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-- Rumsfeld "Pressured" Into Personally Signing Condolence Letters for War Dead In Iraq
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Originally posted by Shakka And it's not accident that Fannie's stock price was up today on the news of the CEO and CFO departures...despite the fact that their whole accounting situation still stands in limbo and there could be more shoes to drop.

Because the hit it took for the actual financial impact on the company were sustained back when the news was released:



It makes no sense to continually sell without the disclosure of additional bad news. The fact that FNM is pro-actively dismissing its executives without ofheo needing to go through the steps of filing a federal statute to remove the CEO and CFO sends a promising signal to investors that FNM is going to be pro-active in restoring investor confidence. But anyway why are we talking about fannie? You still haven't addressed specific freddie concerns with its derivatives portfolio. All of whose concerns were addressed by S&P and Moody's in the industry analysis of housing GSEs.

I'm still sticking by my argument that someone taking "two seconds" to sign a piece of paper pushed in front of him without taking the time to register the significance of what he is doing is no greater than having a robot sign it. I'm sure Mr. Rumsfeld wakes up every day hearing new reports of casualties in Iraq and if that doesn't make him feel condolence for those loses than him putting his John Hancock on a piece of paper sure as hell won't.

I'm sorry that these families are upset, but that's what happens in war. Their loved one signed up, voluntarily, to serve their country, no matter what she asks of them and as a by-product some will die. I don't know what these families want. How is a signature going to make their loss any easier or less painful? Are they going to demand personal letters from every member of the armed forces or maybe a private visit from the President next in some desperate hope of making their loss more palatable?

Part of being a soldier is the real possibility of dying. If the family or the soldier was oblivious to this fact, I feel for them. But when one dies in the line of duty, with both family and soldier knowing full well what may happen, I fail to see how a "personally signed" letter from the Defense Secretary is going to make their lives easier or their loss more justifiable in their grieving eyes.

4 words: Much ado about nothing.








And Occ, Fannie's derivative/hedging tomfoolery makes Freddie's look pristine. It will get much uglier before it's resolved.

I think either a) he should sign them or b) he shouldn't send them.

They have to be signed by him(as small a gesture as it is) just to make tht connection and actually make them from him. If he's never seen it how is it possibly from him? All it is, is some sort of weird (and quite perverse) mail distrubution.

As for being soliders and that being their job, it is a kind of vaild point but as the person who sent thouse troops all of them to war and as he took the desision to send out letters "from him" he should bloody well send them out himself not fob off the task to a computer. The least he could do is take the time to photocopy them himself I supose..........

Kind of like all of those letters "sent" by James Carville with his "signature" on them asking for campaign money? Or any other politician for that matter. I'm not trying to downplay this(as much as it may seem like it), but isn't there just the slightest double-standard going on here?




and like I said above, I still feel like this is much ado about nothing.

Re: Rumsfeld "Pressured" Into Personally Signing Condolence Letters for War Dead In Iraq

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Originally posted by occrider This really pissed me off. Traditionally, the secretary of defense personally signed the condolence letters to families of the deceased. For some reason, Rumsfeld felt the need to assign that duty to a computer. Reminds me of how we were putting armor on humvees "as fast as possible", only to discover that the company making the armor had additional capacity for more units if the defense department had requested it.

Well, dang Occrider, he might get writer's cramp!


[[[smoke]]]

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Originally posted by NeoPhono I'm still sticking by my argument that someone taking "two seconds" to sign a piece of paper pushed in front of him without taking the time to register the significance of what he is doing is no greater than having a robot sign it. I'm sure Mr. Rumsfeld wakes up every day hearing new reports of casualties in Iraq and if that doesn't make him feel condolence for those loses than him putting his John Hancock on a piece of paper sure as hell won't. I'm sorry that these families are upset, but that's what happens in war. Their loved one signed up, voluntarily, to serve their country, no matter what she asks of them and as a by-product some will die. I don't know what these families want. How is a signature going to make their loss any easier or less painful? Are they going to demand personal letters from every member of the armed forces or maybe a private visit from the President next in some desperate hope of making their loss more palatable? Part of being a soldier is the real possibility of dying. If the family or the soldier was oblivious to this fact, I feel for them. But when one dies in the line of duty, with both family and soldier knowing full well what may happen, I fail to see how a "personally signed" letter from the Defense Secretary is going to make their lives easier or their loss more justifiable in their grieving eyes.

