Free Republic

Ok folks, its time for a long sit-down type of Ticker - the sort that I usually don't write. Let's start with Fannie and Freddie. As anyone who has been reading The Ticker knows, I have been saying for quite some time that Fannie and Freddie are in fact "short to zero" candidates for the common stock. This is simply due to the mathematics of their financial situation - they are levered up anywhere from 60 to more than 200:1, depending on what you include and exclude from "capital" and "credit book." I use the worst-case set of numbers, because...

IMF welcomes US rescue plan for Fannie, FreddiePosted: 25 July 2008 0152 hrs WASHINGTON : The International Monetary Fund on Thursday welcomed the US government's plans to aid mortgage finance giants Fannie Mae and Freddie Mac and ease the housing crisis. "The announced measures on Fannie and Freddie go in the right direction and are consistent with approaches that the Fund has supported," IMF spokesman David Hawley said at a news conference. "And we agree that public sector intervention is warranted, accompanied by improved supervision." His comments in response to a question came a day after a wide-ranging housing rescue...

Angelo Mozilo was in one of his Napoleonic moods. It was October 2003, and the CEO of Countrywide Financial was berating me for The Wall Street Journal's editorials raising doubts about the accounting of Fannie Mae. I had just been introduced to him by Franklin Raines, then the CEO of Fannie, whom I had run into by chance at a reception hosted by the Business Council, the CEO group that had invited me to moderate a couple of panels. ....... I've thought about that episode more than once recently amid the meltdown and government rescue of Fannie and its sibling,...

As financial storm signals appeared the past 18 months, some Bush officials urged drastic reform of Fannie Mae and Freddie Mac. But, according to internal government sources, Treasury Secretary Henry Paulson objected because it would look "too political." The Republican administration kept its hands off the government-backed mortgage companies that are closely connected to the Democratic establishment. Paulson is a Republican, but as head of the Goldman Sachs investment bank he had close ties with Democratic-dominated Fannie Mae.

Mortgage giant Freddie Mac -- emboldened by emergency regulatory actions that have triggered a two-day rebound in its battered stock -- is considering raising capital by selling as much as $10 billion in new shares to investors, according to people familiar with the matter. The high-stakes maneuver would have the potential to avoid a full-blown government rescue for Freddie Mac and Fannie Mae, twin keystones of the U.S. housing market. The publicly traded, government-sponsored companies own or guarantee about $5.2 trillion of home mortgages, or nearly half the total outstanding, and are at the center of government efforts to prop...

Home | Market Monitor | Market WrapUp | Storm Watch | Sitemap | About Us | Contact Us | Disclaimer | Privacy Statement THE FINANCIAL TSUNAMI The Next Big Wave is Breaking Fannie Mae Freddic Mac and US Mortgage Debt by F. William Engdahl July 15, 2008 The announcement by US Treasury Secretary Henry Paulson together with Federal Reserve chief Bernanke, that the US Government will bailout the two largest guarantors of housing mortgage debt—the Fannie Mae and Freddie Mac—far from calming financial markets, has confirmed what we have said repeatedly in this space: The Financial Tsunami which began in...

U.S. SEC Emergency Rule to Curb 'Naked' Short Sales Reuters Tuesday, July 15, 2008; 2:40 PM WASHINGTON - The U.S. Securities and Exchange Commission will issue an emergency rule later Tuesday to stop "naked" short selling in major financial firms, including Fannie Mae and Freddie Mac, the SEC said. Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference. In a naked short sale, the investor sells stock that has not yet been borrowed. Sellers sometimes deliberately fail to deliver securities as part of a scheme...

Big Business: The US Government is the New Bank of America Government as the Big Lender Massive new US bank formed: Gosbank USA By PETER S. GOODMAN For millions of Americans, the government has morphed from lender of last resort into effectively the only lender. Today the GSEs Fannie Mae and Freddie Mac merged with the Federal Reserve Bank, the US Treasury Department, Goldman Sachs, Citigroup and JP Morgan Chase to form Gosbank USA Capping a year of crisis in the credit markets and global financial system that led to the nationalization of banks in Europe and England, the US...

(2008-07-14) — The Bush administration’s plan to use the Federal Reserve and the U.S. Treasury to save two mismanaged quasi-governmental mortgage companies has already revived confidence in the U.S. free enterprise system both at home and abroad. “This just proves that American capitalism works,” said an unnamed analyst from Bear Stearns. “The self-correcting mechanism of free markets still happens as if guided by an invisible hand. This week we caught another glimpse at that hand. Too bad Adam Smith wasn’t alive to see it.” Around the globe, investor faith in the U.S. economy was buoyed by the news that the...

