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Fannie + Freddie used poor accounting to create the largest public bail out ever,+ link, + quote from Ny Times

Freddie and Fannie Mae    The two largest lenders in the United States housing market appear to have been manipulated numbers recently to offset the timing of losses, and used other complex accounting manipulations for a variety of reasons.  The corporations state they were trying to help the most people possible.   Topstockblog opposes public buyout by tax payers with out public ownership.

-quote below taken from http://www.nytimes.com/2008/09/07/business/07fannie.html?hp —-

“Regulators are also said to be scrutinizing whether the companies were trying to manage earnings by waiting to add to their reserves. Both companies have gradually increased their reserves for loan losses — Fannie’s reserves today stand at $8.9 billion, and Freddie’s at $5.8 billion.

Other companies, like private mortgage insurers, have been quicker to identify large losses and have set aside much greater amounts. Fannie and Freddie have dribbled out bad news with each quarterly announcement, suggesting they may be trying to manage this process.

Finally, regulators are concerned that the companies may have mischaracterized their financial health by relaxing their accounting policies on losses, according to people familiar with the review. For years, both companies have effectively recognized losses whenever payments on a loan are 90 days past due. But, in recent months, the companies said they would wait until payments were two years late. As a result, tens of thousands of loans have not been marked down in value.

The companies have injected their own capital into pools of securities containing these loans, arguing that their new policies are helping more borrowers.

Under conservative accounting methods, changing these policies would not have any impact on the companies’ books. However, people briefed on the accounting inquiry said that Freddie Mac may have delayed losses with the change.”

 

Entertainment, and education purposes,

September 6, 2008 - Posted by | American Politics and Policy Ideas, Serious Subjects that need public exposure, Stock investing links, ideas, and opinions. | , , , , , , , , , , , , ,

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