Reps. Oxley and Baker Announce Hearings to Examine Freddie Mac
June 10, 2003
House Financial Services Committee Chairman Michael G. Oxley (OH) today announced that the Capital Markets Subcommittee, chaired by Rep. Richard H. Baker (LA), will hold one or more hearings to examine accounting issues at Freddie Mac, as well as the regulatory oversight of the housing government sponsored enterprises.
Freddie Mac, like Fannie Mae, is a federally chartered, publicly traded company created by Congress to bolster the nation's housing market through a secondary mortgage market.
Following the replacement of top executives at Freddie Mac over the weekend, reports have indicated that the management shake-up may be due in part to accounting irregularities. Freddie was forced to restate its earnings for 2002, 2001, and 2000 earlier this year.
In its annual report [pdf] to Congress last Wednesday, June 4, Freddie Mac's safety and soundness regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), wrote that "we remain satisfied that the board of directors and executive management are taking the appropriate action"with regards to the earnings restatement.
Just three days later, in a letter dated June 7 [pdf] and released on Monday, OFHEO Director Armando Falcon told Freddie Mac's board that "the removal of the management team only goes a part of the way toward correcting serious problems – concerns surrounding management practices and controls remain.”
"Congress needs to get the true story about what was happening at Freddie Mac and what top management was really doing to resolve questions about the company's books. But we should be just as concerned to find out what regulators knew -- or didn't know -- about what was going on there, why they didn't know, and what they were doing about it since January,"Baker said. "These housing GSEs are too important and have too great a role in financial markets for Congress not to make sure adequate and effective oversight is in place to protect investors, homebuyers, and taxpayers from missteps like this ever happening again.”