"ALL CAPS IN DEFENSE OF LIBERTY IS NO VICE."

Saturday, September 06, 2008

FANNIE MAE AND FREDDIE MAC BAILOUT COMING - DUE TO FRAUDULENT BOOK-KEEPING

NYTIMES: Loan Giant Overstated the Size of Its Capital Base
The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

... Just a week ago, Treasury officials were still considering a wide variety of options for Fannie Mae and Freddie Mac, ranging from doing nothing to taking over the companies completely, according to people with knowledge of those discussions.

The Treasury secretary, Henry M. Paulson Jr., who won authority from Congress last month to use taxpayer money to bolster the companies, always maintained that he hoped never to use that power. But, as the companies’ stocks continued to languish and their borrowing costs rose, some within the Treasury Department began urging Mr. Paulson to intervene quickly.

Then, last week, advisers from Morgan Stanley hired by the Treasury Department to scrutinize the companies came to a troubling conclusion: Freddie Mac’s capital position was worse than initially imagined, according to people briefed on those findings. The company had made decisions that, while not necessarily in violation of accounting rules, had the effect of overstating the companies’ capital resources and financial stability.

... Accusations of questionable accounting are not new for either company. Earlier this decade, both companies paid large fines and ousted their top executives after accounting scandals.

Freddie Mac’s current chief executive and chairman, Richard F. Syron, joined the company in 2003 after the former managers revealed that they had manipulated earnings by almost $5 billion. The next year, Fannie Mae’s chief executive, Daniel H. Mudd, was promoted to the top spot after that company was accused of accounting errors totaling $6.3 billion.

... “We have just had to nationalize the two largest financial institutions in the world because of policy makers’ inaction,” said Josh Rosner, an analyst at Graham Fisher, an independent research firm in New York, and a longtime critic of the government-sponsored enterprises. “Since 2003, when these companies’ accounting came under question, policy makers have done nothing.”

ROSNER IS 10000000% CORRECT: THESE OUTFITS HAVE BEEN THE CORRUPTLY EXPLOITED FOR PATRONAGE FOR DECADES:
  • JAMIE GORELICK AND FRANKLIN RAINES WERE CLINTON GANG-MEMBERS WHO DID THE SAME CRAP YEARS AGO.
  • THE SAD AND SICK AND MADDENING THING IS WE THE TAXPAYERS ARE GONNA HAVE TO PICK UP THE BILL.
  • WE ARE ALWAYS LEFT HOLDING THE BAG.
  • IF THEY HAD BEEN TRULY PRIVATE THEN WE PROBABLY WOULD NOT BE INT HIS MESS.
  • AND WHAT'S THE RESULT NOW!? THEY ARE GONNA BECOME EVEN MORE "PUBLIC".
  • THIS IS MORE SOCIALISM, NOT LESS.
  • AFTER THE FEDS CLEAN UP THESE TWO OUTFITS THEY OUGHT TO SELL THEM.

3 comments:

Christopher said...

Why would they 'promote' someone that was part of the team that created the $5 Billion dollar overstatement. Just tossing out the head guy and then replacing him with another jerk from the inside was stupid.

More attention should have been paid to this problem years ago, someone from the outside with open book policy should have been put in charge. The stockholders should have demanded it.

Billions of dollars done the drain, for what? Who came out better for this, someone had to know what was happening.

Reliapundit said...

EXCERPT:
“We have just had to nationalize the two largest financial institutions in the world because of policy makers’ inaction,” said Josh Rosner, an analyst at Graham Fisher, an independent research firm in New York, and a longtime critic of the government-sponsored enterprises. “Since 2003, when these companies’ accounting came under question, policy makers have done nothing.”

_______
that's why we need to privatize this kind of stuff.

yana1458 said...

The crime which was commited here is not fraudulent accounting but the decision by bonus-hungry executives of both companies to enter sub-prime and alt-a mortgage market. They knew that Government will bail them out using taxpayers money. If they did not trade these risky mortgages (as this was not their business), they would not be in a position they are in now. Executives of both companies should be forced to return their bonuses and should be sent to jail to serve long sentences.