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Entwistle & Cappucci LLP Announces Class Action Lawsuit Against Fannie Mae Senior Executives and Underwriters of Series T Preferred Offering

NEW YORK-(Business Wire)-October 3, 2008 - Pursuant to Section 21(D)(a)(3)(A)(i) of the Securities Exchange Act of 1934 (the “Exchange Act”), Entwistle & Cappucci LLP (“Entwistle & Cappucci”) (http://www.entwistle-law.com), a prominent New York law firm specializing in securities litigation, hereby gives notice that it has filed a class action complaint for violations of the federal securities laws against Merrill Lynch, Pierce, Fenner & Smith Inc., Citigroup Global Markets Inc., Morgan Stanley & Co. Inc., UBS Securities LLC, Wachovia Capital Markets LLC, Stephen B. Ashley, Daniel H. Mudd, Stephen M. Swad and Robert J. Levin in the United States District Court for the Southern District of New York. The lawsuit is brought on behalf of all persons or entities who purchased Federal National Mortgage Association (“Fannie Mae” or the “Company”) 8.25% Non-Cumulative Preferred Stock, Series T (“Series T Preferred Stock”) (NYSE:FNM-T) from May 13, 2008 through and including September 6, 2008 (the “Class Period”).

The complaint alleges that the Defendants concealed and misrepresented to investors the Company’s overall financial health as well as the adequacy of the Company’s capital, which had dramatically diminished as a result of its mortgage-related losses, poor underwriting standards and risk management procedures. Such misrepresentations and omissions were contained in the Company’s information statements, quarterly and annual reports and offering circular (“Offering Circular”), which was issued to investors in connection with the offering (“Offering”) of the Series T Preferred Stock on or about May 13, 2008.

As alleged in the complaint, in 2007, U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke urged Fannie Mae to raise more money and bolster its balance sheet in order to comply with existing and impending regulations. Accordingly, Fannie Mae embarked upon a capital raising campaign, which was designed to reinforce the Company’s balance sheet for: (i) continued satisfaction of government mandated capital requirements, thus allowing the Company to continue purchasing mortgages from banks nationwide; (ii) to increase shareholder value; and (iii) to provide stability to the secondary mortgage market.

The Offering, which was part of the Company’s capital raising campaign, involved the sale of approximately 80 million shares, or $2 billion, of Series T Preferred Stock. The Offering Circular, issued in connection with the Offering, as well as the Company’s SEC filings and press releases, misrepresented the Company’s capital position by, inter alia, postponing a series of asset write-offs that were mandated under Generally Accepted Accounting Principles. The full extent of Fannie Mae’s capital deficiencies, if disclosed by the Defendants, would have severely hindered the Company’s ability to raise the required amount of capital. Based upon these and other materially false and misleading statements and omissions during the Class Period, the complaint alleges that the Defendants violated Section 12(a)(2) of the Securities Act of 1933 as well as Sections 10(b) and 20(a) of the Exchange Act.

Beginning on July 11, 2008, investors began to learn the truth about Fannie Mae’s actual financial condition through a series of partial disclosures. Specifically, a July 11, 2008 New York Times article stated the federal government was considering taking over Fannie Mae and placing it in a conservatorship due to growing financial stress on the Company. As a result of this announcement, the Company’s Series T Preferred Stock declined $2.03 per share, or 10.6%, from $19.03 per share on July 10, 2008 to $17.00 per share on July 11, 2008. Thereafter, on August 20, 2008, The New York Times reported that a government bailout was increasingly likely. On this news, shares of the Company’s Series T Preferred Stock dropped an additional $2.79 per share, or 20%, from $13.78 per share on August 19, 2008 to close at $10.99 per share on August 20, 2008.

On September 7, 2008, the United States Treasury Department announced that the Federal Housing Finance Agency (“FHFA”) had been appointed as conservator of Fannie Mae in accordance with the Federal Housing Finance Regulatory Reform Act of 2008 and the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. The Treasury Department’s announcement of the takeover plan revealed Fannie Mae’s inadequate capital management and gross capital inflation, thereby causing the price of the Company’s Series T Preferred Stock to drop $10.70 per share, or 78%, from $13.70 per share on September 5, 2008 to $3.00 per share on September 8, 2008. In total, as a result of the foregoing corrective disclosures, the value of the Company’s Series T Preferred Stock fell $22 per share, or 88%, from the initial Offering price of $25 per share on May 13, 2008 to $3 per share on September 8, 2008.

Plaintiff seeks to recover damages on behalf of Class members and is represented by the law firm of Entwistle & Cappucci, which has significant experience in both prosecuting and defending complex business, securities and antitrust actions on behalf of individuals, corporations, government entities and other institutions. Entwistle & Cappucci’s attorneys have personally handled numerous private as well as class action cases resulting in highly significant recoveries to defrauded investors. The firm currently serves as Lead Counsel and/or as a member of Plaintiffs’ Executive Committee in many high profile securities class actions currently pending throughout the country. Entwistle & Cappucci’s work in representing financial institutions, venture capital and asset management funds in a variety of complex commercial disputes and transactions further positions it to bring a unique perspective to the prosecution of complex litigation.

If you purchased Fannie Mae Series T Preferred Stock during the Class Period, May 13, 2008 through and including September 6, 2008, you may move the Court to serve as a lead plaintiff no later than November 7, 2008. In order to serve as lead a plaintiff, however, you must meet certain legal requirements.

If you wish to discuss this action or have any questions concerning this notice, or your rights or interests with respect to this matter, please contact plaintiff's counsel, Vincent R. Cappucci, Esq. of Entwistle & Cappucci LLP, 280 Park Avenue, 26th Floor West, New York, New York 10017, Telephone: (212) 894-7200.

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