News Article - 10 September 2008
Category:

Fannie Mae and Freddie Mac, the two US mortgage lenders, have been accused of creating a "house of cards" with their business processes.

The accusation came from US senator Richard Shelby, of Alabama, the senior Republican member of the Senate Banking Committee, after a briefing by Treasury officials.

He said that both companies had used accounting rules to hide difficulties, with the treasury secretary Hank Paulson and regulator James Lockhart only recently realising the extent of the problem.

"Once they got someone looking closely at Fannie and Freddie's books, they realised there just wasn't adequate capital there," said Mr Shelby.

"They found out they had a house of cards."

Top executives of Fannie now stand accused of lying about the firm's finances and face a class action.

The lender's former chairman Stephen Ashley, ex-chief executive David Mudd, chief financial officer Stephen Swad and chief business officer Robert Levin have all been named in the action.

Article keywords:

---

More industry news

• Think tank warns UK may have already slipped back into recession
• Growing demand for HR staff in technology and international sectors
• Boosting business growth a ‘priority’ to avoid Eurozone slowdown
• HMRC launches alternative disputes pilot scheme this week
• December employment statistics disregard gloomy recruitment predictions
• Eurozone manufacturing PMI shows modest improvement
• UK scores highly for economic governance by ratings agency
• Government launches two-year project focusing on manufacturing sector
• Burden of regulation on UK businesses ‘too high’

Back to news home page »