1、Order Code RS21567Updated November 7, 2007Accounting and Management Problems at Freddie MacMark JicklingSpecialist in Financial EconomicsGovernment and Finance DivisionSummaryFor most of 2003, Freddie Mac, one of the two government-sponsored enterprises(GSEs) that dominate the secondary market for h
2、ome mortgages, was embroiled in acontroversy over improper accounting methods. The company announced in Januaryof that year that a major revision of past financial statements was underway. Therestatement was issued on November 21, 2003. Net income for 2002 and earlier yearswas revised upward by $5.0
3、 billion. Freddie Mac has admitted that some of itsaccounting policies were selected in order to produce a steady stream of earnings, andthat numerous transactions were undertaken for the sole purpose of “smoothing out”reported earnings. These accounting problems led to the replacement of Freddies t
4、opexecutives, payment of $125 million in fines, and $410 million to settle an investorlawsuit. On November 6, 2007, former CEO Leland Brendsel settled charges by payinga $2.5 million fine and returning $10.5 million in salary and bonuses to Freddie Mac.In March 2007, the company resumed timely annua
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