Fannie Mae Releases 2005 Financial Results
Wednesday, May 2, 2007; 11:18 AM
Mortgage giant Fannie Mae took a step closer to resolving its long-simmering accounting problems today when it released full financial results for 2005 and indicated that its 2006 results will likely be finished by the end of the year.
The District-based firm also announced the appointment of a new chief financial officer, Stephen M. Swad, who joins the company from AOL and brings a background in the accounting issues that led to many of Fannie's problems.
In releasing its 2005 financial statements, the company reported earning $6.3 billion, a 26 percent increase over the year before.
But more importantly, the release marks another milestone in the company's effort to work through an accounting scandal that prompted the ouster of its top management and raised allegations that Fannie Mae executives had manipulated the books in order to maximize their bonuses. Federal authorities are trying to recoup tens of millions of dollars in bonuses from former Fannie chief executive Franklin D. Raines. The company itself paid $400 million in penalties to settle with the Securities and Exchange Commission.
In a statement this morning, Fannie Mae Chief Executive Daniel H. Mudd characterized today's release of the 2005 records as part of the company's "steady march" toward clearing up problems that led it to overstate profits by about $6.3 billion beginning in the late 1990s.
The announcement of Swad's appointment is another sign that Fannie Mae is emerging from its internal troubles.
The current financial chief, Robert T. Blakely, was hired after helping clean up the books at the former MCI Inc. He will continue in the job during a transition period as the company finishes its 2006 financial filings, and will leave Fannie Mae at the end of the year.
Swad will bring the company's 2007 quarterly reports up to date.
A former Time Warner vice president, Swad until February was the chief financial officer at the media conglomerate's AOL subsidiary. He left as part of a broader reorganization at the company -- reportedly to work at a private equity firm.
Fannie officials said his hiring will add expertise in some of the issues that have plagued the company in the past, particularly the accounting for financial instruments known as derivatives. Swad was a deputy chief accountant at the SEC and helped developed the accounting and disclosure rules governing derivatives.