An examination of the Fannie Mae scandal and the recent changes in corporate governance.
Written in 2006; 3,407 words; 15 sources; MLA; $ 96.95
Paper Summary:
In this paper the author examines the scandal that surrounds the Fannie Mae company (also known as The Federal National Mortgage Association), which is a U.S. government chartered company, providing mortgages for low-income persons. The author looks at the Fannie Mae company together with its rival Freddie Mac as accounting for half of America's home mortgages. The author proceeds to detail the scandal that surrounded the Fannie Mae company as a result of the accounting strategy which helped the company hit its earnings-per-share targets and rewarded the top executives generously. The author also details the response of Fannie Mae to the findings against them. The paper discusses the Sarbanes-Oxley Act of 2002 which was instituted to try and prevent these sorts of scandals in large corporations. Finally, the author concludes that with the deadline of the new Sarbanes-Oxley Act, there will probably be more significant changes in the future.
Outline:
Introduction
Background of Fannie Mae Scandal
Fannie Mae's Response
Issue
Recent Changes in Corporate Governance Which May Help Elevate Problems
Recommended Changes in Corporate Governance for Fannie Mae
Conclusion
From the Paper:
"However, Fannie's assertions may not have been completely true. As regulators began to look into Fannie Mae's accounting records, it was discovered that Fannie Mae was plagued with many of the same problems present in Freddie Mac. "Armond Falcon Jr., top federal regulator of the two home mortgage financing agencies, Fannie Mae and Freddie Mac, accused Fannie Mae officials of pervasive and willful misapplication of standard accounting rules." (Toedtman, 2004, p. A57) Targets of the investigation for mismanagement were the top two offices in the company. At the management helm of Fannie Mae is Chief Executive Office Franklin D. Raines, who served as White House Budget Director during the Clinton administration, followed by the Chief Financial Officer, Timothy Howard, who has the primary responsibilities for fiscal management."
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