Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

(FNM to be delisted?) Statement from Daniel H. Mudd, President and CEO, Fannie Mae
Yahoo News ^ | August 9, 2005 | Daniel H. Mudd

Posted on 08/11/2005 1:40:17 PM PDT by hripka

WASHINGTON, Aug. 9 /PRNewswire-FirstCall/ -- The following is a statement by Daniel H. Mudd, President and Chief Executive Officer of Fannie Mae:

Last December, the SEC required Fannie Mae (NYSE: FNM - News) to restate our prior financial statements to eliminate the use of hedge accounting and, to the extent material, to correct for errors in our accounting for deferred purchase price adjustments. Our safety and soundness regulator, OFHEO, also raised questions with respect to our accounting, which has led us to undertake a comprehensive review of our accounting policies and practices. Today, in our SEC Form 12b-25 filing, Fannie Mae provided details on this work and several relevant implications of the restatement.

Completing this restatement is Fannie Mae's number-one corporate priority, and we are moving forward. The effort is led by a top executive team -- interim Chief Financial Officer Rob Levin, our new Controller, David Hisey, and our Executive Vice President for Regulatory Agreements and Restatement, Mike Williams -- working with our new independent auditor, Deloitte & Touche, LLP. All of these activities either report directly to the Board of Directors' Audit Committee or to me. This process involves every line of business and entails a comprehensive review of our accounting practices, including those related to derivatives, mortgage purchase and sale commitments, and investment securities, among others.

The restatement begins with a reevaluation of all of our accounting policies and practices. Then, coupled with the known issues and any further issues we identify in the process, we will implement new accounting procedures, develop new systems, and install new routines and controls. We will then move to the stage of reprocessing historical transactions, and to a lesser degree, even where the accounting policy is unchanged, we will have to demonstrate the accuracy of the accounting we used for those practices. This will produce a complete re-audit of all aspects of our financial statements. Finally, while Deloitte & Touche already has begun certain pieces of their audit, the firm will only be able to audit the portions of our financial statements requiring restatement once we have completed all of our work described above. We are undertaking aspects of this effort simultaneously wherever possible, but much of the work has to occur in sequence; some of the activities, such as developing and implementing new systems, are long duration projects by their very nature.

We are leaving no stone unturned. To accomplish this, we have to obtain and validate market values for a large volume of transactions including all of our derivatives, commitments and securities at multiple points in time over the restatement period. To illustrate the breadth of this undertaking, we estimate we will need to record over one million lines of journal entries, determine hundreds of thousands of commitment prices and securities values, and verify some 20,000 derivative prices.

As our normal business operations continue, we also are committing every available resource to the restatement. This year we expect that over 30 percent of our employees will spend over half their time on it, and many more are involved. In addition, we are bringing some 1,500 consultants on board by year's end to help with the restatement. We have organized lines of accountability, a Project Management Office, regular review and reporting and ongoing Board oversight. Altogether, we project devoting six to eight million labor hours to the restatement. We also are investing over $100 million in technology projects to enhance or create new systems related to accounting and reporting. We are fortunate to begin with a talented, committed group of employees. We also have had great success in recruiting a strong team and have significantly increased the size of our Controllers Department.

From the beginning of this effort, I have said that we will put as much time, manpower and resources into the restatement as the restatement needs, and we will not be done until we are confident we have done it right. While we do not believe the restatement will be completed until sometime during the second half of 2006, our goal is to get our restatement right and to complete it as efficiently and expeditiously as possible.

Finally, as we also disclosed in our Form 12b-25 today, as we work through our restatement and review, Fannie Mae is engaged in regular discussions with the staff of the New York Stock Exchange regarding the status of our restatement and continued listing through completion of the restatement.

We are committed and determined to get this work done, get it right, and continue on the path of restoring investor, market and public confidence in Fannie Mae.

Fannie Mae is a New York Stock Exchange Company. It operates pursuant to a federal charter. Fannie Mae has pledged through its American Dream Commitment to expand access to homeownership for millions of first-time home buyers; help raise the minority homeownership rate to 55 percent; make homeownership and rental housing a success for millions of families at risk of losing their homes; and expand the supply of affordable housing where it is needed most. More information about Fannie Mae can be found on the Internet at http://www.fanniemae.com.

Source: Fannie Mae


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: clinton; derivatives; earnings; fanniemae; fnm; gorelick; housing; housingbubble; jamiegorelick
Navigation: use the links below to view more comments.
first 1-2021-4041 next last
This doesn't sound very good. Why take one YEAR to go over their earnings? This is either incompetence or fraud. Comments?
1 posted on 08/11/2005 1:40:18 PM PDT by hripka
[ Post Reply | Private Reply | View Replies]

To: hripka
This is either incompetence or fraud.

