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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Earlie who wrote (194385)	9/30/2002 3:16:23 PM
From: orkrious	Read Replies (2) of 436258

from RMpro Brian Gilmartin FNM at serious risk if Fed cuts rates ? 9/30/02 02:33 PM EDT This just in from a savvy subscriber, Andreas from Massachusetts based on our post about the Fed rate reductions, possibly as soon as this Friday: " To what degree, if any, do you consider the Fed to be in a bind between the need for lower interest rates and the a duration gap crisis at FNM. John Hussman, Ph.D. (hussman.net) calculates that a 0.5% decrease in rates destroys 25% of FNM's capital base as they have leveraged themselves 40:1 on a bet that rates will increase. Your thoughts?" I personally as not aware of any "systemic" risk problems in our financial system right now other than the oft-heard rumours about the size of the derivative book at JPM. FNM appears to have broken down technically, (last week it closed below the July 24th low of $64.06) and the above disclosure if true might represent a serious problem for Greenspan. Could an easier Fed compound Fannie's problems, and create additional problems for the Fed ? Anybody have any thoughts on this ? (I know Aaron Task wrote a piece this weekend on FNM vs FRE, but I haven't had a chance to read the missive yet.) none

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