Reply #61: Faulty accounting costs Fannie Mae another $850m

[54anickel]

http://www.boston.com/business/globe/articles/2006/11/09/faulty_accounting_costs_fannie_mae_another_850m/

WASHINGTON -- Fannie Mae, the largest U S mortgage finance company, said it will spend $850 million this year to fix accounting errors and complete a $10.8 billion restatement.

The government-chartered company, which in May estimated it would spend $800 million this year revamping its bookkeeping, will also spend more than $200 million preparing financial statements and filing reports to the Securities and Exchange Commission, Fannie Mae said in a regulatory filing yesterday.

The $200 million "is a pretty eye-popping number for six months of regular, ongoing financial statement preparation," said Matthew Park, an analyst at Prudential Equity Group Inc. in New York. The spending disclosed yesterday increases the total cumulative costs from the faulty accounting to $1.62 billion.

Fannie Mae has said the money will be used to pay auditor Deloitte & Touche LLP, law firm Paul, Weiss, Rifkind, Wharton & Garrison, and hundreds of consultants. The costs will continue to have a "substantial impact" on administrative expenses until the company is current in filing with the SEC, Fannie Mae said.

"These are huge numbers," chief executive Daniel Mudd told analysts in a conference call yesterday. "As your CEO I'm obviously anxious and I'm obviously going to drive to have expenses return to a more normalized range."

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