The central bank has been justifiably on inflation watch lately. But fears about a Fannie and Freddie meltdown may force the Fed to hold back on rate hikes. Inflation risks haven't gone away, but the Federal Reserve might not be able to do much about it right now. Inflation hawks had been hoping the Fed would finally start to attack rising prices by raising interest rates. But the near-meltdown of Fannie Mae and Freddie Mac could tie the Fed's hands, forcing the central bank to keep rates low. Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500), the two government-sponsored...

Washington takes on the shorts Treasury bails out Fannie, Freddie, while SEC declares war on rumors By MarketWatch Last update: 8:49 p.m. EDT July 13, 2008WASHINGTON (MarketWatch) -- The U.S. financial system has lost hundreds of billions of dollars on stupid investments, but don't worry: The federal government has found someone to blame: Rumor-mongers and short-sellers. Sunday the 13th was a very unlucky day if you've been shorting Fannie Mae, Freddie Mac, or a host of other financial firms. Washington has put you on notice: If you don't have something nice to say about banks, don't say anything at all....

On Friday Treasury Secretary Paulson Said Keep Fannie and Freddie in Current Form. U.S. Treasury Secretary Henry Paulson signaled that a government takeover of Fannie Mae and Freddie Mac won't be necessary, saying they should continue as shareholder-owned companies with federal charters. "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission," Paulson said in a statement in Washington. Paulson's remarks indicate he wants to reassure shareholders they won't be wiped out by any government efforts to ensure the stability of the firms that own or guarantee almost...

The U.S. Treasury Department and Federal Reserve on Sunday announced sweeping measures to lend money and buy stocks if necessary in embattled mortgage lenders Fannie Mae (FNM.N) and Freddie Mac (FRE.N). ADVERTISEMENT Acting before a key $3 billion sale on Monday of short-term debt by Freddie Mac, Treasury and the Fed unveiled a series of measures that made clear they want the shareholder-owned lenders to continue their pivotal role in U.S. financial and housing markets and to remain in private hands. "(Their) continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore,...

In good times, they were superfluous. Now they're only as good as their U.S. guarantee Are Fannie Mae (FNM) and Freddie Mac (FRE) really too big to fail? That's certainly a widely held assumption across much of the political spectrum. Republican Presidential candidate John McCain voiced the conventional wisdom on July 10 when he said, "They must not fail." Democrat Charles Schumer, the New York senator, agreed, saying: "Markets should be assured that the federal government will stand by Fannie Mae and Freddie Mac." On July 11, shares in the two companies briefly dropped about 50%, but recovered late in...

If the US bails out Fannie Mae bonds as suggested in We're All Homeowners Now, Nationalization of Fannie, Freddie Unavoidable, inquiring mind just might be wondering "Who is the biggest beneficiary?". It's a good question too. Please consider Chinese Government is Top Foreign Holder of Fannie Mae, Freddie Mac Bonds. As politicians call for taxpayer bailouts and a government takeover of troubled mortgage lenders Freddie Mac and Fannie Mae, FreedomWorks would like to point out that a bailout is a transfer of possibly hundreds of billions of U.S. tax dollars to sophisticated investors and governments overseas. The top five foreign...

They own or guarantee $5 trillion worth of mortgages­ - nearly half of all the country's outstanding home loan debt - and they're crashing. Big time. Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they're unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers. How could the companies end up in such awful straits? ... as...

Fears about Fannie Mae and Freddie Mac retreated somewhat Tuesday after their federal regulator, OFHEO Director James Lockhart, said new accounting rule changes should make "no difference in the risks of the two firms."On Monday, Freddie and Fannie shares plummeted after a Lehman Brothers analyst said a new FASB rule could require the two firms to write-down as much as $75 billion.Rather than the accounting rules, what's really got investors spooked is a growing realization the government will have to nationalize Fannie and Freddie, says Kevin Depew, executive editor of Minyanville.com.The two mortgage lenders are simply too big to fail...

Reuters) - Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg. "Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday. Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying. Shares...

The two largest U.S. mortgage finance companies on Wednesday won approval to pump up to $200 billion into the distressed U.S. mortgage market, the latest step in government efforts to stabilize credit markets and save the economy from recession. Policy-makers at the Federal Reserve, regulatory agencies and the Treasury Department have let loose a flood of measures to battle rising home foreclosures and stabilize shaky markets, but some still see the need for a more direct government hand. The Office of Federal Housing Enterprise Oversight said it was immediately easing restrictions on Fannie Mae (FNM.N) and Freddie Mac (FRE.N) to...