It's not so much that the families demanded or required the personal acknowledgment from the sec-defense or the President, nor are they expecting to make the loss any easier if they had gotten a personalized signature. It's the fact that he attempted to console them with a form letter with an auto-signature is an insult. Particularly when it involves something as momentous as the loss of a loved one. If you had read the reactions from the family members, they weren't more sad or greiving because they didn't get rummy's john hancock, they were pissed and mad as hell that Rumsfeld would insult them by sending something with a fake signature.

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Kind of like all of those letters "sent" by James Carville with his "signature" on them asking for campaign money? Or any other politician for that matter. I'm not trying to downplay this(as much as it may seem like it), but isn't there just the slightest double-standard going on here?

How many fake letters were sent by Carville, or any other politician for that matter, to soldiers who died in combat?

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and like I said above, I still feel like this is much ado about nothing.

A) Support the troops!

B) The outrage coming from the troops and the families of dead troops about this incident isn't a big deal. Really ... blown out of proportion. You signed up to fight in the army, and now you or your family should expect deaths.

Must be one of those "mixed messages" that Bush talked so much about during the campaign.

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And Occ, Fannie's derivative/hedging tomfoolery makes Freddie's look pristine. It will get much uglier before it's resolved.

Oh yea? Like what? You must have a juicy source. I have a friend who is a fannie examiner at ofheo and I've heard squat.

You could understand how during a major conflict such as ww2 or vietnam..because there were so many casualties tens of thousands dead that the secatary of defence shouldnt be signing all of the letters as it would take up so much of their day..but given that this conflict is going on for a couple of years now and the death toll is approx 1200..it works out 2 or 3 letters at most per day..hardly an inconvience for somebody who just died for their country

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Originally posted by occrider How many fake letters were sent by Carville, or any other politician for that matter, to soldiers who died in combat?

Don't make it an issue of degree. My question was simply, isn't there the slightest double-standard at work here?

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Oh yea? Like what? You must have a juicy source. I have a friend who is a fannie examiner at ofheo and I've heard squat.

I have a friend who ate breakfast with a guy who's brother's sister's girlfriend saw Ferris pass out at 31 Flavors last night...but I digress. One of my main sources is a very smart research boutique that does excellent forensic accounting work among other things. Not to mention sources such as the WSJ, periodicals, and others. But like they say, "The market can stay irrational longer than you can stay solvent." Alas, here are a few snippets anyway(Pardon my paraphrased notes):

From the WSJ on 9/24/2004:

quote:

According to OFHEO, FNM's accounting for its hedging activities and derivative transactions is not in accord with GAAP. OFHEO found that FNM used "an imporper cookie jar" reserve for its portfolio of MBS, the likely source of most of the "smoothing" of EPS. Both findings contradict FNM's assurances that it can deliver non-volatile earnings, year after year, b/c its business isn't risky. OFHEO found that FNM "tolerated" lax internal controls, deferred expenses to achieve bonus compensation targets, and "maintained a corporate culture that emphasized stable earnings at the expense of accurate financial disclosures."

Comments from Lynn Turner on 10/14/2004:

quote:

FNM's study of its practices & policies for OFHEO will take at least as long as FRE, possibly up to a year or two. SEC informal inquest will likely become a formal investigation in due time. There's a possibility that FNM will be reporting unaudited earnings going forward, but unalbe to give an audited account in the 10Q filings as KPMG has recently refused to certify financial statements when there is an investigation ongoing. That KPMG put $200M in unrecognized errors from 1997 on the scoresheet will go towards showing materiality under SAB 99 that mgmt left it out there to affect bonus payouts. Being an SEC registrant exposes the CEO and CFO if internal controls are no good and the SEC would likely push to remove them if it believes they made false certifications. Facts so far indicate that there are serious internal control issues. It will be difficult for the CFO to survive, especially since he's on the board.

