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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Smiling Bob who wrote (137035)	7/28/2008 11:15:42 AM
From: Jim McMannis	Respond to of 306849

Where's the outrage....... The repugnant bailout nation There seems to be little outrage as the US, a country where free enterprise is supposed to reign, moves to nationalize losses without even contemplating reform. articles.moneycentral.msn.com By Bill Fleckenstein We are at another moment when those of a bullish persuasion, whose financial muscle memory was developed under former Federal Reserve Chairman Alan Greenspan, are determined to put lipstick on the pig at every opportunity. As soon as any facet of each financial minicrisis ends -- whether that be in certain subprime lenders, certain Alt-A lenders, certain monoline insurers or certain banks -- folks act as though all is well, even as financial institutions continue to implode. At nearly every one, there's a lot more than meets the eye, because much of the surface strength centers on the perception that these institutions have correctly marked their mortgage-related assets. Recently, the portfolio of Cheyne Finance, one of the more infamous structured-investment vehicles, or SIVs, was sold at 44 cents on the dollar. I suspect that similar assets are not marked anywhere near that valuation on financial institutions' balance sheets. So, the game of "everything's contained" continues, albeit in a different form.

To: Smiling Bob who wrote (137035)	7/28/2008 11:38:43 AM
From: Jim McMannis	Respond to of 306849

Freddie, Fannie `Fair Values' Hardly Look Fair: Jonathan Weil bloomberg.com July 28 (Bloomberg) -- Forget everything you've read about how woefully undercapitalized Fannie Mae and Freddie Mac are. The situation is much worse. Unlike other companies, the two government-chartered mortgage financiers publish quarterly fair-value balance sheets showing what the real-world values of their assets and liabilities supposedly are. By this measure, both companies' net- asset values are much lower than what the government lets them show as capital, or what the accounting rules let them report as shareholder equity. The companies' critics for years have pointed to the gaps between these figures as proof that the government's capital requirements are a joke. What I hadn't realized, until an astute reader tipped me off, is that the fair-value balance sheets overstate the companies' asset values, too. The issue centers on the way Fannie and Freddie calculate their fair values for deferred-tax assets, which is really just a fancy term for deferred losses. If you believe the companies' numbers, the more money they lose, the more their deferred taxes are worth. Deferred-tax assets consist of tax-deductible losses and expenses carried forward from prior periods, which companies can use to offset future tax bills. Under generally accepted accounting principles, they are valuable only to companies that are profitable and paying income taxes. To the extent a company doesn't expect to have enough profits to use them, it's supposed to record a valuation allowance on its GAAP balance sheet. So Profitable more