At Fannie Mae, Barnes said, "the atmosphere and culture, particularly within the Controller's Division, is one of intimidation, restraint of dissenting opinions and pressure to be part of the 'team,' " giving Raines and Howard the numbers they sought to please the markets.
Raines insisted that the regulators' findings, though serious, were arguable interpretations of complex accounting rules.
"These accounting standards are highly complex and require determinations over which experts often disagree," he said. Raines noted that Fannie Mae's outside auditor, KPMG, had endorsed the company's application of accounting rules.
Armando Falcon, director of the Office of Federal Housing Enterprise Oversight, in testifying before the Fannie Mae executives, asserted that Fannie Mae improperly put off booking income to a future reporting period "to create a 'cookie jar' reserve that it could dip into whenever it best served the interests of senior management."
Those interests included smoothing out volatility in earnings from quarter to quarter and meeting earnings-per-share targets linked to bonuses for executives, Falcon said.
