Fannie Mae’s board met Sunday to discuss the possible management shake-up in the wake of the SEC ruling pronouncing the mortgage giant guilty of violating the accounting rules. There was no statement issued and Fannie Mae representatives offered no comment.

The SEC ruled Friday that Fannie Mae is guilty of violating the accounting standards and needs to restate its earnings for the past four years. Fannie Mae has agreed to comply with the decision and will recognize $9 billion of losses on interest-rate risk hedging derivatives in its next quarterly earnings statement.

The decision of the chief accountant at the SEC will add more substance to the calls for tougher supervision at the government mortgage agencies Fannie Mae and its smaller counterpart Freddie Mac. Bush administration is currently pushing in Congress for legislature that will create a new agency to oversee both as critics claim the Office of Federal Housing Enterprise Oversight, or Ofheo, was not efficient.

It may also bring about a management reshuffle causing Fannie Mae’s chief executive and chairman Franklin D. Raines and chief financial officer Timothy Howard to resign.

The restatement will cause Fannie to adjust its income, which may squeeze its capital and push it under the requirements. Fannie may have to cut its dividends and sell some of its $900 billion of mortgage-related holdings to raise capital. In the first nine months of 2004, Fannie reported income of $5.43 billion.

The case is also ruinous for the company’s reputation as a moral institution helping poor families to get access to housing.