The Fannie Mae review is out. "Employees at mortgage giant Fannie Mae manipulated accounting so that executives could collect millions in bonuses as senior management deceived investors and stonewalled regulators at a company whose prestigious image was phony, a federal agency charged Tuesday."

"'The image of Fannie Mae as one of the lowest-risk and 'best in class' institutions was a facade,' James Lockhart, the acting director of OFHEO, said. 'Our examination found an environment where the ends justified the means. Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing.'"

"The report also faulted Fannie Mae's board of directors for failing to exercise its oversight responsibilities and failing to discover 'a wide variety of unsafe and unsound practices' at the largest buyer and guarantor of home mortgages in the country."

"Regulators had earlier said that Fannie Mae in 1998 improperly put off accounting for $200 million in expenses to future periods so executives could collect $27 million in bonuses."

"'By deliberately and intentionally manipulating accounting to hit earnings targets, senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders,' the report says. The manipulation 'made a significant contribution' to the compensation of former chairman and CEO Franklin Raines, which totaled more than $90 million from 1998 to 2003, it says, including about $52 million directly tied to the company hitting earnings targets.'"

"Fannie Mae's 'arrogant and unethical' corporate culture led to an $11 billion accounting scandal at the mortgage giant, federal regulators said Tuesday in announcing a $400 million settlement with the company."

"It said Fannie (Research) used its enormous political power in Washington to lobby Congress in an effort to interfere with OFHEO's examination of the company's accounting problems. According to the report, Fannie overstated income and capital by about $10.6 billion, in line with the estimates of the company's potential restatement."

"'A combination of factors led Fannie Mae senior management, through their actions and inactions, to commit or tolerate a wide variety of unsafe and unsound practices and conditions,' the report said."

"OFHEO said Fannie's corporate culture encouraged a false perception that the company took so little risk and was so well managed that it could hit announced earnings per share precisely almost every quarter. That view, OFHEO said, led to the belief that senior executives deserved to be handsomely compensated for the company's 'extraordinary performance.'"

"The regulator found that $52 million of former Chief Executive Raines' $90 million in compensation was linked to earnings. 'The OFHEO report shows that Fannie Mae's faults were not limited to violating accounting and corporate governance standards, but included excessive risk taking and poor risk management as well,' said Treasury Undersecretary Randal Quarles."