Reading Fannie Mae's Scary Cookbook

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Reading Fannie Mae's Scary Cookbook FlorianPascale
FlorianPascale:

Reading Fannie Mae's Scary Cookbook

 
28.09.04 16:35
#1
Reading Fannie Mae's Scary Cookbook
hxxp://www.nytimes.com/2004/09/26/business/yourmoney/26watch.html

Auszug:

Fannie Mae's regulator did not quantify how much of the company's hedges were accounted for improperly. But it did note that as of December 2003, the company recorded $12.2 billion in deferred losses relating to cash-flow hedges. If Fannie Mae has to record some or all of this against its retained earnings, which were $24.5 billion at the end of last year, its regulatory capital will suffer, the report noted dryly.

Which leads to another revelation that Fannie Mae's fans must now face: that the company is grossly undercapitalized. Its equity capital of roughly 2 percent is much lower than the 8 percent required of "A"-rated banks, according to Sean Egan of the Egan-Jones Ratings Company. "In the past Fannie has made the argument that it was very familiar with the mortgage market and therefore needs less equity," Mr. Egan said. "Our view is the lack of diversification argues for a greater level of equity."
...............
Also troubling is the fact that Fannie Mae's problems have implications for the entire mortgage market
..............
The software, the memo said, allowed a user "to manipulate factors to produce an array of recognition streams," which "strengthens the earnings management that is necessary when dealing with a volatile book of business."

This nugget means that Fannie Mae is probably not alone in playing fast and loose with financial reality.

Ein Unfall der vorbereitet ist und passieren wird - und wenn er passiert, dann werden die ausländischen Investoren außerhalb der USA nicht erfreut darüber sein.

Fannie Mae and the story that won't go way...

hxxp://www.nytimes.com/2004/09/28/business/...6365725-Q/xfGR9ZHwrUsKqZ0F4fZA

"...
Fannie Mae, the nation's largest mortgage buyer and a financial juggernaut ..., agreed yesterday to major changes in its accounting and management practices in an unusual deal reached after a week of negotiations with the company's federal regulator.

... accounting irregularities and earnings manipulation that helped enrich the company's senior executives and presented an apparently false portrait of Fannie Mae's financial well-being to the public.

... might be only the first of many changes at Fannie Mae.

Congress is also planning its own hearings on Fannie Mae.

...the ramifications could be significant, not only for the company itself, but for the entire mortgage market, ...

... questions currently swirling around Fannie Mae, ...

... a requirement that it add more than $5 billion in fresh funds to its capital reserve within the next nine months, ...

...the company may have to make enormous restatements as it revises previously issued financial results.


Fannie Mae, ... also agreed to recalculate the value of complex financial products it has used to hedge its overall exposure to interest rate risks since 2001 and to revise how it has accounted for some expenses.

A bevy of Wall Street firms, including J. P. Morgan Chase, helped structure and trade some of the disputed hedging products and are likely to come under S.E.C. scrutiny. J. P. Morgan declined to comment yesterday.

..."

Was geht da vor sich bei Fannie Mae und wie wird es dort weiter gehen? Dort taucht wieder der Name auf: JP Morgan - der Derivatekönig. Diese Nachrichten stehen nun schon seit einer Woche oder länger konstant in der Weltpresse. Ist es fair anzunehmen, das was wir hören, eine milde Version von der Realität ist?  
Reading Fannie Mae's Scary Cookbook FlorianPascale
FlorianPascale:

Hurricanes Hurt Bottom Line of Insurers

 
28.09.04 16:45
#2
Hurricanes Hurt Bottom Line of Insurers
hxxp://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&feed=ap&src=601&news_id=ap-d85chrqo0&date=20040928

Auszug:

HARTFORD, Conn. (AP) — Insurers are expected to take a $15 billion to $20 billion hit from the four hurricanes that have hit Florida in the last month and their third-quarter profits will show it, dropping an estimated 40 to 60 percent, experts say
....................
"There's still some storms out there," Worters said.

