A senior House Democrat said yesterday that he will not support a budget increase for the federal regulator of Fannie Mae until questions raised in a confidential report have been addressed.
Rep. Barney Frank (Mass.), senior Democrat on the committee overseeing Fannie and its regulator, said in a letter to colleagues that an inspector general's report on how the Office of Federal Housing Enterprise Oversight examined the mortgage funding company's accounting "raises very serious issues which must be thoroughly discussed and addressed."
Frank said in an interview that the issues involve "the role that OFHEO has played." The report "has major public policy implications," but he could not be more specific because the report has not been made public, he said.
OFHEO has said recently that budget restrictions threaten to hamper its continuing investigation of Fannie Mae's accounting.
The Bush administration has proposed increasing OFHEO's annual budget from about $40 million to $59.2 million. In June, Frank joined House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) and others in endorsing that increase.
The Senate panel that oversees OFHEO's funding, chaired by Christopher S. Bond (R-Mo.), has proposed withholding $10 million of the regulator's budget until director Armando Falcon Jr. is replaced. Bond asked that the inspector general at the Department of Housing and Urban Development determine if any improper political influence affected OFHEO's scrutiny of Fannie Mae's accounting.
The report has not been made public because disclosure could "interfere with enforcement proceedings," the HUD inspector general's office said last month.
OFHEO spokeswoman Corinne Russell said the agency has not seen the inspector general's report, and she declined to comment. The regulator, in partial results of its review of Fannie Mae released in September, said the mortgage funding giant had violated accounting rules to make its financial results appear less volatile. The agency also alleged that Fannie Mae delayed booking $200 million in expenses in 1998, enabling several top executives to receive their maximum bonuses.
Fannie Mae chief executive Franklin D. Raines has criticized OFHEO for making its allegations public before they could be resolved. Raines said the agency's findings involve complex issues that could be interpreted differently.
Dan Gage, a spokesman for Rep. James T. Walsh (R-N.Y.), who chairs the House appropriations subcommittee that oversees OFHEO's funding, said: "Apparently Mr. Frank is no longer in favor of improved oversight responsibilities over two of the world's largest financial institutions."