Fannie + Freddie = Fraud

According to recent reports about investigations into the corporate governance and accounting practices at Fannie Mae and Freddie Mac, it appears that the two Government Sponsored Entities (GSEs) did not learn their lesson from improper disclosures made only a few years ago.  This is what was reported by the Associated Press yesterday.

The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues at Washington-based Fannie and McLean, Va.-based Freddie.  Critics have long questioned the companies' bookkeeping.  Last November, for example, a Fortune magazine story said new accounting procedures at Fannie Mae masked potential losses on bad loans.  And several years ago, both Fannie and Freddie were forced to restate billions in earnings after federal regulators discovered accounting irregularities at both companies.

If we can't trust these GSEs to clean up their act and root out fraud, how can we again trust our government with $700 billion of our money to handle the very same mortgage-backed securities that ran through these corrupt GSEs?  What are your thoughts?  Please join the conversation below.