Fannie Restates its Earnings for Years 2001 to 2004

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Saturday February 12, 05:12

Fannie Restates its Earnings for Years 2001 to 2004

(by Mark Riley)

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Fannie Restates its Earnings for Years 2001 to 2004

It can take Fannie Mae a year to complete its earnings restatement valued at $9 billion, the Securities Exchange Commission’s chief told policymakers on Wednesday.

Last year Fannie was told to restate its earnings for 2001 to 2004 after the SEC discovered that the group abused accounting rules.

Donald Nicolaisen, the SEC’s chief accountant, stated on Wednesday at Congressional hearings that the accounting rules were “crisp and clear” and the company had failed to meet professional accounting standards while other companies using the same rules had applied them correctly.

The SEC’s enforcement division was investigating the matter why Fannie’s management broke the rules to decide whether the company’s executives should return bonus payments received between 2001 and 2004.

Franklin Raines, Fannie’s former chief executive, could face civil or criminal penalties in case investigators furnished the evidence that he deliberately manipulated the rules in his personal interest. It’s known that Mr. Raines left the company after the SEC directed Fannie to restate its earnings.

Fannie’s stock price has dropped sharply this year because of the financial impact of the pending restatement which will decrease both past earnings and the cost of raising billions of dollars in cash to meet new capital requirements.

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