Restatements that could total in excess of $5B will dramatically reduce the company�s book value, its regulatory capital levels, and its ability to grow. The process will take time...

And the kicker/summary/ramifications from my source...

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12/16/2004 Fannie faced with a potential $9B earnings restatement following SEC investigation for improper hedging and improper accounting. Ramifications of the SEC decision include: � Likely departure of Franklin Raines and Tim Howard, leaving FNM temporarily without leadership. � Restatement of 4 years of earnings, leaving the company vulnerable to investor lawsuits, like that filed by the Ohio AG. � A filing of potential criminal charges by the DOJ. � Need to raise capital, which could come from preferred stock, balance sheet shrinkage, or asset mix changes(i.e. securitizations require lower capital requirements). �An impetus for Congress to push through GSE oversight legislation tha t will result in a stricter and more powerful regulator. Rep. Richard Baker(R-LA) has already called for further investigative hearings to take place in early �05. �Incentives for OFHEO to push harder with their investigative probing into the management practices, accounting policies and auditor independence. The SEC�s decision may actually provide Congress with the impetus to provide greater funding to OFHEO to pursue this role. �Potential for the rating agencies to review their debt ratings of the GSEs, with the prospect that a downgrade in the future could have negative ramifications in the banking industry for holders of agency debt of GSE guaranteed MBS. � A move by accountants, particularly Deloitte & Touche(which aided in the forensic accounting review of FNM�s accounting practices) to review the accounting policies and procedures for derivative structures at firms like IFIN or COF. �This action could further spur the PCAOB to take further steps toward insuring auditor independence. � Now that the losses in the �pay fixed/receive floating� rate swaps will be recognized, there could be an unwinding of the hedge of the hedge(i.e. selling the �receive fixed/pay floating� rate swaps), which could put pressure on the bond markets thereby creating a whipsaw to higher rates and a widening of swap spreads. � A widening of swap spreads and higher nominal rates would send a chill through the �games playing� occurring right now in the sub-prime market. �A significant delay before any SEC certified financial statements are made available again, which technically should bring into question NYSE listing requirements.

Not to mention the imminemt slowdown in the housing boom/rising rate environment/move to ARMs from FRMs, which Fannie can't deal in. And now that juicy little 3% dividend might be in jeopardy? Where do I sign up?!

But on second thought, you're right. This sounds like the ideal place to stash my hard earned duckets. These guys are the poster child of proper management and accounting. All of the negative issues are clearly behind them now and the skies are clear going forward. I know this is true because the stock price has gone up. Nevermind what could possibly happen if the government didn't give them "implicit backing". But I digress...this is for another discussion on another day.

quote:

Originally posted by zig You could understand how during a major conflict such as ww2 or vietnam..because there were so many casualties tens of thousands dead that the secatary of defence shouldnt be signing all of the letters as it would take up so much of their day..but given that this conflict is going on for a couple of years now and the death toll is approx 1200..it works out 2 or 3 letters at most per day..hardly an inconvience for somebody who just died for their country

I agree--hardly an inconvenience, and hardly worth 2 pages of debate over. The implications of the argument are that somehow Rummy simply doesn't care about the soldiers or their families, and is only some old stodgy bastard who could care less that people are dying. I for one don't think that that is the case at all. I'm waiting for the day that we see these letters for sale on eBay. If you got an authentic signed letter, you could probably sell it for hundreds, if not thousands. Again, I just feel like the media is desperate for a story--and they love stories that make the administration look bad. Here are some thoughts by Boortz today. A lot of you may hate him, and that's fine by me. But I think he makes plenty of salient points.

