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PROBLEM After reviewing the facts of the article it appears that Fannie Mae has an accounting problem which may be due to inappropriate management decisions and lax internal controls of these decisions and practices ALTERNATIVE 1 The first alternative in solving managements poor financial decisions at Fannie Mae is to have the board of directors demand that top management executives at Fannie Mae step down from their duties or the Federal regulators should terminate their ties with the company ADVANATGE This alternative could help correct and improve the current financial scrutiny the company is currently under Since it is believed that certain top level executives allowed or developed inappropriate accounting practices for either personal gains or to over-exaggerate earnings growth these people should be no longer be involved in the direct decisions of the company This may set a precedent within the company that these types of actions will not be tolerated moving forward Also investors may feel relieved knowing that the individuals involved are no longer with the company boosting investor confidence DISADVANTAGE This alternative may not necessarily solve the problem because it doesnt necessarily solve the poor past accounting decisions It may also be hard to terminate all that had their hands in this problem and then there is the responsibility of hiring a new management team ALTERNATIVE 2 The second alternative to the accounting problem is for the Fannie Mae management team to agree to recalculate restate and adjust earnings that were reported in the last three years ADVANTAGE Restating and adjusting the past three years earnings may decrease the current financial speculation the company faces today Also Fannie Mae may not have to add capital if the changes net out close to zero DISADVANTAGE If they restate and adjust the past three years earnings and it is revealed that improper accounting adjustments indeed took place the company would have to add capital to
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