Upper Fannie management implodes

Fannie Mae's board on December 21st ousted its two top executives and fired its auditor, KPMG, as the company's accounting standards violations crept into the light and the Securities and Exchange Commission (SEC) ordered a restatement of possibly $9 billion. Chief Executive Officer Franklin D. Raines and Chief Financial Officer Timothy Howard were temporarily replaced by, respectively, Daniel H. Mudd, currently a vice chairman and chief operating officer, and Robert Levin, currently an executive vice president. Mudd vowed to "make things right" with regulators and Congress, the Washington Post reported.

Raines' departure is officially being called a "retirement" and Howard's a "resignation." In "retirement," Raines will receive $1 million a year.

Accounting changes required by the Office of Federal Housing Enterprise Oversight (OFHEO) and the SEC forced Fannie to recognize $9.18 billion in losses on derivative contracts.

Fannie Mae still faces investigations by OFHEO, the SEC, Justice Department and an undoubtedly growing number of suits from shareholders. Fannie's problems are unlikely to have much immediate effect on the mortgage or housing markets, analysts say.