[Congressional Record Volume 152, Number 67 (Thursday, May 25, 2006)]
[Senate]
[Page S5217]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005

  Mr. McCAIN. Mr. President, this week Fannie Mae's regulator reported 
that the company's quarterly reports of profit growth over the past few 
years were ``illusions deliberately and systematically created'' by the 
company's senior management, which resulted in a $10.6 billion 
accounting scandal.
  The Office of Federal Housing Enterprise Oversight's report goes on 
to say that Fannie Mae employees deliberately and intentionally 
manipulated financial reports to hit earnings targets in order to 
trigger bonuses for senior executives. In the case of Franklin Raines, 
Fannie Mae's former chief executive officer, OFHEO's report shows that 
over half of Mr. Raines' compensation for the 6 years through 2003 was 
directly tied to meeting earnings targets. The report of financial 
misconduct at Fannie Mae echoes the deeply troubling $5 billion profit 
restatement at Freddie Mac.
  The OFHEO report also states that Fannie Mae used its political power 
to lobby Congress in an effort to interfere with the regulator's 
examination of the company's accounting problems. This report comes 
some weeks after Freddie Mac paid a record $3.8 million fine in a 
settlement with the Federal Election Commission and restated lobbying 
disclosure reports from 2004 to 2005. These are entities that have 
demonstrated over and over again that they are deeply in need of 
reform.
  For years I have been concerned about the regulatory structure that 
governs Fannie Mae and Freddie Mac--known as Government-sponsored 
entities or GSEs--and the sheer magnitude of these companies and the 
role they play in the housing market. OFHEO's report this week does 
nothing to ease these concerns. In fact, the report does quite the 
contrary. OFHEO's report solidifies my view that the GSEs need to be 
reformed without delay.
  I join as a cosponsor of the Federal Housing Enterprise Regulatory 
Reform Act of 2005, S. 190, to underscore my support for quick passage 
of GSE regulatory reform legislation. If Congress does not act, 
American taxpayers will continue to be exposed to the enormous risk 
that Fannie Mae and Freddie Mac pose to the housing market, the overall 
financial system, and the economy as a whole.
  I urge my colleagues to support swift action on this GSE reform 
legislation.

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