Apology for Accounting Failures May Have Been Premature

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“I am sorry,” Daniel H. Mudd, interim chief executive of mortgage giant Fannie Mae to ld the Senate Banking Committee last week. Mudd's comments were made as Fannie Mae and Freddie Mac regulator, the Office of Federal Housing Enterprise Oversight (OFHEO) and other agencies prepared to testify that a new independent regulatory agency needed broad powers to limit the companies' holdings.

The Securities and Exchange Commission (SEC), OFHEO and the Department of Justice are investigating accounting problems including altering the books with phony signatures to trigger bonuses for top executives at Fannie Mae. On Tuesday, Armando Falcon of the OFHEO, told the Associated Press in an interview that the accounting scandal could spill into the housing industry and make it difficult for homebuyers to obtain mortgages.

If the OFHEO and other agencies hadn't acted, Falcone said “I think they would have eventually manifested themselves in the form of some larger problem that might have created some kind of systemic disruptions,” in the housing market.

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