Fannie Mae investor sues five banks

A shareholder is suing five banks for allegedly not warning her about accounting change proposals which caused Fannie Mae shares to nosedive in price.

Karen Orkin, who bought 600 Class B Fannie Mae shares, filed the suit at the Supreme Court in New York this week as a proposed class action, Bloomberg said.

Citigroup, Merrill Lynch, Wachovia, Morgan Stanley and UBS, the banks which underwrote the stocks were named in the suit.

The proposed rule is FAS 140, the accounting standard that specifies the conditions for keeping securitsed assets off the balance sheet. If the proposal is issued in its current form it could see companies like Fannie Mae bring some special-purpose vehicles back on their balance sheet.

According to Bloomberg, the revised rule may force Fannie Mae and fellow mortgage lender Freddie Mac to bring an aggregate $3.7 trillion in off balance sheet assets onto the books.