{"id":194605,"date":"2008-09-07T23:04:00","date_gmt":"2008-09-08T04:04:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/09\/07\/fannie-and-freddie-and-shady-accounting\/"},"modified":"2008-09-07T23:04:00","modified_gmt":"2008-09-08T04:04:00","slug":"fannie-and-freddie-and-shady-accounting","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/09\/07\/fannie-and-freddie-and-shady-accounting\/","title":{"rendered":"Fannie and Freddie and Shady Accounting"},"content":{"rendered":"<p>It appears that both firms <a href=\"http:\/\/www.nytimes.com\/2008\/09\/07\/business\/07fannie.html?_r=2&amp;hp&amp;oref=slogin&amp;oref=slogin\">grossly overstated their capital using accounting tricks<\/a>, and the Morgan Stanley auditors hired caught the problems:<\/p>\n<blockquote><p>Indeed, one person briefed on the company\u2019s finances said Freddie Mac had made accounting decisions that pushed losses into the future and postponed a capital shortfall until the fourth quarter of this year, which would not need to be disclosed until early 2009. Fannie Mae has used similar methods, but to a lesser degree, according to other people who have been briefed.<\/p><\/blockquote>\n<p>Some techniques used:<\/p>\n<ul>\n<li>Not writing down their subprime and alt-A loans to market prices.<\/li>\n<li>Counting deferred tax credits, which are worthless until a company generates a profit, as capital. (Only Fannie and Freddie have the right to do this)<\/li>\n<li>Extending the default period on a loan before declaring a loss from 90 days to <span style=\"font-weight: bold;\">two years<\/span>.<\/li>\n<\/ul>\n<p>This is all stuff that only Fannie and Freddie could do.  No other US bank is allowed to.<\/p>\n<p>This is why the elimination of political and lobbying activities is important.  The mess uncovered will become even bigger as normal accounting is applies.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It appears that both firms grossly overstated their capital using accounting tricks, and the Morgan Stanley auditors hired caught the problems: Indeed, one person briefed on the company\u2019s finances said Freddie Mac had made accounting decisions that pushed losses into the future and postponed a capital shortfall until the fourth quarter of this year, which &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1004,985],"tags":[],"class_list":["post-194605","post","type-post","status-publish","format-standard","hentry","category-finance","category-regulation"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/194605"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=194605"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/194605\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=194605"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=194605"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=194605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}