GSE accounting: Clear to you ain’t clear to me
According to the SEC, the accounting requirements that Fannie Mae violated are no puzzle at all, but rather:
“clear” and “not overly complex,” the chief accountant of the Securities and Exchange Commission told a House subcommittee yesterday.
Donald T. Nicolaisen, who in December directed Fannie Mae to correct its financial statements back to 2001, said, “I have reason to believe that the standards are workable and are being followed” by other companies. District-based Fannie Mae has estimated that the corrections could erase $9 billion of previously reported profit.
House Financial Services Committee chairman Richard H. Baker saw further vindication in the SEC’s conclusions:
“The unfortunate finding of the SEC is that the accounting practices of Fannie Mae were not just an exercise of bad judgment, or a one-time aberrant act, but a consistent misapplication, at best, or at the worst, an intentional act of accounting misrepresentation,” said Baker, a longtime Fannie Mae critic.
More significantly, the hearing now platforms the Chair to propose the new tougher regulator:
[Rep. Baker] said he plans to introduce a bill next month to create a stronger regulator for Fannie Mae and rival Freddie Mac.
Whoever it is must make sure taxpayers get plenty of affordability value for the GSEs’ awfully big advantages.
