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To: Les H who wrote (158044)	4/2/2002 10:21:09 AM
From: Bocor	Read Replies (1) \| Respond to of 436258

I guess the market values "honesty...FNM and FRE moving up today, lol >>At year's end, the notional value of Freddie Mac's derivatives totaled $1.05 trillion, up from $475 billion the year prior. Of that, $661 billion was over- the-counter (OTC) derivatives, while the remainder was primarily exchange- traded. The notional amount of Fannie Mae's derivatives portfolio increased to $533 billion at the end of 2001, up from $324 billion the year before. OTC derivatives account for Fannie's entire book.>>

To: Les H who wrote (158044)	4/2/2002 10:31:31 AM
From: LLCF	Read Replies (1) \| Respond to of 436258

I like this part: <<The large differential between short- and long-term rates prevalent in the market last year was a primary reason for the huge growth in the agencies' derivatives portfolios. That's because Freddie Mac and Fannie Mae increased their use of short-term debt liabilities in 2001 in order to augment the profit margins derived from investing in mortgage assets, which have longer average lives than short-term debt. In doing so, the agencies had to increase their derivatives activity in order to synthetically lengthen the life of that short-term debt.>> Oh, you couldn't just float more longer bonds??? Oh, that would COST too much??? What are you saying... derivatives are FREE MONEY???? Oh, are they augmenting income??? How so? What a joke. DAK