Fortune) -- Freddie Mac and Fannie Mae can only make it through a prolonged credit crisis if they raise billions of dollars of new capital. That, in a nutshell, is what the plunging stock prices of both mortgage buyers are saying Tuesday. Freddie accounted for a sharply higher batch of bad loans in its third quarter earnings, a little more than a week after Fannie did the same thing. But Freddie said that it would move quickly to raise more capital through a large issue of preferred shares. It added that it was seriously considering cutting its dividend - another...

The 45% drop in earnings at Freddie Mac, for a quarter that ended in June, predating August’s intensification of the mortgage market crisis, indicates an uncomfortable reality. President George W. Bush may attempt to hold back the tide of foreclosures by handing out yet more federal guarantees to subprime borrowers, but that will only delay the inevitable. Far from being able to assist the mortgage market by purchasing yet more mortgage backed securities, Fannie Mae and Freddie Mac are about to fight for their lives. The more interesting question is what should be done about it if they perish. -...

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors. This surge in rates on so-called jumbo loans is particularly notable because rates on 10-year Treasury bonds have been falling. Normally, mortgage rates move in tandem with Treasurys, but market jitters have caused investors to ditch mortgage securities. Meanwhile, American Home Mortgage Investment Corp. finally succumbed yesterday to the mortgage-sector chaos that had crippled it in recent weeks and filed for protection from creditors under Chapter 11 of U.S. bankruptcy...

WASHINGTON (Reuters) - Mortgage finance companies Fannie Mae (NYSE:FRE - news) have new programs to help troubled subprime borrowers avoid foreclosure, the companies' chiefs will say Tuesday, according to prepared testimony for a congressional hearing. Daniel Mudd, Fannie's Chief Executive Officer, will unveil a new effort called "HomeStay" when he testifies Tuesday before a congressional panel to discuss the subprime lending crisis, according to text of his prepared remarks obtained by Reuters. The program will offer troubled borrowers "a range of workout solutions," looser credit requirements and ways to shed subprime mortgages before payments spike, according to prepared testimony to...

Wall Street has a soft spot for the "soft landing" thesis, but to me it's crystal clear that a serious economic slowdown is under way. What has been surprising: not that the economy is weakening but that so many people seem to expect a soft landing, and therefore remain in denial about the seriousness of the slowdown. I guess the predilection toward a soft landing is a function of the following: So many folks in the investment business -- and in the country at large-- haven't experienced a consumer-led recession in so long that they think this outcome is just...

NYSE to Permit Fannie Mae to Keep Trading but Must Meet March 15 Deadline for Filing 2005 Financials WASHINGTON (AP) -- Fannie Mae has until March 15 to file its 2005 annual report, the New York Stock Exchange said Tuesday. The exchange will permit the mortgage giant's shares to continue trading if it complies with additional listing requirements, as expected, in the interim, according to a Securities and Exchange Commission filing from Fannie Mae. If the annual report has not been filed by Dec. 31, 2007, Fannie Mae's shares face delisting, the exchange said. Fannie Mae is delinquent in filing...

If the housing market sputters, it's not just individual homeowners who will feel the jolt. The legion of financial institutions that own mortgages will also get rattled. Banks, thrifts and credit union lenders now hold only one-third of the $8.5 trillion in single-family mortgage debt outstanding. That's down from 44% in 1989 * * * In the place of traditional lenders, government-chartered mortgage financers such as Fannie Mae (FNM) and Freddie Mac (FRE) have added volume to their loan books. They've pooled and sold off many of these mortgages to investors in the U.S. and abroad. * * *And banks'...

WASHINGTON (AP) -- Mortgage giant Fannie Mae has used its regional partnership offices over the years primarily to lobby Congress instead of promoting affordable housing, the Department of Housing and Urban Development concluded after a yearlong review. HUD opened a formal inquiry into the political activities of Fannie Mae's regional offices in July 2004 following a Wall Street Journal story that said the company used its partnership offices to funnel money into key congressional districts. HUD, which refused to release its report to the public, said in a statement Monday that Fannie's congressional charter allows it to set up regional...

WASHINGTON (AP) -- Embattled mortgage giant Fannie Mae said Thursday that it has hired the chief financial officer of MCI Inc. to help it "rebuild and renew," as it disclosed new accounting errors and confirmed it will have to restate earnings by some $11 billion. Its shares fell more than 2 percent. The government-sponsored company, which finances one of every five home mortgage loans in the United States, also named a new chief operating officer as it again missed a regulatory deadline for filing a financial report -- this time for the third quarter. In a filing with the Securities...

