Fannie Mae was developed in the 1930’s
due to the housing market crash of the Great Depression. Fannie Mae was initiated as a
government-sponsored enterprise at the time President Franklin D. Roosevelt and
Congress were in great need of restoring faith to the American people (Hoang,
T. and Martin, 2012/2013, p 30). In 1938, the federal government charged
Fannie Mae with a federal charter to provide affordable housing and attract
investments to the housing market (Jennings, 2012, p 121). In 1968, Fannie Mae was again chartered as
shareholder-owned corporation making it responsible to gain capital from the
private market and no longer the federal government (Jennings, 2012, p 121).
Could Fannie Mae be labeled an “honest”
company? Reviewing the questions
presented by Entine and Jennings Fannie Mae compliance with the law shows some
creative accounting practices resulting in a fine of $125 million (Jennings,
2012, 128). Although nothing illegal transpired according to the law, but
ethically it was wrong on so many levels. Fannie Mae’s sense of propriety is
somewhat confusing in that the firm conforms to established standards of
operation, but unjust to others in the company and society. It is quite obvious that product claims do
not match reality; executives took inflated bonuses that took away from
stakeholders in the company. Fannie Mae
was unforthcoming with its company’s information by ignoring numerous reports
made by Fannie Mae’s employees regarding accounting practices (Jennings, 2012,
p 127). How Fannie Mae treats its
employees was answered in the previous two answers. In 2001, Business Ethics magazine deemed
Fannie Mae as one of the country’s top corporate citizens scoring high in the
areas of community and diversity (Jennings, 2012, p 122). The ethical issues
concerning the conduct of third-party affiliations with Fannie Mae resulted in
illegal accounting practices. However, Fannie
Mae made donations to many charitable causes in return for political contacts
and purposes to be used in the firms favor regarding regulatory or legislative
action (Jennings, 2012, p 129). The
company’s reaction toward unfavorable or negative disclosures is to agree to
disagree.
According to the eight-question
model of Entine and Jennings, regarding a company and to determine the
character of its soul by answering these questions. The outcome as ascertained by the results of
this model, the answer to the whether Fannie Mae could be labeled and “honest”
company is no. The reasons why are established in the previous statement.
References
Jennings, M. M. (2012).
Business ethics case studies and selected reading. Mason,
Ohio: South-Western Cengage
Learning.
Hoang,
H. and Martin, A. D. (2012/2013). The impact of the bailout of fannie mae and
Freddie mac on mortgage and housing
industries. Review of BBusiness 33(1) 28-39. Retrieved from
Fannie
Mae Picture
