[Congressional Record Volume 150, Number 119 (Tuesday, September 28, 2004)]
[Senate]
[Pages S9806-S9807]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  OFHEO'S INVESTIGATION OF FANNIE MAE

  Mr. HAGEL. Mr. President, the Office of Federal Housing Enterprise 
Oversight's, OFHEO, findings-to-date report on its ``Special 
Examination of Fannie Mae'' is deeply troubling. It raises serious 
doubts about the ability of Fannie Mae's management to correct the 
safety and soundness problems at Fannie Mae. What is most troubling is 
that OFHEO had to use subpoenas in order to conduct its congressionally 
authorized investigation of Fannie Mae. Fannie Mae's resistance to 
cooperate with this investigation is unacceptable.
  Based on the findings in OFHEO's report, it is clear why OFHEO's 
requests were repeatedly rebuffed by a stonewall of silence and why 
Fannie Mae's management insisted on keeping its financial operations in 
a black box. OFHEO's report shows among other things that Fannie Mae's 
top management indulged in a windfall of bonuses after it improperly 
manipulated the company's annual earnings. If these actions are found 
to be deliberately linked, then the board of Fannie Mae needs to take 
appropriate action and address the problem, just as the board of 
Freddie Mac did last year.
  The boards of both GSEs have a fiduciary responsibility to their 
shareholders and the public to ensure that

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any improper actions by management are dealt with swiftly and 
accordingly. The confidence in the GSEs has a direct impact on the 
stability of the American economy. The American people and the markets 
must have confidence in the operations of the congressionally chartered 
Fannie Mae and Freddie Mac.
  We need to build upon legislation that several of my colleagues and I 
introduced last year. The Senate Banking Committee passed a watered 
down version of our legislation, but it is clear from OFHEO's findings 
that it is not adequate. To prevent these serious actions from 
occurring, the new GSE regulator must have at a minimum the same powers 
and resources as those of other financial regulators such as the 
Federal Reserve System, the Federal Deposit Insurance Corporation and 
the Office of the Comptroller of the Currency.
  House Banking Subcommittee Chairman Richard Baker has scheduled a 
hearing next week to examine the problems at Fannie Mae. There are 
still too many unanswered questions and I look forward to seeing the 
results of the House hearing. Given the frequency of the accounting 
problems, pattern of manipulation and questionable management actions 
at both Freddie Mac and Fannie Mae, Congress can no longer look the 
other way.

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