Fannie Mae's chief financial officer, J. Timothy Howard, fought for years against the accounting regulations at the heart of the company's current financial crisis.
Howard complained to the Financial Accounting Standards Board before the regulations were adopted in January 2001 and continued to plead for change long after, arguing that they were costing money and making Fannie Mae's financial statements needlessly confusing, according to documents released by the board.
J. Timothy Howard isn't as well-known as Franklin D. Raines, but Fannie Mae's chief financial officer had considerable influence behind the scenes.
(Susan Biddle -- The Washington Post)
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Now, Howard's aggressive management of Fannie Mae finances are under the microscope of federal investigators as Fannie Mae faces the prospect of restating earnings and erasing $9 billion in profit reported since 2001.
Through a company spokeswoman, Howard declined to comment for this article.
A 22-year veteran of Fannie Mae, Howard, 56, has been chief financial officer since 1990. He was never as high-profile as Fannie Mae's chief executive, Franklin D. Raines, but wielded great behind-the-scenes power. A September report from the Office of Federal Housing Enterprise Oversight said Howard's wide influence led to conflicts of interest as he both set financial goals and then oversaw the accounting of whether those goals were met.
In December 2000, the accounting board was about to put into effect the rule that now has Fannie Mae in trouble with the Securities and Exchange Commission -- a regulation called FAS 133 that governs how companies account for financial instruments called derivatives. "We have been preparing for the advent of FAS 133 for the past three years," Howard told investment analysts in a conference call at the time. "We've been in a continual substantive dialogue with the FASB on the workings of FAS 133, and we now are widely viewed as a leading source of expertise on its implementation."
But after FAS 133 took effect, Howard continued to write letters to the chairman of the accounting board complaining that the regulation was onerous. It forced Fannie Mae to show paper liabilities that would never be realized, he wrote in January 2002, and "represents a deadweight economic cost to our investors."
Citing a giant corporate scandal in the news at the time, Howard assured the FASB chairman that "Fannie Mae is almost the polar opposite of Enron. We strive for the utmost clarity in our financial reports."