The blogosphere and commentary zone are buzzing with the news how Fannie Mae's Franklin Raines, the now-deposed chairman and chief executive of the home mortgage giant, secured more than $52 million in bonuses while the company did a con job on investors.

Make no mistake about it, in the years to come, Fannie Mae will be cited as a textbook case of accounting trickery designed to line the pockets of executives, at the expense of shareholders.


Consider this account from The Wall Street Journal:

"Ofheo's 340-page report blamed both the board and management for a corporate culture that allowed managers to disregard accounting standards when they got in the way of achieving earnings targets. The company then rewarded executives with huge bonuses for hitting those targets, the report said. For the six years through 2003, the report said, $52 million of the $90 million of compensation for Mr. Raines, then the CEO, was directly tied to meeting targets for earnings per share ... The report quotes a speech from Sampath Rajappa, a former head of the company's auditing office, as telling internal auditors they had a "moral obligation" to strive to meet a goal set by Mr. Raines in 1999 to double earnings per share to $6.46 by 2003. "By now every one of you must have $6.46 branded in your brains," the report quotes Mr. Rajappa as saying. "You must have a raging fire in your belly that burns away all doubts, you must live, breath and dream $6.46 . . . After all, thanks to Frank [Raines], we all have a lot of money riding on it" in terms of bonuses.
Given Mr. Rajappa's responsibility for monitoring compliance with accounting rules, those remarks were "inappropriate," Ofheo said. Mr. Rajappa couldn't be reached for comment."

If you want to read the complete WSJ account, just click here.

Fannie Mae has yet to restate its earnings for past periods. That means one thing: stay tuned for it reporting more errors. Plus there's the prospect of a claim for reimbursement of inflated salaries. What's needed is nothing less than a new CEO, one with no past ties to the company to deal with those matters credibly, says Bloomberg columnist David Pauly.

In the blogosphere, the PolitiCat blog says these kinds of shenanigans require collusion inside the organisation.

Hmmm, that makes the Fannie Mae hierarchy sound like your typical corporate "delinquent community", an issue I discussed in this blog about two weeks ago.

David Remer's PoliWatch News asks whether the $400 million fine will just amount to higher interest rates and fees. ''When is America going to start punishing corporate criminals instead of the the public for wrong doing?''

John Gratton at Core Character says that the fines should be punitive, much more than was stolen, and that the directors and executives responsible face criminal charges. "Crime shouldn't pay, over and over and over," he says. "That doesn't seem like too much to ask - it's the American dream."

Larry Ribstein's Ideoblog takes a different tack.

With the prospect of further legal action, this story is not going to go away. Like Banquo's ghost, it will be around for some time.