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Thursday, December 23, 2004 HOW MUCH HAS THE LEFT HURT US? While I was getting ready for the show today I heard a station promo offering support to "our men and women in uniform fighting the war against terror." Seems simple enough, doesn't it? But stop to think just a moment .. let those words roll by just once more. We are fighting a war against terror. The problem here is that no everyone is on board. There is no question that things in Iraq have not gone precisely the way many expected after the fall of Saddam. I don't think anyone foresaw the level of the insurgency that would dog our efforts to establish a free and independent Iraq. We also didn't foresee the degree to which the left in this country would continue, day after day, to criticize and condemn virtually every step taken by George Bush and coalition leaders in first liberating and then attempting to secure Iraq. Virtually ever action taken by the American military in Iraq has been criticized by the left. First coalition forces didn't move on Fallujah soon enough, then it was too soon. Too many troops, not enough troops' too bold, too timid. Wrong war. Wrong place. Wrong time. Since the very beginning there has been virtually no support for the liberation of Iraq from the left in this country, and the enemies of freedom in Iraq have certainly taken notice. How could they not? As soon as the United States appointed an interim Iraqi government to run the show until elections could be held, the left launched attacks on the validity of that government and predicted that it would fail. Don't you just know that those who opposed any freely elected government in Iraq just beamed? When Iraqi Prime Minister Iyad Allawi visited Washington DC this past Fall the American media virtually ignored him, an attempt to strip him of any vestige of legitimacy, respectability and authority. How could the enemies of freedom in the Middle East not notice? There are people in the Middle East, around the world and here at home who earnestly want the US to fail miserably in Iraq. In the Middle East you have leaders in Syria, Iran, Saudi Arabia and other lesser countries who are frightened to death over what a freely elected government in Iraq would mean to them. These people are doing all they can to support the Iraqi Islamic insurgency. Around the world we have nations and leaders who want to see the role of the United States in international affairs weakened. They want a power vacuum that perhaps they can move to fill. The see a U.S. failure in Iraq as something that would weaken this country. The future lives of Iraqi civilians means nothing to these people compared to their desire to see the United States take a hit. And that brings us here to our own people. There are people in this country: call them Bush-haters, Democrats, liberals, progressives ... call them what you will ... but they are dedicated to the idea of discrediting George Bush in any way that they can. They are dismayed over even the most remote possibility that Bush might actually pull a free, independent and stable out of his hat. They know that success in Iraq could change the face of the Middle East for ever. It could be the beginning of the end of radical Islam .. and eventually make Islamic terrorism a thing of the past. Freedom is the greatest enemy of tyranny .. and those are the two sides battling it out in Iraq; but to listen to the left in this country you would think they're leading the cheers for the tyranny side. n Let's cut to the chase. How do you think things would be going in Iraq right now if there was unity in the United States? What do you think the situation would be in Iraq today if the American left had adopted the attitude that "Well, we're in this. So let's get the job done."? Would American soldiers have died be alive today if the left in this country had not done so much to discredit Bush and virtually everything he's done in Iraq? How many insurgents would have stayed with their goats in Syria and Iran if they had believed that the United States was of one voice when it came to establishing a democratically elected government in Iraq? Here's what I'm saying ... in more concise terms. The obsessive compulsive Bush haters in America have been giving aid and comfort to the Islamic terrorists and insurgents who want to make Iraq a theocratic Islamic state run by a group cloned from the Taliban. The encouragement these Islamic goons derive from the bleatings of the left in this country might be your most prominent cause for the level of insurgency that exists in Iraq today.

[

quote:

Originally posted by Shakka Don't make it an issue of degree. My question was simply, isn't there the slightest double-standard at work here?

Well if you would categorize me shooting your dog in the same bucket as me shooting your family, than yes I suppose one could claim that there is a double standard. The point, is that they are nothing alike. Why would I give two shits if I get a letter asking for donations with a fake signature? I would give two shits if someone tried to pretend to console and care about the loss of a loved one by sending a letter but didn�t bother to sign it or spell my name right. It�s disrespectful � you�re better off not sending the letter at all.

quote:

I have a friend who ate breakfast with a guy who's brother's sister's girlfriend saw Ferris pass out at 31 Flavors last night...but I digress. One of my main sources is a very smart research boutique that does excellent forensic accounting work among other things. Not to mention sources such as the WSJ, periodicals, and others. But like they say, "The market can stay irrational longer than you can stay solvent." Alas, here are a few snippets anyway(Pardon my paraphrased notes): From the WSJ on 9/24/2004: Comments from Lynn Turner on 10/14/2004: Restatements that could total in excess of $5B will dramatically reduce the company�s book value, its regulatory capital levels, and its ability to grow. The process will take time... And the kicker/summary/ramifications from my source...

