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HomeSense on Cents Recommended Weekend Reading
Posted by Larry Doyle on June 20th, 2009 12:30 PM |
Let’s “span the globe” and get an international perspective on financial developments that impact all of us whether we know it or not.
Moving across the ‘pond,’ we can get a taste as to how the finest ‘Scotch’ turned bitter, in reviewing:
Decline of West Where Mathewson Rues What RBS (Royal Bank of Scotland) Wrought
by Simon Clark, Rodney Jefferson, and John Helyar
Bloomberg
Taking a truly global perspective and realizing the magnitude of the worldwide recession, we are reminded of how blessed we are:
World Hunger Reaches 1 Billion People, U.N. Says
Assocated Press
Wall Street Journal; June 19, 2009
Lest we forget the historic nature of President Obama’s speech in Cairo, how do Europeans view the impact of that speech? Let’s review:
Obama’s New World Order
by Nick Whitney
Project Syndicate
Moving eastward, let’s take the pulse of the long term predicament facing The People’s Republic of China and review:
China’s Savings Problem and the Consumption Constraint
by Michael Pettis
China Financial Markets (linked at Wall Street Pit)
I hope this quick trip around the globe helps us all appreciate the varied nature of world cultures and the issues facing all of us. As such, I pray that collectively the stronger and better part of our human spirit will prevail as we work our way through and over the global economic landscape.
Enjoy!!
LD
The Wall Street “Sausage-Making” Process
Posted by Larry Doyle on June 20th, 2009 9:01 AM |
Why do pigs need to go through such a curing process before finding their way to market? The innards of a pig are filled with all sorts of waste. In the same vein, the new Wall Street pig, otherwise known as an x-Tender security (but hereby deemed Porky Pig at Sense on Cents), is also filled with similar “junk.” I will try to make this quick, but bring a mask as we navigate the Wall Street sausage factory.
Please recall from my post yesterday, “An Auction-Rate Pig by Any Other Name Is Still a Pig”, that this ‘new’ Wall Street product is merely a revised version of THE LARGEST fraud perpetrated in the history of finance. This “pig” allows municipalities to address long-term funding needs via the short term debt market. The arbitrage involved in that process is akin to slaughtering the pig and making sausage.
Given the stench surrounding this product, take a deep breath as we tip-toe through the pigsty and move into the sausage factory. The Wall Street Journal can serve as our tour guide as it writes, Belt-Tightening by States Squeezes Cities and Towns. Let me connect the dots.
As this article highlights, municipalities across our country are increasingly financially strapped by a combination of decreasing tax revenues and lessened state funding. Regrettably, these municipalities are forced to cut expenses via a reduction in services and layoffs. Additionally, it is only logical to expect that municipalities will increase taxes to bridge their financial gap.
Add it all up, though, and it is very clear that an overwhelming number of municipalities in our nation are not as creditworthy today as a year or two ago. When credit ratings decline, borrowing costs go up. Those increased borrowing costs further squeeze the municipalities. What to do? Let’s enter the sausage factory.
With the blessing of the SEC, and the wizardry of financial engineers on Wall Street, municipalities can address long-term funding needs by borrowing money via the short-term market with a ‘promise’ to repay the funds if the short-term market shuts down. These municipal deals, much like sausage, are packaged and distributed via money market funds that incorporate a variety of short term deals. As such, the poorer credit quality of the municipality is “processed” and sold without investors fully appreciating the contents of the money market fund.
This works, right? The municipality receives the badly needed funds and the Wall Street banks earn their fees. Meanwhile, investors – who by nature move in and out of money market funds expecting them never to “break the buck” (meaning the funds will always maintain a $1.00 net asset value) – are kept in the dark.
Investors should appreciate that money market funds will likely “break the buck” going forward. All one needs to do is review the fiasco involved with the longstanding money market fund, The Reserve Fund. Investors in that money market fund are now involved in a protracted legal dispute and the value of the fund is truly a great unknown. What happened? The fund took increased credit risk in a variety of products. Investors were clueless of these credit risks.
The same “sausage-making” is going on with this new x-Tender product. I exhort every investor to “check the contents” and ask the “butcher”, that being your broker or financial planner, as to what is going into that money market fund before you buy it.
LD
Who Protects Investors from Regulators?
Posted by Larry Doyle on June 19th, 2009 2:44 PM |
Is there anything worse than being violated by an individual in a position of trust? Crimes perpetrated by regular citizens are one thing, but crimes perpetrated by individuals in a position of public trust, in my opinion, are the most heinous. I am speaking of members of the clergy, teachers, law enforcement, and public servants.
