The Powerful Friends of Fannie Mae

Business Week reports:

Fannie agreed on May 23 to pay $400 million to resolve federal civil allegations that from 1998 through 2004 it prettified its books in a way that allowed executives to inflate their pay. Before the last microphone was shut off at the Washington press conference announcing that deal, government investigators were looking into whether some of the financial world's biggest names facilitated Fannie's misbehavior.

Securities & Exchange Commission staff members are looking into deals in which Goldman Sachs Group (GS ), among others, allegedly helped Fannie rearrange earnings to maintain the appearance of steady profit growth, according to people familiar with the inquiries. Investigators also are scrutinizing KPMG, which, as Fannie's outside auditor, approved financial statements since deemed misleading. And the SEC staff is examining deals designed by Lehman Brothers Inc. (LEH ) and later executed by KPMG that the Internal Revenue Service has determined improperly deferred taxes.

The list goes on. Referring to one arrangement that could come back to haunt insurer Radian Group Inc., a Fannie official wrote in a Jan. 9, 2002, internal e-mail: "I am terrified of the negative public-relations aspects of a disclosure of a transaction like this."

Let's give Business Week credit,in their article they make some strong comparisons to Enron.Give Goldman Sachs credit:how they can keep such a stellar reputation after being involved in so much sleaze the last several years.Are any Senators going to ask Henry Paulson at the Treasury hearings about Fannie Mae? Don't bet on it.