Washington Times:

The current controversy centers on the Chief Audit Executive (CAE), a critical role at Fannie Mae “tasked with providing independent, objective assurance of the enterprise’s governance, risk management and control processes,” the inspector general reported.

But despite the CAE’s role in determining the financial safety of Fannie Mae’s actions, including what loans to hand out, the company internally hired a manager who didn’t have enough experience to meet the role, falling below the “preferable” level of qualifications for the job.

Though looking for at least 15 years’ experience as an auditor, the manager hired had only seven years’ experience and hadn’t worked as an auditor since 1992, the report said.

Furthermore, before becoming the CAE, the manager had served as the chief credit officer for Fannie Mae’s largest business unit. That presented a major conflict of interest, investigators said, since he was strongly invested in the financial success of the company, which could have clouded his judgment on whether a loan was sound.

The report did not name the manager.

Spokespeople for Fannie Mae did not return reporters’ requests for comment Tuesday.

Peter Morici, an economist and professor at the R.H. Smith School of Business at the University of Maryland, said it was “absolutely ridiculous” for Fannie Mae to be hiring its own managers as auditors “when there’s such a large pool [of] talent out there available for this.”

It is “good old-fashioned Latin American corruption,” said Mr. Morici, who also is a frequent columnist for The Washington Times and other publications. “They’re going to inspect their own work, their friends and supervisors. It’s just not what you do. It’s like having the students write and grade their own exams.”

In their report, investigators described the hiring process as “haphazard” and “far from diligent.”