Fannie Mae chairman and chief executive Franklin Raines and chief financial officer Timothy Howard could be on the way out in the wake of the Securities and Exchange Commission's ruling against the company's accounting interpretations, industry sources have told MortgageWire."I do not see how Frank Raines and Tim Howard can keep their positions at Fannie in light of the SEC action, given their extremely strong defense of Fannie's accounting at the Oct. 6 Financial Services Committee hearing," said industry consultant Bert Ely. That hearing explored allegations that Fannie Mae used accounting trickery in regard to its derivatives so it could achieve earnings goals that triggered bonus payments to its top executives. Mr. Ely added: "Freddie Mac's top people got the boot after its accounting problems surfaced last year -- why should it be any different at Fannie?" Fannie Mae officials would not comment as of MW's deadline. Meanwhile, an analyst report issued by Sanford C. Bernstein & Co. predicts that even though Fannie will have to restate previous years' earnings by $9 billion, "offsetting gains will therefore elevate" earnings per share in future periods. "The question would seem to be, over what period of time, 2 - 5 years, or over 10 - 20 years?" writes Bernstein analyst Jonathan Gray.

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