Skip to comments.Fannie Mae Shares Dive on Report of New Problems
Posted on 09/29/2005 5:34:24 AM PDT by 2banana
Fannie Mae Shares Dive on Report of New Problems Wednesday, September 28, 2005
Fannie Mae Restatement Delayed, Stocks DropFannie Mae Mortgage Portfolio Drops Again Fed Head Warns Congress on Fannie, FreddieFannie Mae Accounting Probe WidensFannie Mae: New Accounting Issues FoundFannie Mae Won't Pay Bonuses to Top ExecsFannie Mae to Sell $5B in Preferred Stock Fannie Mae to Pay Ex-CEO $1.3M Per YearEx-Fannie Mae Chief to Get Hefty PensionTwo Top Fannie Mae Execs Forced Out
WASHINGTON Shares in Fannie Mae (FNM) plunged Wednesday after a report saying investigators found new accounting violations at the mortgage finance enterprise, which is already under scrutiny for bookkeeping distortions.
Fannie Mae (search) shares tumbled following the report, which said investigators discovered evidence executives overvalued assets, underreported credit losses, and misused tax credits. The article cited unnamed sources close to, or who have been involved in, the inquiries.
Fannie Mae stock had been down less than 1 percent before the article was published at about 1320 EDT , but moved quickly lower. Shares closed at $41.71, down 10.7 percent, in their biggest one-day drop since the market crash of October 1987.
The drop wiped out more than $4 billion of the stock's market value.
Last year, OFHEO accused Fannie Mae of accounting improprieties in the midst of an extensive review of the company's books. Fannie Mae acknowledged accounting problems, ousted top executives and said it would restate earnings.
Fannie Mae is also under investigation by the Securities and Exchange Commission (search), the Departments of Labor and Justice, and by a legal team appointed by the company's board of directors.
(Excerpt) Read more at foxnews.com ...
Woopss Fat Fingered that one
But a GNMA fund is a bond mutual fund - it won't be directly affected by problems with FNMA's stock price.
And the market assumes that AAA-rated FNMA and GNMA mortgage-backed securities are backed by the full faith and credit of the US Government (in fact they aren't, but if a crisis came we taxpayers would certainly be asked to back them up...to the tune of several trillion dollars) so the problems with the Louisiana-like "private" entity Fannie Mae don't have any real impact on the bond markets. ;)
Accounting scandals can't stay submerged forever. And usually, the longer they wait to pay the piper, the nastier the concussion.
Nice wise-ass intro....I own GNMA because I understand GNMA and do not FNMA..hence "whats the diff"
I was also curoius about their basic function as a buisness not how they are labeled for the financial markets.
Actually, I believe, altho I have been known to be wrong before ;), that GNMA is explicitly gov't backed. Whereas FNM and FRE are not.
"Nice wise-ass intro"
You noticed too, huh?