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To: oldirtybastard who wrote (148291)	2/4/2002 11:34:16 AM
From: marginmike	Read Replies (1) \| Respond to of 436258

actually Enron and LTCM both crashed because of a loss of confidince by the markets, and the feeding frenzy attacks on their positions when blood was in the water. ENRON and LTCM had derivitive positions revealed to others who attacked theri positions creating a snowball of loss of confidence and declining values in positions.

To: oldirtybastard who wrote (148291)	2/4/2002 11:46:14 AM
From: robnhood	Read Replies (1) \| Respond to of 436258

<<<-- =DJ Budget Notes Heavy Fannie, Freddie, FHLB Debt Activity -- By John Connor Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Fannie Mae and Freddie Mac have grown faster than the mortgage market in recent years, and the two government-sponsored enterprises have funded their rapidly growing asset portfolios by increasing their outstanding debt, the Bush administration said. "The GSEs' combined debt outstanding rose from $518 billion at September 1997 to $1.26 trillion at the end of September 2001, an annualized growth rate of nearly 25% a year," the administration said in a fiscal year 2003 budget document released Monday. The budget said another housing-related GSE, the Federal Home Loan Bank System, issued $4.9 trillion in debt securities last year. "However, the majority of debt issued by the system is overnight or short-term, but 73% of debt outstanding had an original maturity of one year or longer, and total debt outstanding was about $611 billion at the end of 2001," it said. Discussing Fannie Mae and Freddie Mac in the "analytical perspectives" section of the new budget, the administration noted that the two companies, created by Congress to assist housing, have been growing faster than the mortgage market in recent years. "From September 1997 to September 2001, their combined mortgage asset portfolios increased 150% in dollar volume, and their guarantees of MBS (mortgage-backed securities) increased 40%," the budget said. "To fund their rapidly growing asset portfolios, Fannie Mae and Freddie Mac have increased their outstanding debt." The budget said increased guarantee volume and retained portfolios "imply increased credit and interest rate exposure." It said the two firms have tried to limit their risk using various risk management techniques, but added that these tools "do not eliminate all the risk associated with funding long-term, mostly fixed-rate assets that have uncertain payment streams. "Furthermore," the budget added, "the hedging transactions transform credit or interest rate risk into counterparty risk (the risk that the counterparty of a hedging transaction fails to honor the contract). Thus, the GSEs' management of counterparty risk is of increasing importance." The budget said the credit quality of mortgages owned or guaranteed by Fannie Mae and Freddie Mac "has benefited in recent years from strong housing markets that have improved collateral values," but noted the companies are increasingly active purchasers of subprime loans that tend to have more credit risk than their traditional mortgage purchases. It observed that risk-based capital requirements for Fannie Mae and Freddie Mac "become fully enforceable in September 2002." The budget also said, "The FHLBanks' investment activities pose important public policy issues about the degree to which their asset composition adequately reflects the mission of the system," which is to assist housing. It noted that "like other government-sponsored enterprises, the system issues debt securities at close to U.S. Treasury rates and invests the proceeds in higher-yielding securities.">>>