CHAPTER 15Sorting Out the Facts
REACTIONS IN THE POLITICAL AND BUSINESS WORLDS TO Nicoliasen’s ruling on Fannie Mae’s accounting were strikingly different.
The Office of Federal Housing Enterprise Oversight and the Wall Street Journal pronounced the $9 billion earnings restatement a worse accounting scandal than Enron, WorldCom, or Tyco. Fannie Mae’s investors (and Warren Buffett) concluded otherwise. The company’s stock barely moved in the days following the ruling. Investors understood that the restatement had no effect on Fannie Mae’s economic value. There was no “phantom income.” OFHEO admitted that our hedges were effective; their objections were limited to the timing of when the expenses associated with those hedges should be recognized. ...
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