NEW YORK (MarketWatch) -- Fannie Mae said Thursday it's uncovered new accounting problems in the course of an ongoing review, with the mortgage giant identifying more than $10 billion in issues related to derivatives, insurance accounting and other matters.In a filing with the Securities and Exchange Commission, the Washington-based company (FNM:Fannie Mae), which has previously said it will restate several past periods of financial results, now expects that its 2005 annual financial report won't be completed before the second half of 2006.Fannie also said the New York Stock Exchange is reviewing the company's listing since it's been unable to file...

Privatize Fannie and Freddie Government reformers need to look toward the markets. By Mallory Factor Two centuries ago, Thomas Jefferson argued that private property was the touchstone of American democracy. If he were alive today I am sure he would still be making that argument, because the idea is just as valuable now as it was then. And so I don’t hesitate to argue, in the spirit of Jefferson, that Congress today is jeopardizing the American Dream. What are they doing to contravene the wishes of our third president? Confronted by a real problem related to the semi-governmental status of...

WASHINGTON — An extensive investigation of embattled Fannie Mae (FNM) points to its former finance chief and controller as mainly responsible for the accounting failures at the mortgage giant now struggling to emerge from an $11 billion scandal, said a report released Thursday. The report by a team of investigators led by former Sen. Warren Rudman also found that former chairman and CEO Franklin Raines, while not sharing direct responsibility, contributed to a culture of arrogance at the government-sponsored company. The report comes about 17 months after the revelation that federal regulators had discovered violations of accounting rules and earnings...

Franklin Raines — the ousted cooked-books chief of mortgage giant Fannie Mae — is being accused of corrupting its directors by giving them $12M in charity checks to ignore his scandals. A federal shareholder suit yesterday claims that Raines lavished directors with generous donations to their favorite charities, funneled through a Fannie Mae charitable foundation he controlled for serving the needy......to "dominate his fellow board members" and prevent them from challenging his activities in a mounting $10.8 billion accounting scandal at Fannie Mae. Raines who was chairman of Fannie Mae's board and the its charitable foundation, directed the money to...

Homeless Man Gets Five Fannie Mae Loans In Florida The St. Petersburg Times found a homeless man who had bought a few houses. “After struggling much of his adult life with unemployment, homelessness and drug addiction, Johnny Moon Sr. died last year on a dirty mattress on the floor of a small home near Tampa’s College Hill district. Moon left behind a watch, a flashlight and a wallet containing a solitary dollar bill. And more than a half-million dollars worth of real estate.”

WASHINGTON, May 10 (Reuters) - Fannie Mae's (FNM.N: Quote, Profile, Research) chief executive said on Wednesday the U.S. housing market will face significant resetting of adjustable rate mortgages over the next two years and he worries about this sparking foreclosures in some locations. Daniel Mudd, president and chief executive officer of the government-sponsored mortgage giant, told Reuters in an interview that Fannie Mae models suggest a couple of reset "spike periods" in the next two years, based on past originations of mortgages with adjustable rates and other features such as low initial "teaser rate" periods. It is still unclear what...

WASHINGTON (XFN-ASIA) - Fannie Mae's federal regulator said Tuesday the company's executives and board of directors were to blame for the accounting scandal that rocked the big mortgage company, and said the firm must pay a $400 million fine. A harsh and stinging 348-page report by the Office of Federal Housing Enterprise Oversight said senior management manipulated accounting at the giant company, that Fannie 'stonewalled' government investigators and that Fannie should further probe employees associated with the accounting scandal. The long-awaited report says Fannie employees manipulated earnings to trigger bonuses for management from 1998 to 2004. 'The image of Fannie...

US Senate panel plans one more hearing on GSE bill Tue Jun 20, 2006 6:10 PM ET By David Lawder WASHINGTON, June 20 (Reuters) - The U.S. Senate Banking Committee expects to hold one more hearing on legislation to rein in government-sponsored housing enterprises before sending the bill to the Senate floor, a panel aide said on Tuesday. Sen. Richard Shelby of Alabama, the committee's Republican chairman, will schedule a hearing in the next few weeks to collect testimony on Fannie Mae's $11 billion accounting scandal from credit rating agencies and possibly from Fannie Mae board members, said panel spokesman...

Director of oversight agency says still finding control issues following the $11 billion accounting scandal. June 15, 2006: 1:59 PM EDT WASHINGTON (Reuters) - Fannie Mae's $11 billion in accounting errors cost shareholders up to $30 billion, the acting director of the Office of Federal Housing Enterprise Oversight told a Senate panel on Thursday. James Lockhart said his agency continues to find control problems at the mortgage finance company and that it will be many years before Fannie Mae (up $0.25 to $47.51, Charts) has the proper financial controls in place following an $11 billion accounting scandal.