Yup I stay abreast with the wsj religiously as well. However, I also take the time to read analyst reports of the material impact of the financial viability of FNM and FRE. The impact of the accounting digressions were already assessed when the revaluing of the derivatives portfolio was initially announced. It was already assumed that an earnings restatement would be forthcoming and that ofheo would force FNM to increase its regulatory capital, it�s common sense because that� exactly what happened to FRE. Investors who are reacting to that news just now are way behind the ball on this. Therefore, the fact that ofheo is just publicly releasing this information now does not have a material impact on FNM�s portfolio valuation beyond what was anticipated back in September:

quote:

December 8th 2004 Moody�s believes that risks should be mitigated on an economic basis, and we look through the accounting treatment of various financial instruments to understand and challenge the effectiveness of hedging strategies. In the case of Fannie Mae, the dynamic rebalancing of their market positions with a mix of instruments highlights the need for analysts to separate risk mitigation decisions from the accounting policies applied to the instruments used. As an example, a receiver swaption combined with a bullet pay fixed interest rate swap is economically equivalent to a cancelable swap while the accounting treatments of each of the two structures would be different. The GSEs� GAAP earnings illustrate the complex non-linear path-dependent relationship between the firms� financial quarterly results and the intra-quarter evolution of interest rates and interest rate volatilities. Net interest income is primarily a function of the average level of interest rates and the mortgage to debt spread during the quarter and it is also affected by changes in amortization expenses/gains on premiums due to changes in interest rates. Guarantee and management fees are dependent on business volume subject to distortions from changes in amortization income due to changes in interest rates. Non-interest income is dependent on the changes in fair value in the derivatives and trading securities portfolios. For accounting purposes, on the fair values are mostly sensitive to changes in interest rates (duration and convexity effects). Of the three components of net revenues, the changes in non-interest income have the largest impact on the volatility of net revenues. The asymmetric treatment of underlying exposures and hedges by FAS 133 introduces differences in the timing of derivatives impacts. Depending on the designation of the derivatives contracts the changes in market values are either classified in earnings or in the comprehensive income account (AOCI � a balance sheet account) for derivatives designated as cash-flow hedges. In most cases, the asymmetric treatment of the hedge and the underlying exposure will create volatility in reported financial results. Faced with this volatility, firms have the opportunity to influence the accounting result by choosing one particular hedging action over another one. Other factors might influence the choice of hedging decisions such as the reported amount of $ notional or cash-flow considerations. Because of the impact of FAS 133 and FAS 149 on GAAP numbers, it is Moody�s position that earnings volatility does not fully reflect the economic risk picture of a firm. We prefer more economically driven measures as our key risk indicators, such as the change in the fair value of the balance sheet. . . . Interest Rate Risk: Fannie Mae�s Principal Market Exposure Fannie Mae�s strategy is intended to optimize the risk adjusted return trade-off to achieve its ROE target while protecting against unfavorable interest rate moves. Interest rate risks are hedged statically and dynamically with a mix of debt and derivatives instruments measured and monitored using multiple risk measures. The systems used by Fannie Mae are well regarded by Moody�s, and discussed in greater detail in the Model and System Risk section. . . . Unhedged Spread Risk Creates Uncertainty, but Risk is Transitory While the interest rate risk components are hedged, the mortgage-agency spread risk is not, and hence represents a potential major source of uncertainty in the fair value of net assets. However, this risk is transitory and does not affect the viability of the current portfolio in of the firm.

quote:

Not to mention the imminemt slowdown in the housing boom/rising rate environment/move to ARMs from FRMs, which Fannie can't issue...

