WASHINGTON - The chairman of a congressional subcommittee has asked Fannie Mae's regulator to require ousted chief executive Franklin D. Raines, interim CEO Daniel H. Mudd and other current and former executives to give up bonuses that were based on flawed accounting.
"If financial gain was given based on accounting manipulation, then anyone who benefited should have responsibility to give it back," said Rep. Richard H. Baker, a Louisiana Republican, in an interview yesterday.
Fannie Mae's directors removed Raines and Chief Financial Officer J. Timothy Howard on Dec. 21 after the Securities and Exchange Commission ruled that from 2001 until mid-2004 the company made mistakes in accounting for contracts designed to protect its $913 billion in mortgages and mortgage securities from swings in interest rates.
Fannie Mae, the largest source of money for the nation's mortgage industry, said in November that the errors may lead to a $9 billion restatement of earnings. In 2003, Raines earned $20 million in base salary, bonus, stock grants and long-term incentive payments, an 8 percent increase from 2002.
Baker is chairman of the subcommittee on capital markets, insurance and government-sponsored enterprises, which oversees Fannie Mae and its regulator, the Office of Federal Housing Enterprise Oversight. His panel is part of the House Financial Services Committee.
In a Dec. 16 letter, Baker asked the oversight agency's director, Armando Falcon, to "take action to recapture all bonus payments from executives that were awarded based upon the faulty and deeply flawed earnings statements of the enterprise."
A copy of the letter was provided to Bloomberg News by Baker's office yesterday.
"We are in the process of responding to the congressman's request," said a spokeswoman for the oversight panel.
Mudd was Fannie Mae's chief operating officer before he was given the interim job.
Raines's benefits including an annual payment of $1.37 million, deferred compensation of about $8.7 million and lifetime medical and dental coverage, according to an SEC filing last month. He has vested options for 1.63 million shares, and is scheduled to receive vested options on an additional 368,819 shares for what the company called his retirement.