Fannie Mae Defends Its Reputation; CEO Decries Confusion With Freddie Mac Woes
Franklin D. Raines, the chief executive of mortgage funding giant Fannie Mae, said yesterday that an accounting scandal at rival Freddie Mac has unfairly tarred his company and has contributed to higher interest rates for consumers.</br></br>"I think it's been devastating to the reputation of these firms, and I think it has caused material harm to consumers," Raines said at a news conference.</br></br>"I've jokingly said to friends that I now know what the definition of collateral damage is, and we have suffered a lot of that, I think unfairly," Raines added. "Unlike Freddie Mac, we didn't do any of these things."</br></br>Fannie and Freddie, which share a special federally chartered status, are both in the business of buying mortgages from lenders and repackaging them into securities for sale to investors. They and their private-sector competitors play a major role in the housing market by replenishing the funds lenders can provide to people buying and refinancing homes.</br></br>Freddie Mac disclosed last month that it is correcting $1.5 billion to $4.5 billion in accounting errors. The company engaged in complicated, multibillion-dollar transactions with minimal business justification to deliver the smooth earnings growth that Wall Street favors, and made elaborate efforts to circumvent a new accounting rule and obscure its impact, according to a report commissioned by Freddie's board of directors.