All of which will be counterbalanced by the tightening of the mortgage to debt spread risk as interest rates rise. Sure, I could focus on one or two items in a closed system and pretend that nothing else is going on, but that�s not going to help me to evaluate the firm�s overall performance. Besides, most of the firm�s earnings come from asset liability management, not g-fees.

quote:

But on second thought, you're right. This sounds like the ideal place to stash my hard earned duckets. These guys are the poster child of proper management and accounting. All of the negative issues are clearly behind them now and the skies are clear going forward. I know this is true because the stock price has gone up. Nevermind what could possibly happen if the government didn't give them "implicit backing". But I digress...this is for another discussion on another day.

Well if it were legal, I would have bought FNM stock shortly after the double dip and held on to it for a while � the risk from these transitory changes are all going to be borne by short-term shareholders.

quote:

Originally posted by occrider Well if it were legal, I would have bought FNM stock shortly after the double dip and held on to it for a while

Likewise, I would've bought 10,000 shares of Microsoft in 1986 and would've shorted a billion shares of Enron on 9/28/2000. The whole hindsight thing is just so much fun!


On a side note--my apologies if I pissed you off or rubbed you the wrong way with any of my commentary. This is certainly a heated topic. And while I've never met you and don't know much of anything about you, I truly wish you a happy and joyous holiday(whatever you celebrate). Life is too short to go through pissed off.

P.S. If I were to send you a hoiday card, I promise I would sign it myself.

Cheers!

quote:

Originally posted by Shakka Likewise, I would've bought 10,000 shares of Microsoft in 1986 and would've shorted a billion shares of Enron on 9/28/2000. The whole hindsight thing is just so much fun!

Indeed it is.

quote:

On a side note--my apologies if I pissed you off or rubbed you the wrong way with any of my commentary. This is certainly a heated topic. And while I've never met you and don't know much of anything about you, I truly wish you a happy and joyous holiday(whatever you celebrate). Life is too short to go through pissed off.

Meh ... it's bound to happen on a message board. No offense taken . Anyway have a happy festivus to yourself as well. By the way ... I celebrate drinking .

quote:

P.S. If I were to send you a hoiday card, I promise I would sign it myself.

Haha only from you would I accept an auto-signature

Cheers! [/QUOTE]

Not to harp on an old thread, but did you happen catch the Barron's follow-up article over the weekend?

Link

[quote]Mortgaging the Future
Fannie Mae's troubles are far from over


THE BIG HEADS FINALLY ROLLED at Fannie Mae last week, but the soap opera starring the company's crummy accounting is far from over.

Two weeks ago, the Securities and Exchange Commission stunned Fannie Mae and its many camp followers in Wall Street's analytic community and on Capitol Hill by corroborating serious accounting violations at the government-sponsored mortgage giant that will entail the reversal of about $9 billion in profits reported by Fannie over the past three and a half years. Then, on Tuesday, Fannie directors forced the departure of chief executive Franklin Raines and chief financial officer Tim Howard, and dismissed Fannie's outside accounting firm KPMG.

Raines, a former high-ranking official in the Clinton Administration, was a big-time power broker in Washington D.C., with the ability to reward politicians with large campaign donations and funding for pet housing initiatives in home districts. Fannie played the lobbying game with unmatched vigor and aplomb. Adding to Raines's cachet was the fact that he was one of the first African-Americans to head a Fortune 500 company.

Barron's readers were amply prepared for the latest developments. In a cover story earlier this year ("Swept Away," May 17) we warned that the quasi-public housing giant used unorthodox accounting to pump up its earnings and capital position and, at the same time, justify huge pay packages for Raines and other senior managers. We even detailed where the accounting games were being played: [b]The company classified more than $13 billion of losing derivative positions as "cash-flow" hedges.

This treatment allowed Fannie to spread the losses over many years rather than expensing them immediately. These losses were incurred as a result of Fannie's inept hedging and ill-timed bet that mortgage rates would remain steady or rise.
[photo]
Fannie's Franklin Raines: out of a job



Three months ago, Fannie's regulator, the Office of Federal Housing Enterprise (Ofheo), released a stinging 200-page report that delineated serious violations of accounting rules. It charged Fannie with abuse of, among other things, expense recognition and its use of derivative accounting. Raines and other Fannie officials stoutly defended the outfit's accounting procedures in subsequent congressional hearings, stating that it would abide by any decision on accounting questions by the SEC, which in the meantime had launched its own investigation. Thus, Fannie rolled the dice and lost big-time when the SEC, in effect, ruled in favor of Ofheo.

