Mortgage giant Fannie Mae, remaking itself as it recovers from a multibillion-dollar accounting scandal, is cutting its 6,500-person work force by several hundred employees by year's end.
The planned job cuts, the company said Tuesday, are among cost-cutting measures that Fannie Mae has undertaken to reduce its operating expenses by $200 million this year compared with 2006. The company confirmed the cuts following reports by the Washington Examiner and The Washington Post newspapers.
"Our objective is to bring costs in line following a period of significant increases in overall administrative expenses," spokesman Brian Faith said in a statement. He said the work force will be reduced by "several hundred" full-time employees by the end of the year. Details are still being discussed, Faith said.
Fannie Mae, which is the second-largest U.S. financial institution after Citigroup Inc., spent about $1 billion last year on the massive review of its accounting and preparing financial statements. The government-sponsored company finances one of every five home loans in the United States and is one of the largest private employers in the Washington area.
In December, the company announced a long-awaited restatement for 2001 through mid-2004 that erased $6.3 billion in previously reported profit. Fannie Mae has said that it expects to file its financial statements for 2005 by August and its 2006 report by year's end.
The accounting scandal that erupted in September 2004 brought the ouster of top company executives and a record $400 million civil fine in a settlement last year of federal regulators' allegations of a pervasive six-year accounting fraud. Fannie Mae also agreed to limit the growth of its multibillion-dollar mortgage holdings and make top-to-bottom changes in its corporate culture, accounting procedures and ways of managing risk.
In other recent actions changing its structure and the way it operates, Fannie Mae said in February that it was shutting down its high-profile charitable foundation this year and beginning to disclose its corporate contributions. The politically influential company, known for its hefty contributions to House and Senate members from both parties, also has reduced its spending on lobbying.
Fannie Mae also disclosed in February its decision to withhold $44.4 million in bonus money tied to company earnings targets from 46 current and former senior executives — including Chief Executive Daniel Mudd and ousted former CEO Franklin Raines — after a government-ordered review found they were undeserved on the basis of performance. The company also decided to eliminate some perks for its executives.
Fannie Mae and its smaller government-sponsored sibling, Freddie Mac, were created by Congress to pump money into the $8 trillion home-mortgage market. The idea was to keep interest rates low and make home ownership affordable for low- and moderate-income people. Freddie Mac has been recovering from its own accounting scandal, which surfaced in mid-2003.