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Fannie's Troubles May Hit Big Donor

After Firm's Accounting Scandal, Charitable Foundation Asked to Look for Budget Cuts

By David S. Hilzenrath
Washington Post Staff Writer
Thursday, April 14, 2005; Page E01

The Fannie Mae Foundation, one of the Washington area's major charitable donors, is preparing potential budget cuts as a result of financial troubles at its benefactor, the government-chartered housing finance company Fannie Mae.

The cuts would add to the local fallout from an accounting scandal that has sent Fannie Mae's stock plunging, toppled senior executives and prompted the company to withdraw from a major redevelopment project in Southwest Washington.

The Bryant Early Learning Center has received support from the Fannie Mae Foundation, which gave $61.4 million in grants last year. (James M. Thresher -- The Washington Post)

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Fannie, which is working on an accounting restatement that will erase billions of dollars of previously reported earnings, is under orders from regulators to raise capital and fill a hole in its balance sheet.

The foundation's management plans to present spending cut proposals to its board at an April 21 meeting, said Glen S. Howard, the foundation's senior vice president and general counsel. Howard would not discuss the potential extent of the cuts.

"We're looking at everything," he said.

The executive committee of the foundation board, which consists of Fannie Mae interim chief executive Daniel H. Mudd and two other Fannie Mae corporate executives, requested the proposals last month, foundation officials said.

"All of our resources come from them, so it shouldn't be surprising that we are affected by their cost-cutting as well," Howard said. "As far as what's going to happen, I don't know."

A spokeswoman for the company, Janice Walker, declined to discuss Fannie's plans for funding the foundation, saying only, "We are looking overall at our administrative costs."

The foundation, which employs about 90 people and paid its top executive more than half a million dollars in 2003, has a budget this year of about $92.5 million. It awarded $61.4 million in grants last year, of which $25.3 million was for District-based organizations. Those numbers included commitments to be paid in future years.

The money was for causes as diverse as the Northwest Washington Little League, the Capital Area Food Bank and a company that builds homes in Anacostia. Major grant recipients also have included the Enterprise Foundation, which supports affordable housing; Harvard University; the Brookings Institution; the John F. Kennedy Center for the Performing Arts; and Habitat for Humanity International.

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