Will Fannie Mae's troubles ease? Will Franklin Raines's get worse?
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The priority for 2006 at mortgage finance company Fannie Mae is getting its books in order. An army of employees is busy completing its estimated $10.8 billion accounting restatement. Leading the effort will be Robert T. Blakely, who is credited with cleaning up the books at MCI Inc., formerly WorldCom Inc., and restating $11 billion in previously reported earnings.
As Fannie Mae tackles that job, it will have to relive some of the dark days of 2004. A report on the company's management and accounting practices, commissioned by the board of directors, is expected this month, followed by a report from the company's chief regulator, the Office of Housing Enterprise Oversight. The reports could provide ammunition to Fannie Mae's critics on Capitol Hill, such as Senate Banking Committee Chairman Richard C. Shelby (R-Ala.), who hopes to bring to a vote his bill to strengthen regulation of Fannie Mae and Freddie Mac.
After keeping a low profile during 2005, former Fannie Mae chief executive Franklin D. Raines could also be back in the spotlight in 2006. The two reports on Fannie Mae are likely to explain in more detail the role he played in the accounting scandals. Next year, a federal judge in Washington is expected to decide whether a shareholder lawsuit against Raines and Fannie Mae can go forward, unless the parties settle out of court first.
-- Annys Shin
