Rudman to Testify on Fannie Mae Report
March 9, 2006
Financial Services Committee Chairman Michael G. Oxley (OH) has announced the Committee will convene for a hearing to examine the findings of the recent investigation led by former Senator Warren B. Rudman into Fannie Mae's accounting and corporate governance problems on Tuesday, March 14, at 2 p.m. in room 2128 of the Rayburn Building.
The hearing, entitled Review of the Rudman Report on Fannie Mae, will cover accounting irregularities and other issues addressed in the Rudman Report to the Special Review Committee of the Board of Directors of Fannie Mae.
Capital Markets Subcommittee Chairman Richard H. Baker (LA) said, "The Rudman Report confirms many of the concerns expressed by Committee members about the dangers posed by the combination of the size, implicit government guarantee, and inadequate oversight of the housing Government Sponsored Enterprises (GSEs), and provides further evidence of the urgent need to address these concerns by passing GSE reform. I look forward to exploring these issues and other findings in the report with Senator Rudman when he appears to present it to the Committee."
The findings in the Rudman report include: Fannie Mae’s accounting policies in virtually all areas reviewed were inconsistent with Generally Accepted Accounting Practices (GAAP); management was motivated by an interest in showing stable earnings growth and achieving forecasted earnings; accounting systems were grossly inadequate; and corporate culture suffered from an attitude of arrogance.
Chairman Oxley said, “I look forward to hearing Senator Rudman’s insights on Fannie Mae’s accounting issues. The members of the Financial Services Committee have been concerned about the accounting irregularities at the GSEs and we have worked diligently to improve oversight of the GSEs. It’s important that Congress act soon to send the President bipartisan legislation that would create a stronger regulator. The House has approved H.R. 1461 to do just that and I hope my colleagues in the Senate will act soon.”
Fannie Mae is regulated for safety and soundness by the Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO launched an investigation into accounting irregularities at Fannie Mae in 2003 and released its findings in a September 2004 report.
The Financial Services Committee has been at the forefront in reforming regulation of the GSEs, holding over 20 hearings and receiving testimony from over 100 witnesses since the 106th Congress. In October 2005, the House overwhelming approved legislation introduced by Capital Markets Subcommittee Chairman Baker to create a new, world-class regulator for Fannie Mae, Freddie Mac and Federal Home Loan Banks.
Fannie Mae and Freddie Mac were charted by Congress to establish and maintain a secondary mortgage market. Fannie Mae and Freddie Mac provide liquidity to the primary mortgage market by purchasing mortgages from lenders, financing their purchases by issuing debt securities. They also repackage mortgages in the form of mortgage-backed securities and guarantee payments to investors.
Scheduled to testify:
- The Honorable Warren B. Rudman, Partner, Paul, Weiss, Rifkind, Wharton & Garrison LLP
Source: Financial Services Committee