Essay about Fannie Mae Case

1377 Words Nov 24th, 2007 6 Pages
Fannie Mae case.
Federal regulators noted a growing string of high profile scandals at major U.S. corporations in recent years. The number of fraud cases investigated by the Securities and Exchange Commission jumped 41 percent in the last three years (112 cases in 2001 compare to 79 cases investigated in 1998), resulting in tens of millions of dollars in fines to settle the charges.
I have decided to take a closer look at Fannie May. This company operates in the residential mortgage finance industry. It facilitates the flow of mortgage capital to increase the availability of homeownership for low, moderate, and middle-income Americans. Its lender customers are part of the primary mortgage market, where mortgages are originated and
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The effects on Fannie Mae, a highly politically connected company, could be enormous. The company holds over $1 trillion in assets, and purchases more mortgage loans than any other lender in the U.S.
When the accounting errors first emerged Fannie Mae estimated that there would be an adjustment of about $9 billion in its reported earnings over the contested period. That number has since increased to over $11 billion but may increase again as further irregularities discovered with insurance related issues. No estimate of these additional potential revisions is currently available.
On December 21, 2004, Franklin D. Raines stepped down as Chairman and Chief Executive Officer and J. Timothy Howard resigned as Chief Financial Officer. Raines' departure, at age 55, was structured as an early retirement. Under his employment agreement and the terms of the Executive Pension Plan, Raines is entitled to receive 60 percent of his "High-Three Total Compensation", which is his highest total compensation for three consecutive years during the last 10 years. Upon early retirement, this number is slightly reduced leaving him with estimated annual benefits of $1,085,462. Furthermore, the company's Stock Compensation Plan of 1993 allows all options to become immediately exercisable and fully vested upon early retirement. The 2003

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