WASHINGTON (MarketWatch) -- The Bush administration continued to turn up the heat on government-sponsored housing giants Fannie Mae and Freddie Mac Thursday as a senior Treasury official warned that the huge companies shouldn't expect government assistance if they get into financial trouble. In a speech to a real estate group, Treasury Undersecretary Emil Henry said past government bailouts don't mean the government will act again. "Past actions, especially in the case of government bailouts, are not a good predictor of future actions," Henry said in prepared remarks to a real estate roundtable. "And," Henry asked, "do we really want to...

WASHINGTON (AP) -- Employees at mortgage giant Fannie Mae manipulated accounting so that executives could collect millions in bonuses as senior management deceived investors and stonewalled regulators at a company whose prestigious image was phony, a federal agency charged Tuesday. The blistering report by the Office of Federal Housing Enterprise Oversight, the product of an extensive three-year investigation, was issued as the government-sponsored company struggles to emerge from an $11 billion accounting scandal. Earlier, a person familiar with the situation said that Fannie Mae was being fined between $300 million and $500 million for the alleged manipulation of accounting to...

WASHINGTON, D.C. - As director of the U.S. Office of Federal Housing Enterprise Oversight, Armando Falcon took on the once untouchable mortgage finance giants, Fannie Mae and Freddie Mac. His efforts ultimately led to higher standards for risk management and the dismissals or retirements--depending on whom you ask--of top suits at both companies. On Falcon's watch, Fannie and Freddie's fancy accounting footwork was exposed, encouraging some in Congress to try to limit the powers of these government-sponsored enterprises. But Falcon, who resigned in April and now helps institutional investors understand the policy world of Washington from his perch atop Canonbury...

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan again pushed for limits on the multibillion-dollar mortgage holdings of Fannie Mae and Freddie Mac, saying such restrictions would not hurt the thriving housing market. Greenspan, who has been pressing Congress to limit the holdings of the two mortgage giants, warned on Thursday that their debt poses a risk to U.S. financial markets. As Fannie and Freddie grow ever larger, their ability "to quickly correct a misjudgment in their complex hedging strategies becomes more difficult," Greenspan said. "We are thus highly dependent on the risk managers at Fannie and Freddie to do...

WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan issued a fresh call on Thursday for Congress to limit the multibillion-dollar holdings of the mortgage giants Fannie Mae and Freddie Mac, warning that their huge debt could hurt U.S. financial markets. Greenspan's comments came in a speech that focused on the broader issue of the growing use of complex financial instruments, known as derivatives. The Fed chief, as he has done in the past, saw problems with the use of derivatives but also warned against increased government regulation in this area. Concerns about potential market disruptions posed by the two mortgage...

recognize as much as $2.8 billion in additional losses on its derivatives portfolio because of new accounting concerns recently raised by its chief regulator, according to people familiar with the matter. Those losses would come on top of the estimated $9.18 billion in losses related to derivatives that the mortgage giant already has said it will have to recognize as part of its still-unfinished financial restatement. If Fannie has to recognize the full $2.8 billion in additional losses, that would bring the potential size of its restatement to nearly $12 billion, further chipping into the company's regulatory capital. Fannie's regulator,...

Jan. 27 (Bloomberg) -- Fannie Mae, facing scrutiny from Congress over its accounting and record in making housing more affordable, pledged to help an additional 6 million homebuyers in the coming decade purchase their first home. Among the new homeowners, 1.8 million will be members of minorities, according to Washington-based Fannie Mae, the largest buyer of U.S. home mortgages and a government-chartered company. The announcement coincides with concern among both Democrat and Republican lawmakers -- including Representative Barney Frank, a Massachusetts Democrat, and Representative Richard Baker, a Louisiana Republican -- that Fannie Mae is falling short of its congressionally-mandated mission...

Fannie Says It's 'Troubled' By OFHEO Disclosure Proposal By John Connor of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--Fannie Mae (FNM) is "troubled" by a proposal made by its regulator to facilitate the process whereby Fannie Mae and Freddie Mac (FRE) voluntarily register their common stock with the Securities and Exchange Commission. The two mortgage finance giants agreed last July 12 to voluntarily register their common stock with the SEC pursuant to the 1934 Securities Exchange Act, and Fannie Mae earlier this week filed its Form 10 registrations statement and initial Form 10-K annual report with the SEC. The Office of...