Fannie Mae to employees: Stay off Wall Street
|May 6, 2005|
Employees reportedly barred from buying, selling stock
Fannie Mae has barred its 5,000 employees from buying or selling company stock, according to a report in today's Washington Post.
The trading ban was announced in an e-mail sent to employees Friday evening, the Post reported. Fannie took the step because "it felt it was the prudent course of action," spokesman Charles V. Greener told the Post.
The troubled mortgage giant was directed late last year to make accounting corrections that could knock out some $9 billion of Fannie Mae's past profit. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae's chief financial officer, Timothy Howard, resigned Dec. 21.
Fannie Mae's financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.
Fannie Mae has now told workers to abstain from buying or selling company stock, saying the move is designed to protect them from inadvertently violating securities laws triggered when insiders trade while they are aware of material information that is not widely available in the market, reports said.
The company cited its "inability to make public filings with the Securities and Exchange Commission, the increasing number of employees supporting our restatement effort, and the continuing progress of internal and external reviews and investigations" as a rationale for the ban, according to the e-mail, the Post reported.
A small group of Fannie executives with access to sensitive financial information had been subject to a trading blackout since September, reports said. The new policy extends the ban to employees at all levels of the company, the Post said. Fannie officials did not say how long the blackout would last and have not given a timetable for the restatement, according to reports.
For some workers, the ban could be lengthy, lifting only when the company has filed financial statements with the SEC, according to the Post. Other employees could be released from the restrictions as more information about the scope of the restatement becomes public, reports said.
Both Fannie Mae and fellow government-sponsored enterprise, or GSE, Freddie Mac face heavier regulation and calls for portfolio limits in the wake of the accounting irregularities uncovered late last year. Daniel Mudd Fannie Mae's interim CEO Daniel Mudd
Daniel Mudd, Fannie Mae's interim chief executive officer, in April acknowledged to Congress that the mortgage giant "has disappointed a lot of people," pledging to "put our house in order."
Armando Falcon Jr., head of the Office of Federal Housing Enterprise Oversight, which regulates Fannie Mae, testified before the Senate Banking Committee in April. Pressing for legislation to regulate the GSEs, Falcon outlined six basic principles to guide such legislation in his prepared remarks.
"The regulator must remain independent; the regulator must be permanently funded, outside the appropriations process; the regulator must have powers equal to those of other safety and soundness regulators; the regulator must have full discretion in setting capital standards; the regulator’s mandate must be enhanced; and the legislation should build on progress already made," said Falcon, director of the Office of Federal Housing Enterprise Oversight.
Copyright 2005 Inman News