Information has become available and I need to put out a retraction from my post last night relating to the accounting changes at Fannie Mae. Tanta over at Calculated Risk does an amazing piece on how the Fannie numbers were not "cooked" as much as presented in a different way from previous filings. Here is the post, its a long one, but a great read:
http://calculatedrisk.blogspot.com/2007/11/fannie-maes-credit-loss-ratio-fuzzy.html
I was guilty of using reporting that was not thoroughly researched by myself. I have time and skill limitations when its comes to deep financial accounting reporting, and I hope dear readers you understand that limitation. The problem with writing in real time on the web is illustrated by this example. I admit my mistake.
Having said that, I still have problems with Fannie Mae. I will reprint the comment I left at Calculated Risk here:
Tanta,
Excellent piece as usual. I admit I am one in the "blogosphere" that posted on the story yesterday evening. Thank you for the detailed analysis. I am not sufficiently skilled in matters of finance (I am only a DNA Molecular Biologist!) to go through all the details of the Fannie accounting changes. I clearly ,missed the subtlety of the change. The burden of proof is on Fannie to be believable and I think that there are still a few points that are troubling:
1. With FNM's failure to produce filings over the years, is now a great time to roll out new "presentation" parameters?
2. Not having information on cure rates for loans looked terrible to all traders and analysts
3. If management of the single largest lending entity in the world cannot communicate clearly what is going on, what is going on?
You are correct that this instance shows the trouble with writing in real time without thorough analysis, and I thank you for your herculean effort.
Tanta has a reply to my comment up already, all I can say is OUCHIE!
In the future I will try my best to not "jump the shark" on financial disclosures until the things can be thoroughly de convoluted enough for a moron to process. The great thing about getting information and news in the Internet age is that you can go around the world of expertise and get your own answers and compare logic. Do not always assume the source you are reading is absolutely correct.
Sorry folks. I feel I let you down.
3 comments:
Ted in all fairness unless the implicit government backing of a taxpayer bailout is removed from Freddie and Fannie these two behemoths are a clear danger to the taxpayer regardless of their accounting. As private sector companies congress should take steps to write it in stone that there will not be a bailout under any circumstance or put them under the public sector if their is any possibility of that happening IMHOP.
Kevin
Kevin,
Thanks again for stopping by leaving a comment. With the push to allow Fannie to buy mortgages in the MILLION dollar range, all taxpayers should be very nervous about their wallet. Also, my name is not Ted!
Sorry about the name screw up but I didn't notice that getyourselfconected was split up under About ME and mistakenly thought TED was your name, now it has ED, which I know isn't right either. Sorry for the mistake.
Kevin
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