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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: stan_hughes who wrote (371689)	7/22/2008 1:19:27 PM
From: Secret_Agent_Man	Respond to of 436258

exceptionally well put- thanks stan-

To: stan_hughes who wrote (371689)	7/22/2008 1:58:19 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 436258

I believe limited bank capital is the reason for the recent wave of banks like Chase and Bank of America "upgrading" their Visa accounts to "Visa Signature" accounts. I am fairly certain this change reduces the amount of the bank's capital that is needed to facilitate your Visa account to the amount actually borrowed on each account. I opted-out of this alleged upgrade and I suspect the primary benefit of this upgrade is for the bank. The difference being Visa accounts come with an authorized "Credit Limit" while Visa Signature accounts have a "non-reporting credit line". At the bank's option, they may allow you to exceed your "non-reporting credit line" without an over-limit fee but the full amount of the balance exceeding the "non-reporting credit line" is due in full on the next statement. As I'm not interested in buying a Rolls Royce with my Visa card, this feature holds little interest. This change lowers the Credit Score of those using Visa accounts without carrying a credit balance by effectively increasing credit utilization, as your maximum credit used now becomes your credit limit increasing your credit utilization. Capital One pioneered this reporting technique to lower their customer's credit score to make them less attractive to other lenders. .

To: stan_hughes who wrote (371689)	7/22/2008 3:41:36 PM
From: Terry Maloney	Read Replies (1) \| Respond to of 436258

Yes, well put indeed. Not that I've got anything against slow-boiled frogs, but if the average American is going to hurt a lot, wouldn't that imply Mom & Pop Investor are going to have to dump their mutual funds/401k's, whatever, anyway? Also got to wonder if post-Olympics, the Chinese will just sit on their hands as they watch American demand for their products evaporate at approximately the same speed as the value of their clownbuck holdings ... Interesting times, these ...

To: stan_hughes who wrote (371689)	7/27/2008 10:26:57 PM
From: carranza2	Read Replies (4) \| Respond to of 436258

Raines' - Fannie Mae's CEO - 2002 response to a WSJ piece questioning his integrity. A howler: online.wsj.com Don't Tar Us With an Enron Brush February 25, 2002 Shame on you. The Wall Street Journal, of all publications, has the opportunity and responsibility to provide leadership and shed light on the Enron debacle. At the very least, markets jittery about Enron need calm, trustworthy, responsible voices to clarify complex issues, get the facts, get them right, and put them in the proper context. Unfortunately, in your Feb. 20 editorial about Fannie Mae, you only fan fears with your glib, disingenuous, contorted, even irresponsible attempt to tar our company with the Enron brush. At best, the editorial betrays a complete lack of knowledge or understanding about our business. At worst, you chose the thrill of a good smear job over the hard work of reporting or writing opinion pieces grounded in facts. After asking whether readers are "shaking in your boots yet," the editorial claims "we don't want to scare readers here." The editorial page is trying to have it both ways. The innocent victims are the capital markets, the holders of our stock and bonds, and homebuyers. For two years they have suffered the financial consequences of "headline" risk created by the Journal. Leverage and capital. Your editorial suggests that leverage is inherently dangerous when in fact most mortgages are held by leveraged investors. The real issue is whether the institution holds capital appropriate to the risk of the assets it holds. You fail to mention that Fannie Mae and Freddie Mac are the only large financial institutions in America that operate under a risk-based capital rule with a stress test, meaning we always have to hold enough capital to survive an economic "nuclear winter." Indeed, our capital standard is regarded by some as downright draconian. Former FDIC Chairman William Seidman said it "could be devastatingly stringent if applied to most other financial institutions." The editorial also fails to note that -- in sharp contrast with Enron -- Fannie Mae manages only one asset, in one country -- U.S. residential mortgages -- and it is among the safest, best collateralized assets in the world. Debt. Debt is crucial to free market and private enterprise. Consumers use debt to finance cars. Private companies issue corporate paper to finance their operations. Americans take out mortgages to become homeowners. The nation's largest banks have billions, even trillions of dollars in debt, much of it government guaranteed deposits. Beyond overstating Fannie Mae and Freddie Mac's debt by more than $1 trillion and misstating that our debt is government-backed (it explicitly is not), your editorial somehow suggests that companies that issue debt are a problem. Fannie Mae's debt finances homes for millions of families. That makes it some of the most secure private debt in the world. Auditors. In your editorial, you quip, "Their financial statements are audited, for whatever that's worth." What is that supposed to mean? That all auditing is a sham? (The editorial also misstates that we paid $6.6 million in consulting fees to our auditor; in fact, 85% of that was for tax services, and validation fees related to issuing REMIC and other securities.) Transparency. Good information is the lifeblood of efficient markets; bad information disrupts markets. Moody's calls the financial disclosures Fannie Mae adopted in October 2000 "a new standard . . . for the global financial marketplace could usher in a wave of enhanced financial risk disclosure." You call our financial disclosures "terrible." Who to believe? Consider that your editorial, in addition to overstating the amount of our debt, also grossly overstated our leverage; stated that we cut back on our credit insurance (wrong); grossly mischaracterized the effect of the new Federal Accounting Standard 133 on our shareholder equity when our regulatory capital rose by $4.3 billion; and suggested that congressional hearings were overdue when we had 11 in the past two years. All of the information was available in our monthly, quarterly and annual financial disclosures, on our Web site. Derivatives. Your editorial mentions in ominous tones Fannie Mae's use of financial tools known popularly as derivatives. But for our business, derivatives reduce risk. Fannie Mae uses the most straightforward types of options, swaptions, caps and floors. We do not speculate in derivatives or engage in derivative trading. We use derivatives to hedge and reduce interest rate risk. We go to great lengths to ensure our derivative counterparties are highly rated, and our derivative contracts are well collateralized. Your focus on the notional amount of derivative contracts was sensational at best. If all our derivative counterparties failed to perform, it would cost Fannie Mae about two weeks of earnings. Risk. Your editorial rings alarm bells about risk. Risk is a necessary part of daily life and central to the creation of wealth and prosperity. Instead of helping to understand the risk question you chose to be "shocked" that Fannie Mae's business involves the management of credit and interest rate risk. Meanwhile you failed to explain our successes in doing so over many years or that we have posted double-digit operating earnings growth 15 years in a row through all interest rate and economic scenarios. There are many lessons to be learned from the Enron debacle. One is the importance of careful fundamental analysis of major companies. Fannie Mae welcomes and, indeed, we seek out, that type of analysis. Another lesson from Enron is that corporate behavior is fundamentally a product of the culture of the company. At Fannie Mae we take pride in the tone we set at the top, in our risk management focus, in our commitment to integrity and intellectual honesty and in the values of our people. We are well aware that you disapprove of our public mission to direct additional capital to the housing market. Rather than hide behind a fog of accusations about riskiness, why not come right out and debate whether we have too much invested in housing and homeownership in America? Franklin D. Raines Chairman and CEO Fannie Mae Washington