It's both!

2 posted on 08/11/2005 1:42:36 PM PDT by ncountylee (Dead terrorists smell like victory)
[ Post Reply | Private Reply | To 1 | View Replies]

To: kjenerette

...sounds like an association we know?


3 posted on 08/11/2005 1:46:07 PM PDT by Van Jenerette (U.S. Army 1967-1991 Infantry OCS Hall of Fame, Ft. Benning)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hripka

Fraud, fraud, fraud. Perpetrated by Democrat hack Frank Raines and his co-hack Jamie Gorelick. Fannie Mae had been manipulating its earnings for YEARS....using bizarre and arcane derivative hedges and inappropriately accounting for them in order to hit their earnings per share target that resulted in maximum bonuses for Fannie Mae executives....Gorelick got almost a million dollars. Raines raked in millions while donating thousands to Democrat candidates. It is taking the new regime at Fannie Mae an incredible number of man-hours to unravel all the fraud and go back and correctly account for everything. The earnings restatement may be upwards of $20 billion. It was a huge and complicated fraud scheme. Jamie Gorelick was the General Counsel while it was being perpetrated.


4 posted on 08/11/2005 1:47:14 PM PDT by Dems_R_Losers (Where is Chris Lehane??)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hripka
Taking a guess here..but a lot of the earnings in prior years were based on the value of derivatives..These are, very, very complex instruments...and many say that their values can't really be calculated..guesstimated is more likely..so they have a lot of spade work to do...if you restae, what is the basis for doing so..let me give you an example in simpler terms that may help..

Let's say I'm selling a house.I put a price on it..and the true value of that house is what a seller is wilng tompay..and I to accept.. The transaction could be completed in one day..

But assume I die, and my executor has to value the house for estate tax purposes, in order to file the requisie federal and state returns. The procedure to obtain a fair market valueat time of death requires that the executor get several appraisals, very detailed,a nd also comparable recent transactions..to document and support the assigned value..it's longer, harder, and must be able to withstand more detailed scrutiny than just a simple acceptance of an offer to buy/sell

5 posted on 08/11/2005 1:50:02 PM PDT by ken5050 (Ann Coulter needs to have children ASAP to pass on her gene pool....any volunteers?)
[ Post Reply | Private Reply | To 1 | View Replies]

To: ken5050

Isn't Fannie Mae a financial company? Isn't it their JOB to keep correctly priced asset on their books?


6 posted on 08/11/2005 1:55:19 PM PDT by hripka (There are a lot of smart people out there in FReeperLand)
[ Post Reply | Private Reply | To 5 | View Replies]

To: hripka
Why take one YEAR to go over their earnings? This is either incompetence or fraud. Comments?

Not 1 year, 5 YEARS. They are restating back to 2001.

FNM estimates it will take 1000 man-years to correct their books.

7 posted on 08/11/2005 1:56:48 PM PDT by AdamSelene235 (Truth has become so rare and precious she is always attended to by a bodyguard of lies.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: A. Pole; ex-Texan; Travis McGee; sine_nomine; balrog666; speekinout

Bubble Ping


8 posted on 08/11/2005 2:00:43 PM PDT by hripka (There are a lot of smart people out there in FReeperLand)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hripka
I don't mean to piss in anyone's Cheerios but as I've been saying for years:

If Fannie Blows, you lose:

Your "safe" money market 401K fund (full of short term FNM paper).

Your "high quality" bond funds.

The money center banks:JPM,C,D-bank (FNM derivative counterparties)

Many small banks (many of them hold GSE paper as cash equivalents).

The dollar

The housing market

Bummer, huh?

9 posted on 08/11/2005 2:05:14 PM PDT by AdamSelene235 (Truth has become so rare and precious she is always attended to by a bodyguard of lies.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: AdamSelene235
The press release says they will be done in the 2nd half of 2006. So it will take one year to fix several years of earnings mistakes.

The press release also says that it will take six to eight million labor hours to finish. 50 weeks times 40 hours per week is 2000 hours per year (one man-year) . Six million hours divided by 2,000 hours is THREE thousand man years to finish their books

10 posted on 08/11/2005 2:11:49 PM PDT by hripka (There are a lot of smart people out there in FReeperLand)
[ Post Reply | Private Reply | To 7 | View Replies]

To: ncountylee

This was Bill Clinton's sand box


11 posted on 08/11/2005 2:25:25 PM PDT by tom paine 2
[ Post Reply | Private Reply | To 2 | View Replies]

To: hripka
50 weeks times 40 hours per week

GoldBricker !

