(Washington, D.C.) – Tom Schatz, President of the Council for Citizens Against Government Waste (CCAGW), today released the following statement in response to today’s announcement that Fannie Mae has restated its earnings by $6.3 billion for the period 2001 through June 30th, 2004:

“After two years of investigation and the expenditure of more than $1 billion on thousands of accountants, lawyers, and consultants, Fannie Mae yesterday publicly disclosed the full extent of its accounting transgressions and earnings manipulation between 2001 and mid-2004.  Fannie Mae officials now state that the company will have to restate its earnings for that period by $6.3 billion.  While many in the investment and financial community are hailing the announcement as a significant step forward for the beleaguered company and are relieved that the restatement is less than the $10.8 billion originally anticipated, taxpayers should take little comfort in this news.  The company, which, together with its cousin government-sponsored enterprise (GSE) Freddie Mac, owns or backs almost half of the nation’s $8 trillion residential mortgages and carries $1.4 trillion in debt, has still not filed financial statements for 2004 or 2005.  Had the New York Stock Exchange not passed a special exemption on its behalf, Fannie Mae would have been delisted for its failure to file timely financial reports.  Former Fannie Mae officials Frank Raines and Timothy Howard, who presided over the massive scandal and still managed to pocket millions in severance pay, have yet to pay back one cent of the compensation they received as a result of the inflated earnings reports that flourished under their leadership.  Most importantly, the GSEs are still not under the scrutiny of a bona fide federal regulator with broad, bank-like powers to ensure safety and soundness and to protect taxpayers from having to bail out a poorly-managed GSE.  Taxpayers have Congress to thank for that unwelcome development.   

“Over many years, members of Congress, many of whom were the beneficiaries of the GSEs’ financial and lobbying largesse, consistently turned a blind eye to incontrovertible evidence that Fannie and Freddie were engaging in risky activities outside their congressional charters.  Finally, in the wake of the high-profile scandals at both Freddie Mac in 2003, and Fannie Mae in 2004, Congress was forced to take action.  Yet, throughout the three years since, Congress dragged it feet and failed to adequately address the obvious need for tougher oversight of the GSEs.       

“In the face of intense pressure to rein in the GSEs, the Senate Banking Committee, under the leadership of Chairman Richard Shelby, finally passed sensible, ambitious, and comprehensive GSE reform to establish a tough new federal regulator for Fannie Mae and Freddie Mac, but could not get the bill to the floor for a vote before the November election.  And though incoming House Financial Services Chairman Barney Frank (D-Mass.) promises to pass GSE reform in the very early months of 2007, press reports indicate that the Bush administration is already compromising with Democrats on some of the bill’s most important elements, namely the ability of the new regulator to shrink the GSEs’ portfolios in order to protect taxpayers and ensure the soundness of the nation’s financial systems.  On behalf of its million members and supporters nationwide, CCAGW urges the Bush administration, the Treasury Secretary, the Director of the Office of Federal Housing Enterprise Oversight, and members of the 110^th Congress to stand behind a bill that includes strong legislative language shrinking the GSEs’ mortgage-backed securities portfolios.  Restraining the GSEs’ growth and forcing them to refocus on their congressionally-chartered mission is the only way to protect taxpayers from a potential GSE bailout and safeguard the nation’s entire financial system in the event of a GSE bankruptcy.”

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.