Raines Pulls Fannie's Fat Out of the Fire - For Now.

At one point during his congressional testimony in October, Fannie Mae chairman Franklin Raines was on the verge of tears, choked up about how he had to explain to his daughter why her father's company was in the newspaper everyday being accused of wrongdoing.

Anyone watching the hearing who didn't feel sorry for Mr. Raines (especially those of us with children) doesn't have a heart. At that moment it seemed that the attacks on Fannie Mae had gone on too long, had become too personal, too vicious.

It seemed as though Fannie's critics in Congress (and their waterboys in the private sector) could care less about the real facts and due process. At the same time, the issues raised by the Office of Federal Housing Enterprise Oversight regarding accounting irregularities cannot be ignored. If half of what OFHEO alleges is true, Fannie Mae's current executive team and its accountants at KPMG are toast.

A central question that needs to be answered is did Fannie Mae officials knowingly and willfully manipulate accounting rules so they could "make their numbers" and therefore trigger millions of dollars in bonus money. Did Fannie executives intentionally break the rules? Did they conspire to break the rules?

The answer to these questions will decide whether heads should roll at the company and whether the congressionally chartered mortgage giant is in serious trouble with its regulators, its board of directors and its investors (as well as the Securities and Exchange Commission and, potentially, the Department of Justice).

On Oct. 6, in sworn testimony before Rep. Richard Baker's House GSE Subcommittee, Mr. Raines and chief financial officer Timothy Howard got their chance to answer the explosive allegations levied against the company.

How did they do? Raines and Howard came across as convincing, intelligent, and - most importantly - honest. These two men are not fly-by-night developers who bought a savings and loan back in early 1980s so they could jack it up on brokered deposits and fund speculative land deals. Raines and Howard are not Charlie Keating and David Paul.