Frank Raines Takes On the Critics

Fannie Mae's CEO says his company's accounting practices aren't the same as Freddie Mac's: We are compulsive about managing risk

When mortgage financier Freddie Mac dismissed three top managers on June 9 amid questions about the company's accounting practices, the fallout hit Fannie Mae, Freddie's larger cousin. Both Fannie (FNM ) and Freddie (FRE ) are government-sponsored enterprises (GSEs), meaning they're publicly traded companies but with federal charters that give them some quasi-government features. For example, they're exempt from some state and local taxes, they have a line of credit from the federal government (it has never been tapped, however), and they aren't required to register their debt or equity with the Securities & Exchange Commission. Both companies use derivatives -- complicated financial instruments -- to manage risk in their huge portfolios.

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