Analyzing Of The Case Study Fannie Mae

Analyzing from the case study Fannie Mae is a business substance where proprietorship was controlled or joined forces by the investor. It was created in 1938 by the government. The primary methodology is to urge individuals to put resources into the lodging market. The organization needs to make a soundness in home loan, and ensure clients approach them to buy and furthermore, they presented a credit which could assist them with investing at first. For 10 years the edge of winning came to $895 billion in the home loan portfolio. They additionally cooperated with some little scale organizations and put resources into Barne's. There was an affirmation about ventures and thoughts of Fannie Mae's in Wall road diary. However, no moves were made by the bosses with respect to this issue. Later in 2003, Daniel Muddi CEO raised about it among workers, yet he neglected to tackle it.

Another major problem is accounting in Fannie Mae's policies which made them invest, buying and holding in mortgage loans which were developed by CFO with no proper analyses about future threats which may pull companies fame and money into risk. They came up with a philosophy to attract people to invest in the mortgage market. They introduced a computer model with "arbitrary volatility" which turned out a different methodology to understand and implement. Much higher management couldn't understand what it does with earnings. They have some fixed rates and interest when they are conveying to the customers but in the end, it differs and made a problem. Decisions taken by Mr. Howard who is the CFO have mainly two strategies in the plan. One is to set targets to perform in that financial year and next is to analyze it to meet up to it. But, In the year 1998, he changed the way of his operations by setting EPS goals with the company charge sheets which resulted in unstable earnings. In return, they received a warning about their accounting which they need to report internal controls and strategies.

All these issues raised a question on ethical behavior of officers in Fannie's. Later New York Attorney needed to resign because of the truths which came about the Fannie Mae scandal. They make a policy to shift $40 million income in radian insurance, by knowing all these no one dares to take action or question them, everything went according to their plan. Later because of unethical behavior of Fannie employees and policies company went with more mortgages and some internal income crisis which lead them to pay $200 billion to the federal government to restore Fannie. Because of mortgage loans which went with too risky and no proper guidelines made then to reconstruct the firm.

References

Calabria, M. (2011, March 7). Fannie, Freddie, and the Subprime Mortgage Market. Retrieved from https://object.cato.org/pubs/bp/bp120.