CAGW Announces Second Annual Award for Corporate Welfare

(Washington, D.C.) – Citizens Against Government Waste (CAGW) today named Fannie Mae its 2004 Corporate Turkey of the Year in recognition of how it has cooked the books in its growing accounting and corporate governance scandal.  Fannie Mae is a government-sponsored enterprise (GSE), mashed together by Congress and endowed with tens of billions of dollars worth of special privileges and exemptions.  Fannie Mae has been under scrutiny over the last several years because its securities enjoy the implied backing of the taxpayer, yet Fannie Mae (like its corporate cousin Freddie Mac) is exempt from many of the regulatory and accountability rules other major financial companies must comply with.

“Fannie Mae has used its special taxpayer-backed privileges and exemptions to leverage itself into a massive mortgage empire with virtually no outside supervision or accountability,” CAGW President Tom Schatz said.  “Now, it appears the company is showing the feathers we associate with Enron and Worldcom, putting taxpayers at enormous risk in order to receive huge executive bonuses and artificially inflate its stock price.  It is unconscionable that Congress has stood by and allowed Fannie’s corporate executives to game the system for personal gain, especially in one of the most vital and sensitive sectors of our economy, housing.”

Fannie Mae and Freddie Mac were created more than three decades ago in order to stuff cash into the nation’s mortgage market.  Since that time, the two GSEs have fattened into huge financial concerns.  With $942 billion in outstanding debt, Fannie Mae is the second largest debtor in the country behind the U.S. Treasury.  Fannie Mae and Freddie Mac have gobbled up almost half of the country’s $7.6 trillion mortgage market. 

In September, Fannie Mae’s regulator at the Department of Housing and Urban Development stated that Fannie Mae had engaged in “cookie jar” accounting in order to present gravy earnings to its investors, improperly accounted for its hedging transactions, and manipulated its accounting rules in order to trigger compensation bonuses for its top executives.  Fannie Mae may now have to carve down its earnings by $9 billion.  Fannie Mae, which had been operating under a voluntary disclosure agreement with the Securities and Exchange Commission, missed its deadline for filing its third-quarter earnings report because its accounting firm, KPMG, refused to certify the statement. 

“For using its special taxpayer-granted charter to line its executive’s pockets, and for using a Thanksgiving Day Parade of law firms, lobbyists, and advertising agencies to protect its sweet potatoes, rather than using its billions to help struggling families buy homes, Fannie Mae is the 2004 Corporate Turkey of the Year,” Schatz concluded.  “Fannie Mae is the poster child for corporate welfare.  Congress has had numerous opportunities to hunt this game bird in the past and has failed to corral the nation’s biggest wild turkey.  GSE reform must be at the top of the priority list when Congress reconvenes in January.” 

Citizens Against Government Waste is the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.