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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Monty Lenard who wrote (28356)10/15/2000 4:28:39 PM
From: Ken98  Read Replies (1) of 436258
 
Monty, the debacle with the GSE groups will be their off-balance sheet liabilities, a topic which I have not seen discussed very often.

Fannie Mae, for example, has over $1 TRILLION in contingent liabilities in the form of loan guarantees and credit enhancements. These items include direct loan guarantees for apartment loans as well as credit enhancements like the $500M+ one they recently did for a loan package of second lien home mortgages. These are true distortions of the market pricing of credit risk that will NOT become evident for several years. At which time, I think this will make the S&L scandal look like petty larceny.

This roughly $1 TRILLION sum does NOT appear as either an asset or a liability on the Fannie balance sheet. In fact, they carry NO loss reserve for claims made under these contingent liabilities.

I have not looked at any other agency than Fannie, but assume as similar state of affairs for Freddie and the other GSEs to a lesser degree.

The other interesting fact that I discovered when I looked into this was that Fannie is NOT required to publish quarterly and annual financial disclosures like other publicly traded companies. The only information available is in abbreviated form whenever they come to the market to raise additional capital funds.

Regards, Ken.
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