Applying Entine and Jennings Eight Question Model to Fannie Mae

Created during the Roosevelt administration as a shareholder-owned corporation with a federal charter Fannie Mae was a very unique business venture when created by the federal government in 1938.  The purpose of Fannie Mae was to increase affordable housing and increase investments into the housing market.

            On the surface Fannie Mae appeared to be an outstandingly ethical company, “In 2004, Business Ethics magazine named Fannie Mae the most ethical company in the United States” (Jennings, 2012, p. 121).  As time went on the over inflated market that Fannie Mae had created around its self began to crumble, all the unethical activity’s it was engaging in began to surface.

            In applying the eight question model provided by Entine and Jennings to determine the soul of a company it becomes quite apparent that Fannie Mae was anything but ethical.  In asking only the first two questions in Entine and Jennings list it is plainly illustrated that Fannie Mae was operating unethically.

Question one asks “Does the company comply with the law?”, no Fannie Mae did not comply with the law.  In 2006, the Office of Federal Housing Enterprise Oversight filed a 101 civil suit against the CEO, CFO, and additional members of the Board of Directs at Fannie Mae for falsely meeting bonus requirements and manipulating earning.  Jennings (2012) states that between three individuals at Fannie Mae the suit asked for $115 million in returns for incentive plan payouts and additional $100 million in penalties, in the end the suit settled for $31.4 million..   When faced with the civil charges the individuals from the board of directors at Fannie Mae issued a statement that suggested the settlement was not an acknowledgement of wrongdoing but an agreement to disagree. (Jennings, 2012).   

Questions two, “Does the company have a sense of propriety?” no Fannie Mae did not operate with a sense of propriety.  In 2012 the Federal Housing Finance Agency stated that Fannie Mae was preparing to address complaints from appraisers, consumers and others in regards to violations of the Home Valuation Code of Conducts.  The complaints being addressed were to complains of lenders pressuring appraiser to overvalue a home so a loan could get done (Berry, 2012, p. 175)

Berry, K. (2010). Fannie, Freddie New Appraisal Sheriffs in Town.  American Banker, 175 (F319),7.

Jennings, M. M. (2012). Business Ethics: Case Studies and Selected Readings, Seventh Edition. South-Western Cengage Learning, Mason OH.