;-)

12 posted on 08/11/2005 2:32:29 PM PDT by AdamSelene235 (Truth has become so rare and precious she is always attended to by a bodyguard of lies.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: hripka
We are leaving no stone unturned. To accomplish this, we have to obtain and validate market values for a large volume of transactions including all of our derivatives, commitments and securities at multiple points in time over the restatement period. To illustrate the breadth of this undertaking, we estimate we will need to record over one million lines of journal entries, determine hundreds of thousands of commitment prices and securities values, and verify some 20,000 derivative prices.

And all while continuing to conduct our (fraudulent) business.

13 posted on 08/11/2005 2:43:39 PM PDT by balrog666 (A myth by any other name is still inane.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hripka

Has anyone mentioned Jean Gorelick (of wall infamy) yet?


14 posted on 08/11/2005 2:45:07 PM PDT by bvw
[ Post Reply | Private Reply | To 1 | View Replies]

To: bvw; Grampa Dave; Dog Gone; Ernest_at_the_Beach; BOBTHENAILER

Ding! Ding! Ding!


15 posted on 08/11/2005 2:47:56 PM PDT by SierraWasp (Iraq! Our exit strategy is... VICTORY!!!)
[ Post Reply | Private Reply | To 14 | View Replies]

To: bvw

See #4


16 posted on 08/11/2005 2:51:37 PM PDT by SierraWasp (Iraq! Our exit strategy is... VICTORY!!!)
[ Post Reply | Private Reply | To 14 | View Replies]

To: hripka
Of course I mean Jamie Gorelick, recently of Fannie Mae, of Unitied Technologies, etc. Also of Janet Reno et al at our f*d-up Justice Department during the Clinton reign of tyranny.

Here's a blast from 2002!

Q&A with Fannie Mae's Jamie Gorelick

The vice-chairman sees "a very, very strong 2002" and says Fannie and Freddie are "managed safely"

In the wake of the Enron disaster, Federal National Mortgage Assn. (Fannie Mae) and Federal Home Loan Mortgage Corp. (Freddie Mac), the federally chartered mortgage banks that experienced explosive growth in 2001, have come under increased scrutiny. Once again, Republicans in Congress are threatening to conduct an investigation into the activities of the two -- No. 7 and No. 2, respectively, on this year's BusinessWeek 50 list of top performers -- some say in hopes of revoking the portions of the Fannie and Freddie charters that gives an implicit government guarantee to their borrowing.

BusinessWeek Associate Economics Editor Margaret Popper spoke with Fannie Mae Vice-Chairman Jamie Gorelick for BW Online about the prospects for the coming year. Edited excerpts from their conversation follow:

Q: How did last year's economic turmoil affect your credit losses?

A: We are very well protected against credit losses, which fell to their lowest level in a generation -- since 1983 -- last year. They went from four basis points [0.04%] down to under one basis point [0.01%] of our outstanding portfolio. We believe that while credit losses may rise somewhat in the aftermath of the recession, they are likely to remain quite low in 2002.

(Excerpts from Business Week Online, Spring 2002
http://www.businessweek.com/bw50/content/mar2002/a3776033.htm)


17 posted on 08/11/2005 2:52:48 PM PDT by bvw
[ Post Reply | Private Reply | To 1 | View Replies]

To: SierraWasp

Is she still on the board of Defense, Industrial and Public Sector giant Unitied Technologies? She joined it in 2000. What a charmed life.


18 posted on 08/11/2005 3:02:53 PM PDT by bvw
[ Post Reply | Private Reply | To 16 | View Replies]

To: hripka
This doesn't sound very good. Why take one YEAR to go over their earnings? This is either incompetence or fraud. Comments?

The board is flush with democrat politicos. Obviously that is synonymous with fraud, and when caught they'll claim incompetence.

19 posted on 08/11/2005 3:06:29 PM PDT by Rightwing Conspiratr1 (Lock-n-load!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: hripka
In addition, we are bringing some 1,500 consultants on board by year's end to help with the restatement.

Oh yeah, when in doubt or at a loss for an explanation, bring in consultants.....plenty of 'em ;-)

20 posted on 08/11/2005 3:12:41 PM PDT by varon (Allegiance to the constitution, always. Allegiance to a political party, never.)
[ Post Reply | Private Reply | To 1 | View Replies]


Navigation: use the links below to view more comments.
first 1-2021-4041 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson