (R-La.), chairman of the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, Fannie Mae Chairman and CEO Franklin Raines and Chief Financial Officer Timothy Howard denied the company deliberately violated accounting rules in order to maximize executive bonuses. Baker called the hearing in response to a report released in September by the Office of Federal Housing Enterprise Oversight on “Allegations of Accounting and Management Failure at Fannie Mae” (CU Times, Oct. 13).