Der Hurrican fügt der Volkswirtschaft wirtschaftliche und menschliche Schäden zu, ein weiterer, dynamischer perfekter finanzieller Sturm.

Die Versicherer werden gewzungen sein über ihre Vermögenswerte (Aktienveräußerung etc.) zu verfügen und ihre Versicherungsprämien zu steigern.  

Die Volkswirtschaft von Florida wird auch unter den Nachwirkungen und den Auswirkungen auf die US-Wirtschaft, die bagatellisiert werden leiden.

Ist der Hurrican Fannie? oder "Freddie" der nächste? Oder ein ganz anderer finanzieller Sturm?  
Reading Fannie Mae's Scary Cookbook FlorianPascale
FlorianPascale:

The Crumbling of Fannie Mae

 
28.09.04 18:53
#3
The Crumbling of Fannie Mae
hxxp://www.lewrockwell.com/bonner/bonner48.html

Auszug:

Fannie Mae may be about to crumble. Dan Denning sends us this note:

   "Accounting problems at Fannie Mae may not be restricted to Fannie Mae. It could be systemic. And a snowball may be about to crush the whole mortgage-lending industry.

   "Gretchen Morgenson of the New York Times: ‘Most of the mortgages underwritten in the nation today use automated programs designed by Fannie Mae...Fannie Mae is probably not alone in playing fast and loose with financial reality. That there is software out there designed to let corporate users manipulate figures to get whatever they desire certainly indicates that other companies want to obfuscate, too.’"
Reading Fannie Mae's Scary Cookbook FlorianPascale
FlorianPascale:

Justice Dept. Opens Fannie Criminal Probe

 
30.09.04 17:07
#4
Reuters
Justice Dept. Opens Fannie Criminal Probe
Thursday September 30, 5:38 am ET


NEW YORK (Reuters) - The Justice Department has opened an investigation of possible accounting fraud at Fannie Mae, the Wall Street Journal reported on Thursday, after a federal regulator said the mortgage giant may have manipulated its earnings targets.

The Journal reported that the investigation is still in the preliminary stages. Fannie has been under fire since the Office of Federal Housing Enterprise Oversight, or Ofheo, accused the company of improper accounting that allowed senior executives to pocket multimillion-dollar bonuses.

According to the newspaper, officials have said that some Fannie Mae executives may have misled regulators, which in some cases would be an added criminal offense. Because of the nature of Ofheo's disclosures, the Justice Department concluded that it demanded an investigation, the Journal added.

Ofheo referred its report to prosecutors last week, lawyers close to the case told the Journal.

The regulator's report raised questions of possible accounting manipulations involving financial instruments used to hedge risk, and expensing of costs associated with the company's core business of buying home mortgages from lenders around the country.

No one was immediately available at Fannie Mae or the Justice Department to comment on Thursday.
Reading Fannie Mae's Scary Cookbook FlorianPascale

The Fannie Mae mess is one for the books

 
#5
The Street.com
The Fannie Mae mess is one for the books
hxxp://moneycentral.msn.com/content/P92322.asp

By Peter Eavis 9/30/2004

Fannie Mae, the government-sponsored mortgage company whose financial statements were strongly criticized in a report by its regulator last week, looks set to join Enron and WorldCom in the hall of accounting infamy.

Lining up Fannie Mae (FNM, news, msgs) alongside two of America's worst corporate fraud offenders may seem a stretch to some. But a close reading of the report suggests that Fannie could have kept billions of dollars of losses out of earnings -- as well as out of an important capital number that is used by its regulator to determine the company's financial strength.

WorldCom is thought to have hidden around $11 billion of expenses to boost its earnings. But it's possible that Fannie, which provides huge support to the U.S. housing market through billions of dollars of mortgage purchases each year, overstated the capital number by more than that. For example, at the end of last year, the capital number in question may have excluded as much as $11.6 billion in pretax net losses.


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