Fannie Mae shares soar on accounting news
January 6, 2006
Investigator says team found no new financial problems
Fannie Mae shares soared more than 9 percent Thursday after an investigator hired by the mortgage finance giant indicated he had discovered no new accounting problems, media reports said.
Former New Hampshire Republican Sen. Warren Rudman on Wednesday said he was still drafting parts of his report on Fannie's multibillion-dollar accounting problems and was reviewing new documents in the case, Reuters reported.
But he said his legal team had the information it needed, and indicated that nothing had been uncovered that had not already been disclosed, saying, "I think we probably have most of what we need," and noting the final report could be delayed until February due to new documents, accounts said.
Analysts told Reuters that Rudman's comments were driving Fannie's stock higher on Thursday.
The shares jumped more than 9 percent, hitting an intraday high of $53.60 -- a price not seen since August. The stock at midday traded up $4.54, or 9.3 percent, at $53.29 on the New York Stock Exchange.
The stock was still strong this morning, trading at $58.58 at mid-morning.
"He made the comment that there's nothing new," Ed Groshans, analyst at Fox-Pitt, Kelton, told Reuters. "That alleviates a lot of the concerns in this stock."
"You're starting to see a little bit of a relief rally," Groshans said, according to accounts.
Fannie's stock has been plagued by the company's accounting problems, which are still under investigation and will likely lead to a profit restatement of as much as $11 billion.
In 2003, the Office of Federal Housing Enterprise Oversight discovered accounting irregularities by Fannie Mae, setting off shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission. As a result, the company will have to restate earnings by as much as $12 billion.
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.
Copyright 2006 Innam News