GSE's Afire (my title)

www.gsereport.com ^ | Feb 13, 2006 | Canfield & Assoc.

[Attention Surplus Disorder]

” As investigations by OFHEO, the SEC and Department of Justice into the company's accounting irregularities continue, Fannie Mae announced an unusual change to its long-term bonus plan…Dan Mudd, who was officially installed as Fannie Mae's CEO in June, received $11.5 million in total compensation in 2005, which included a cash bonus of $2.6 million, an annual salary of $950,000, and $8 million in restricted stock… Newly installed Chief Business Officer Rob Levin received $8.9 million in total compensation, including a cash bonus of $1.8 million, $4.3 million in restricted stock and an additional $2.1 million in restricted cash paid in lieu of Fannie's usual stock reward. Chief Operating Officer Michael Williams received total compensation of $7 million, which included a cash bonus of $1.4 million, $3.4 million in restricted stock and $1.7 million in restricted cash. Peter Niculescu, who manages Fannie Mae's portfolio, received $4.1 million in compensation, which included a cash bonus of $909,000, $1.8 million in restricted stock, and $886,000 in restricted cash. Chief Information Officers Julie St. John received approximately $3 million in total compensation, which included a cash bonus of $744,000, $1.2 million in restricted stock, and $583,000 in restricted cash.

According to the company's 8K filing, Fannie Mae's executive pay decisions reflected performance against goals involving the GSE's financing of housing for low-income people, progress on the restatement process and improved relations with regulators, among other factors. (Dow Jones Newswires, Dawn Kopecki, 02/08/06; Wall Street Journal, James R. Hagerty, 02/09/06) “

[unsnip] OH YEAH every corporate executive should IMHO get multi million dollar bonuses for filing the financial statements that they are required to file by law!

”Senate Banking Committee Chairman Richard Shelby (R-AL) said that Fannie Mae may reveal more accounting errors that led the company to an estimated $10.8 billion restatement of earnings. “There will be other shoes to drop,” said Shelby, noting that Fannie and Freddie “have had horrendous accounting problems, and we still don't know what's out there.”

[unsnip]

When this thing blows.....

[Attention Surplus Disorder]

Despite being two years behind in supplying normal financial statements to the SEC in response to their ongoing investigation, Fannie Maes' directors have decided to give themselves substantial raises. Pretty neat, huh?

[hripka]

If Fannie Mae goes, what happens to housing?

[Attention Surplus Disorder]

I don't have a specific answer for you. I am pretty bearish on housing prices, so that may color my viewpoint. If you understand Fannies/Freddies roles in creating the secondary market for mortgages, plus the history of what "conforming" mortgages used to be as opposed to what they are today; which, in turn has created and supported the GIANT boom in creating retail mortgages; the disappearance of these entities would make it much harder to obtain morts, that's for sure. Whether that would have a direct effect on housing prices I'll refrain from saying, but the implication is IMO fairly clear.