Fannie Mae in Crosshairs
Sunday, December 26, 2004; Page F02
Under pressure from regulators, Fannie Mae ousted chief executive Franklin D. Raines and Chief Financial Officer J. Timothy Howard and replaced KPMG as its auditor. The actions followed a Securities and Exchange Commission ruling that Fannie had incorrectly accounted for hedge transactions; the SEC ordered a restatement that could reduce reported profit by $9 billion. Controversy swirled over severance packages for the executives. Acting chief executive Daniel H. Mudd vowed to put things right with regulators and Congress.
In ordering the arrest last year of Yukos oil tycoon Mikhail Khodorkovsky, Russian President Vladimir Putin accused him of buying state oil assets on the cheap. So last week Putin worked the same gambit in reverse, arranging for a state-owned oil company to buy Yukos's main production facility for a fraction of its market value in a rigged tax-auction. The move circumvented a Houston bankruptcy court's order to suspend the sale. The Bush administration said it raised serious questions about the rule of law in Russia.
A European Union court ordered Microsoft to offer European customers two versions of Windows -- one with its own media-playing software and one without -- to curb its domination of the PC software market. A similar remedy was once proposed in this country, only to be rejected by the courts and the Bush administration. The decision was the latest reminder of the extent to which U.S. companies are now subject to foreign regulation. Microsoft said it would comply with the ruling even as it pursues further appeals.
An Arlington engineering and construction company, Contrack International, withdrew from an Iraq reconstruction contract worth $325 million, saying that a deteriorating security environment made the task of rebuilding roads and bridges too dangerous to complete in a cost-effective manner. By some estimates, private security arrangements are adding 60 percent to reconstruction costs. The Pentagon said the decision was understandable and that the Iraq Project and Contracting Office would oversee management of Contrack's projects.
The Bush administration said savings from importing drugs from Canada would be largely offset by the cost of extra regulation to ensure that the drugs were safe. Even then, a special study panel said, importation would need to be restricted to licensed druggists handling a limited number of high-volume, high-cost drugs. The report echoed industry warnings that legalizing imports could discourage development of new drugs. A better way to cut drug costs, said Bush officials, would be to curb excessive litigation.