Yet Fannie's chorus of cheerleaders on Wall Street remains mostly in denial. Last week, Robert Napoli of PiperJaffray held to his view that the Fannie contretemps is largely a mere "accounting issue" and kept his 12-month target price for Fannie's stock at 95. The shares currently trade around 72.

Jonathan Gray of Sanford Bernstein, a longtime holder of Fannie in his personal account, saw fit to drop his price target to 84 from 86, following the departures of Raines and Howard. Yet he has long depicted Ofheo's investigation of Fannie as a witch hunt by an overzealous regulatory agency.

We would observe the following, however. Since it will take Fannie months, if not years, to restate nearly four years of results, the company will be unable to file current earnings reports with the SEC for many, many quarters to come. Thus, earnings projections are an exercise in the theater of the absurd.

And more bad news seems likely to emerge as Ofheo continues to probe other accounting areas at Fannie. Likewise, Wall Street seems to be ignoring an ongoing Justice Department probe of possible criminal-accounting fraud at Fannie. Before it's all over, Fannie may well enjoy the dubious distinction of perpetrating the largest accounting fraud in U.S. corporate history, topping the $11 billion mark set by WorldCom that sent the telecom concern careening into bankruptcy in 2002.
[chart]

After expensing its derivative losses, Fannie will be some $3 billion below its Ofheo-mandated minimum-capital requirement, with regulatory capital of around $30 billion. At least that's the capital deficiency as of the end of the third quarter. If nothing materially changes, that capital deficiency would balloon to over $12 billion by June 30, 2005, when Fannie must meet an Ofheo-mandated capital surcharge of 30%.

At a minimum, Fannie likely will have to suspend its dividend, which would save it about $2 billion a year. The company likely will marshal more capital by shrinking its billion-dollar investment portfolio through run-off and cutbacks on new purchases of mortgages and mortgage-backed securities.

Some analysts hope Fannie can realize gains in its investment portfolio. (Gray claims that as of the end of last year there were $14 billion of such after-tax gains, based on Fannie's "fair value", marked-to-market balance sheet.) However, most of these gains can't be harvested because they sit in Fannie's hold-to-maturity portfolio. Besides, at this point, who can believe the values Fannie assigned to either its assets or liabilities as of that date? And rising rates won't help much in paring the losses in its derivative portfolio, since the bulk of those losses already have been locked in or offset by swap positions that would lose value in a rising rate environment.

Fannie over the years has used its huge permitted capital leverage to gun its growth and earnings. But leverage can hurt when operations are shrunk. To come up with $10 billion in new capital if all else fails, Fannie would have to dump over $300 million of its trillion-dollar investment portfolio. That, of course, would decimate earnings. Sadly, Fannie promises to be a falling-rock zone for stock investors for the foreseeable future.

-- Jonathan R. Laing

I think we can all agree that Rumsfeld is the scum of the earth and move on.

quote:

Originally posted by Dj Tomer I think we can all agree that Rumsfeld is the scum of the earth and move on.

Great political commentary by DJ Tomer. Why is he the scum of the earth in your opinion? I would like to know why.

quote:

Originally posted by Reverend_Trance Great political commentary by DJ Tomer. Why is he the scum of the earth in your opinion? I would like to know why.

I guess that was a little harsh, but still,



I can't say I have any respect for the man

Yes, all political situations are completely stable and unchanging. That's why we're still enemies with England, Italy, Germany, Japan and the former Soviet Union. That picture does absolutely nothing but serve as a history lesson.

quote:

Originally posted by Dj Tomer I guess that was a little harsh, but still, I can't say I have any respect for the man

When that pic was taken, Rummy was still just another pawn in the game.





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