Fannie Mae has announced firing of Chief Executive Officer Franklin Raines and Chief Financial Officer J. Timothy Howard yesterday in the wake of the accounting scandal that led to restatements of $9 billion in profit. Raines’ removal was provoked by loss of confidence in the management that kept reiterating that Fannie Mae’s records were clean in the height of the scandal. Raines insisted during his testimony in Congress that the accusations had no ground.

``Given the unbelievable statements Fannie executives made at our last hearing, this action was entirely necessary,’’ Representative Richard Baker of Louisiana serving on the House Financial Services Committee, said in a statement today.

If ``after a thorough review of all the facts it is determined that our company made significant mistakes, our board and our shareholders will hold me accountable and I’ll hold myself accountable,’’ Raines told Congress. ``That comes with being a CEO. I accepted the burden on the day I took the job, and I accept it today.’’

The management ouster at Fannie has created prerequisites for the creation of a stronger regulatory agency supervising both government agencies reselling pools of mortgages to investors, Fannie Mae and 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.
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 case is also ruinous for the company’s reputation as a moral instituition helping poor families to get access to housing.