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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (41358)	3/17/2002 7:59:01 AM
From: farkarooski	Read Replies (1) \| Respond to of 99280

wealth-lab.com what is this chart telling you ???

To: orkrious who wrote (41358)	3/17/2002 11:55:37 AM
From: mishedlo	Respond to of 99280

No Senate hearing on Fannie or Freddie ... these companies have two of the best lobbying machines in Washington, D.C. ... Daily Report for Executives Monday March 18, 2002 Sen. Reed Rejects Hearing Request On Fannie, Freddie Accounting Methods Sen. Jack Reed (D-R.I.), Senate housing subcommittee chair, has "no intention" of convening a hearing to investigate the accounting practices of Fannie Mae and Freddie Mac despite a request from Sen. Chuck Hagel (R-Neb.) to do so, a Reed spokesman told BNA March 15. In a March 1 letter that became public March 14, Hagel said the Senate subcommittee should use its oversight powers to investigate whether Fannie Mae's and Freddie Mac's accounting practices are adequate to protect U.S. taxpayers. "I ask that you consider holding hearings on the accounting practices and risk exposure of Fannie Mae and Freddie Mac," Hagel said in the letter. "Recent press accounts have raised some very serious concerns and questions as to the taxpayer liability and financial soundness of these government-sponsored enterprises." Although the House Financial Services Committee has held hearings on the safety and soundness of the GSEs, such hearings have yet to occur in the Senate. House Financial Services Subcommittee on Capital Markets Chairman Richard Baker (R-La.) dogged the GSEs in hearings for more than a year over their possible threat to American taxpayers, but legislation he introduced last year dealing with GSEs has gone nowhere. "The senator received the letter, but he has no intention of calling a hearing at this time," the Reed spokesman told BNA without elaborating. As giant housing GSEs, Fannie Mae and Freddie Mac can borrow funds at lower costs than entirely private financial institutions, are exempt from paying state income tax, and are not required to register with the Securities and Exchange Commission. Basically, the GSEs purchase mortgage loans from originating banks and securitize the assets in order to provide more liquidity to the mortgage market. Enron-Like Accounting Questioned In a recent string of editorials, the Wall Street Journal took aim at what it said are the GSEs' "off the balance sheet" accounting tactics. It likened these practices to the accounting problems members of Congress have determined were at the heart of the Enron bankruptcy and subsequent scandal. Essentially, the Journal editorials argued that because Fannie Mae and Freddie Mac are backed by the federal government, any potential fallout from their collapse would affect far more U.S. taxpayers than were hurt as a result of the Enron bankruptcy. In response, Fannie Mae President Franklin Raines defended the soundness of the GSEs and said there was no similarity between the Enron situation and how the GSEs conduct their businesses. The GSEs' operations were also questioned by the Bush administration in its budget proposal for fiscal year 2003. In February, the administration cited the "large size of some GSEs'" as a "potential" problem. "Financial trouble of a large GSE could cause strong repercussions in financial markets, affecting federally insured entities and economic activity," the administration said. "[T]he president's budget raised serious concerns over the GSEs' risk management endeavors," Hagel said in his letter to Reed. "The budget specifically states that, 'the GSEs' management of counterparty risk is of increasing importance.' Counterparty risk, created through hedge transactions, is only one area of public concern. Others include the amount of debt the GSEs carry on their balance sheet and the implied government backing they possess." To help manage their risks, the GSEs invest in separate securities; the quality of these hedge investments, in part, determines how well the GSEs can fair in economic downturns. Many in Congress, particularly Democrats, strongly support the GSEs, saying they significantly boost housing finance opportunities for all Americans, but especially for minorities. Indeed, in its budget proposal, the Bush administration said the liquidity raised by the GSEs "benefits virtually all borrowers in the housing market, although it helps low and moderate-income borrowers more."