Senators Grill Fannie Mae Chief
Friday, June 16, 2006
Fannie Mae chief executive Daniel H. Mudd came under fire yesterday from members of a Senate committee who questioned how he could have been unaware of the company's alleged accounting fraud.
Mudd was chief operating officer during the years in which regulators have concluded that the housing finance company manipulated its accounting to maximize executive bonuses.
"I'm astounded you would even stay with this institution," Sen. Chuck Hagel (R-Neb.) told Mudd at a hearing of the Senate Banking Committee. "Have you thought about resigning?"
Mudd, who was promoted after the accounting scandal cost Franklin D. Raines the combined job of chairman and chief executive, said he did not like "the old Fannie Mae" any more than Hagel did and was "as shocked as anyone" when Fannie's accounting problems came to light.
Mudd said he thought about leaving but is "not a quitter" and stayed to fix Fannie's problems.
Hagel countered that Mudd's $8 million compensation package last year might have had something to do with the decision.
Yesterday's hearing was held to review a report by the Office of Federal Housing Enterprise Oversight, which detailed widespread accounting violations and described an executive culture fixated on hitting bonus targets.
OFHEO Director James B. Lockhart III, who also was confirmed in his job by the Senate yesterday, said during a break in the hearing that as far as his agency was concerned, whether Mudd should keep his job remained an open question.
In a settlement with the Securities and Exchange Commission and OFHEO, Fannie recently agreed to pay penalties of $400 million. The SEC and the Justice Department still are investigating the conduct of individual executives.
Raines and outgoing audit committee Chairman Thomas P. Gerrity declined invitations to testify yesterday.
Board Chairman Stephen B. Ashley, a director of the company since 1995, also faced sharp questioning.
"I think you failed, the entire board failed. . . . Now, can you sit there and tell this committee that you knew nothing about what was going on?" Hagel asked.