Euro Futures (priced in USD): 
Posted on 11/18/2003 8:42:42 AM PST by Starwind
UPDATE - US broadens Freddie Mac probe to Wall Street role
Tuesday November 18, 10:33 am ET
(Adds details, background)
WASHINGTON, Nov 18 (Reuters) - A U.S. financial regulator is investigating the role of companies that were counterparties to questionable deals at the core of accounting irregularities at mortgage finance company Freddie Mac (NYSE:FRE - News), an official said on Tuesday.
"We are in the process of reviewing the counterparties' roles in transactions relevant to our investigation," a spokeswoman for the Office of Federal Housing Enterprise Oversight, Corinne Russell, said.
Russell said the agency has a wide range of actions it can take in response to its findings in the Freddie Mac probe.
"We are considering several money penalties as part of that wide range of actions available to us," she said.
OFHEO launched its probe this summer after government-sponsored, shareholder-owned Freddie Mac rattled investors by replacing senior executives over accounting irregularities the company acknowledged were central to a three-year earnings restatement estimated at about $4.5 billion.
The amounts of the penalties aren't so interesting as who are the counterparties and what specifically did they do.
Nov. 18 (Bloomberg) -- Federal regulators investigating accounting irregularities at Freddie Mac want to look into what role Morgan Stanley and Citigroup Inc. may have played, the Wall Street Journal reported on its Web site.
Investigators want to examine the actions of ``counterparties'' in transactions the mortgage financing company used to hide big gains and smooth out its earnings, the newspaper said, citing Corinne Russell, a spokeswoman for the Office of Federal Housing Enterprise Oversight.
Regulators are at least a month away from deciding whether actions by the securities firms endangered the safety and soundness of Freddie Mac, in which case Freddie Mac and Fannie Mae may be barred from doing business with the firms, the newspaper said.
Citigroup and Morgan Stanley declined to comment, the Journal reported. Freddie Mac is the second-largest source of mortgage financing in the U.S., after Fannie Mae.
Citigroup spokeswoman Leah Johnson and Morgan Stanley spokesman Raymond O'Rourke didn't immediately return calls to their offices and cell phone numbers by Bloomberg News Monday morning before business hours.
These guys need to be taken down....Hard...
Taking down the Freddie Macs and the Fannie Maes would have a big impact on our economy. They might be ready to fall down on themselves.
Yep, Citi and JPM but it will never happen. They exist to help the FED manage the markets which gives them a free hand to engage in just about any fraud they want without much consequence. The so called regulators will find a couple of hapless traders, call them rogues, and they will be scapegoated and fired. Citi and JPM return to business as usual. Same old same old.
Richard W.
I'd like to think Churchill was right about us:
"You can always count on the Americans to do the right thing....After they have exhausted all other possibilities."
WASHINGTON, Nov 17 (Reuters) - A U.S. Federal Reserve staff study concludes that advantages Congress gives mortgage finance companies Fannie Mae and Freddie Mac do not lower mortgage costs much for home buyers, a Dow Jones Newswires report said on Monday.
The Fed study mirrors comments made recently to Congress by Congressional Budget Office Director Douglas Holtz-Eakin, the news report says, citing anonymous people familiar with the study.
Holtz-Eakin told the Senate Banking Committee last month Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are no longer necessary to keep U.S. mortgage markets flush with funds. Eliminating the advantages Congress gives the companies would raise most mortgage interest rates by 0.25 percentage point, he said.
The Fed study is slated for release in December, the news report said.
A Federal Reserve spokesman declined comment.
Federal Reserve officials, including Alan Greenspan (News) , have in the past questioned the role of the government-sponsored mortgage finance enterprises, which while shareholder-owned, benefit from advantages Congress gives them to support their mission of expanding homeownership.
Those advantages -- which include the ability to seek emergency funds from the Treasury Department -- lead investors to believe the government would prop them up in a crisis.
A new Fed study could come at a delicate time as lawmakers debate whether to toughen supervision of the mortgage finance companies and limit their activities. The companies are under fire from lawmakers and the Bush administration after an accounting scandal at Freddie Mac and an accounting error at Fannie Mae.
Separately, the Senate Banking Committee said on Monday it will not hold a confirmation vote on the nominee to head the agency that oversees the finances of Fannie Mae and Freddie Mac, the Office of Federal Housing Enterprise Oversight, until it receives a report from the agency on Freddie Mac's accounting problems.
That report is expected to be made public in early December
Richard W.
The harshest punishment the regulator could bring is to bar Freddie Mac (NYSE:FRE - News) and its sister firm, Fannie Mae (NYSE:FNM - News), from doing more business with offending firms, but to take such action the regulators may have to show that the actions by the Wall Street firms "endangered the safety and soundness of one of the big mortgage-finance companies," the paper said.
Gee, I dunno if that would be such a good idea.
Barring participation ? That would be interesting to ponder. They'd have to clip coupons on their mtg portfolios as they stand. If they're set up in a profit yielding posture right now, they could show profitability for 6 months to a year without making new mtgs and selling them to the GSE's. But, that profit stream would slowly whither as payoff ('paid in full', "PIF', industry jargon) slowly or even dramatically decreased their portfolio.
They'd just have to find another financial vehicle to scam I guess.
Euro Futures (priced in USD):
Richard W.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.