Two bits of news reported last week are worth a mention.

Fannie Mae announced on Tuesday that it would not be paying over $44.4 million in bonuses to its former and current executives. The bonuses were part of an incentive program that was based on performance targets such as earnings growth.

Fannie Mae has been embroiled in an accounting scandal for over two years because of accounting irregularities for the period 2001 to 2004. The Securities and Exchange Commission ordered Fannie to restate its earnings for that entire period and claims have been made that the irregularities may have, in part, emerged from efforts to inflate growth and thus maximize bonuses.



The corporation's board of directors decided to pull the bonuses after reviewing Fannie's restated results for the three years ending December 31, 2003. 18 former and current officers are affected by this reversal in fortunes. An additional 21 current and former executives who were part of the performance program for the three years ending on December 21 are also affected. A spokesperson said that no decisions about bonuses for programs that ended in 2005 and 2006 have been made.

In December the Office of Federal Housing Enterprise Oversight (OFHEO) which regulates Fannie Mae and its competitor Freddie Mac announced that it was filing civil charges against three former Fannie executives who had been forced out at the height of the scandal but with generous, very generous, "parachutes." OFHEO's Office of the General Counsel accused the three of submitting six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.

In other news there is new fall-out from a gloomy announcement the world's third largest bank made earlier this month. U.K. based HSBC Holdings which, through its U.S. subsidiary HSBC Finance Corporation (formerly Household International) has been among the most aggressive lenders in the U.S. subprime market. HSBC informed industry analysts about two weeks ago that it would be writing off 20 percent more bad-debt than it had previously forecast.

According to MarketWatch, HSBC Holdings was not the first big lender to raise "warning flags about bad-performing debt portfolios," but it was the largest. Others named by MarketWatch include Washington Mutual, IndyMac Bankcorp, and New Century Financial. HSBC said that it would be taking an overall charge of $10.56 billion because the bank had failed to predict how many borrowers would fall behind on mortgage payments as their interest rates increased and along with them their monthly payments.

On Thursday another shoe dropped as two of the highest executives of the U.S. based portion of the firm left the group. The two, Bobby Mehta, chief executive of HSBC North America Holdings and HSBC Finance Corporation and Sandy Derickson, president and CEO of the company's U.S. banking operations have been replaced by others from the American subsidiary. The corporation announced that it would be taking a more hands-on approach to management of its U.S. operations and appointed the holding company's finance director as non-executive chairman of HSBC Finance.

According to MarketWatch, the 2003 acquisition of consumer lender Household (most Americans probably remember it by an even earlier name - HFC) has been one of the main causes of the poor performance of the British company's stock. The acquisition contributed to earnings growth but the volatility which came along with the U.S. loan portfolio "has acted as a drag on the shares."