Fannie Mae - An "Honest" Company?

It seems these days, the terms Fannie Mae and "fraud" go hand in hand. But let's not jump to conclusions just yet.

For more than a decade, Fannie Mae achieved consistent, double-digit growth in earnings. In an interview, I would have asked them, "How? How are you guys doing it?"

To add on to that, in the same decade, Fannie Mae's mortgage portfolio grew by five times to $895 billion. When numbers are that big, it is inevitable that they will be examined a lot more carefully. The result when a company focuses on profits and greed? Bad business decisions. Take a look at how their top executives were banking. But, we all know that wouldn't last long.

Between January 2008 and March 2012, Fannie and Freddie would lose a combined $265 billion, more than 60 percent of which was attributable to risky products purchased in 2006 and 2007. In the end, you might say they got what was coming to them. Unfortunately, this affects everyone else around them.

However, let us recall the eight questions Jennings devised to determine the character of Fannie Mae's soul-- can it still be called an "honest" company? It is easy to say the answer is "no." As Jennings (2012) notes, their objective goal increase of $6.46 was enforced no matter what risks were involved. They most certainly do not have a sense of propriety as they held their own internal audits. They were able to hide from the public's eye for a good while as their desires for profits quickly turned into a ruse. In addition, when prompted with little bits of negative disclosure, Fannie Mae was quick to dismiss or cover up their actions. For this debacle to occur with a build up of several years, Fannie Mae had their chance at redemption at earlier times, but had to wait to be discovered by official means in the end.

Indeed, Fannie Mae is not an honest company. However, presently, they are doing much better post-collapse, but still a long ways to go.

References

Jennings, M. (2012). Business Ethics: Case Studies and Selected Readings (7th ed.). Cincinnati: West Educational Pub.