| For Immediate Release | Contact: Mark Carpenter/Tom Finnigan | |
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(202) 467-5300 |
(Washington, D.C.) – The Council for Citizens Against Government Waste President Thomas A. Schatz today issued the following statement in response to the letter sent by the Office of Federal Housing Enterprise Oversight (OFHEO) to Fannie Mae Chairman Franklin Raines ordering the company to recalculate losses on some of the bonds it holds in its $1 trillion portfolio:
“The possibility of an earnings restatement comes amid growing unease about the growth and accounting practices of the three housing government-sponsored enterprises (GSE), Fannie Mae, Freddie Mac and the Federal Home Loan Bank System. There is a growing awareness and understanding in Congress that these entities must have stronger oversight and more accountability. OFHEO’s audit of Fannie Mae is the latest in an unfortunate trend of companies and their accountants claiming their accounting procedures are clean when they are not. The bonds in question include $8 billion in securities backed by mobile homes and another $300 million backed by aircraft leases. The recalculation may force the company to restate earnings downward, but it is unclear by how much.
“The Teflon is wearing off of Fannie Mae’s image. The company has spent millions of dollars on an army of lobbyists and public relations minions to promote its housing-related mission as well as blanketing Capitol Hill to hedge Fannie’s political risk. Rather than continuing to hide behind that smokescreen, it is time for Congress to act to put Fannie Mae and all the GSEs under stringent oversight rules. It is unconscionable that Congress would allow the accounting procedures of the third largest financial institution in the country to remain this impenetrable. While the bonds in question are a small part of Fannie Mae’s portfolio, OFHEO’s demand for a restatement of earnings raises the prospect of additional surprises in the company’s books.
“If Fannie Mae spent as much time and energy on determining the appropriate value of all of its holdings as it does on running ‘American Dream’ ads and subverting attempts to enact reform legislation in Congress, there might not be any letters from OFHEO about its financial statements. Fannie Mae carries $1.7 trillion in debt. It also has special taxpayer-backed advantages, including tax exemptions and lines of credit at the U.S. Treasury, plus an implied taxpayer-backed guarantee, together worth about $20 billion annually, according to the most recent numbers from the Congressional Budget Office. About one-third of that corporate welfare subsidy, approximately $6.7 billion, is being retained by GSE executives and GSE shareholders.
“The OFHEO letter is just the latest in a recent line of questions about the financial status of Fannie Mae and the other GSEs. Taxpayers deserve answers and action that will protect them from potentially being subject to a massive bailout.”
The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.