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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Frank Pembleton who wrote (10968)	4/22/2002 9:21:02 PM
From: ldo79	Respond to of 36161

This oughta' be good for a couple hundred point rally tomorrow - NOT! Greenspan Questions Fannie, Freddie NEW YORK (Reuters) - Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites) on Monday warned that perceived government backing for housing giants Fannie Mae and Freddie Mac may prompt those who trade their mortgage securities to take excess risks. The Fed chief said if investors in their derivatives securities had a false sense of faith that the government would quickly ride to the rescue of so-called government-sponsored enterprises that could distort markets. "The broader risks for financial markets and the economy result from the perception of government support for these corporations and the resulting implicit subsidization of GSEs. Subsidies, by intent, distort the normal balance of markets," the central bank chief said in remarks delivered via satellite to a conference sponsored by the Institute of International Finance in New York. The subsidies have been a hot issue in Congress with influential Republican lawmaker, Rep. Richard Baker, on a campaign for years to rein in the two housing finance giants. "In this case, the perception of government support may induce counterparties of GSEs to apply less vigorously some of the risk controls that they apply to manage their over-the-counter derivatives exposures," Greenspan said. "More generally, we need to be careful not to allow subsidies to unduly disturb an efficient financial structure that has so clearly contributed to increased economic stability," he said. The Fed chief's comments were the latest wrinkle in long-running debate over the role that GSEs, particularly Fannie Mae and Freddie Mac , play in the nation's financial system. story.news.yahoo.com Regards, ldo79