When engaged in private business, individuals typically remain on guard from fraudulent and criminal behavior. That innate defense mechanism is usually relaxed when engaged with a public or quasi-public official. Given that vulnerability, the violation is far more painful due to the emotional damage even if the actual financial costs are minimal.
As I go down this path, let me emphasize the obvious – that is, the presumption of innocence and due process.
1. Today we learn that as part of the case against Allen Stanford, an indictment has also been handed down against Antiguan financial regulator Leroy King. Bloomberg reports that King not only took bribes from Stanford but also showed Stanford information relating to the government’s developing case.
If in fact these allegations are true, King aided and abetted the fraud which is speculated to be of a magnitude of $1-7 billion dollars.
2. In regard to the Bernie Madoff Ponzi scheme, we have no evidence to indicate criminal intent or activity on behalf of anybody at the SEC. That said, the SEC – by its own admission – failed to perform its duties. For those impacted by the Madoff fraud, the lack of accountability by the SEC is no less damaging than if there were criminal activity. Why is that? The length of time over which Madoff perpetrated the scheme along with the amount of evidence provided by Harry Markopolos was so overwhelming and should have minimized the damage, both financial and emotional.
3. We do have evidence of potential culpability on behalf of FINRA in the Auction-Rate Securities fraud. FINRA was headed by Mary Schapiro, current head of the SEC. This fraud is MANY MULTIPLES the size of the fraud perpetrated by Allen Stanford. Professionals, both inside and outside of the financial industry, have estimated that there are anywhere from $80 billion to $175 billion ARS (of a $330 billion market) still outstanding.
Let’s take the midpoint of those estimates, $125 billion, as a best guess of outstanding ARS positions. These securities do not actively trade, like government bonds, but in speaking with Kevin O’Connor of Second Market, he shared that bonds trade around 75 cents on the dollar. Thus, we are looking at approximately $30 billion in losses on a mark-to-market basis.
FINRA’s potential culpability stems from the fact that they liquidated their own ARS holdings in 2007. I have asked repeatedly and will put forth once again, for the benefit of those thousands of investors and billions of dollars:
-what was the exact trade date of FINRA’s ARS liquidation?
-through whom did they liquidate their ARS position?
-what price were they paid for their ARS position?
-did they possess material non-public information about the ARS market failing and act upon it?
The U.S. attorney and SEC are investigating executives from Lehman (Gia Rys, Alex Kirk) for potentially front running the ARS market in 2007. Will we ever find out if FINRA did the same? FINRA is charged with protecting investors. They certainly failed to protect investors in Auction-Rate Securities.
4. Given the fraud involved in the marketing and distribution of ARS, I am blown away by the fact that the SEC, now headed by Ms. Schapiro, blessed the marketing and distribution of the new version of municipal ARS, known as x-Tender, or henceforth called Porky Pig here at Sense on ¢ents. Please see my post earlier today, An Auction-Rate Pig by Any Other Name Is Still a Pig.
Sad but true, as we enter the Brave New World of the Uncle Sam economy, investors need to remain diligent and should not assume that regulators are necessarily protecting them.
LD
An Auction-Rate Pig by Any Other Name is Still a Pig
Posted by Larry Doyle on June 19th, 2009 10:20 AM |
The brazen balls of both Wall Street and Washington know no limits. Hat tip to Kathy for pointing out to me that Wall Street is now running a new version of the Auction-Rate Securities play.
Recall that the Auction-Rate Securities fraud has left thousands of investors and billions of dollars frozen. While that fraud remains outstanding, Wall Street is calling an “audible” but at its core it is the same play. This smells!! Make sure you wear some heavy boots as we take a walk through the sty.
The Wall Street Journal highlights the particulars of this charade, New Security Shifts Risk to Borrower:
It didn’t take long for Wall Street to dress up an old idea and make it seem new again.
Wall Street firms including Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley & Co. have introduced a new security for the damaged municipal-bond market, meant to fill the role once played by securities that lost investor confidence in the peak of the market panic.
Their effort is part of Wall Street’s search for new ways to create business after a crippling nine months of crisis and government intervention. Much like auction-rate, variable-rate, and corporate floating-rate debt, the new tax-free “Windows” or “X-tender” securities offer municipalities the ability to borrow for the long term while paying only short-term interest rates.
This model proved dangerous during the credit crisis. Banks and bond insurers — who offered both express and tacit guarantees to backstop the debt — failed to live up to some of their promises. These securities became untradeable and dropped in value, leaving money-market funds in jeopardy of “breaking the buck.” Borrowers like municipalities, nonprofit institutions and student-lending companies faced penalizing interest rates well over 10% for months.
Like auction-rate securities and other variable-rate debt, the new instruments have an interest rate that resets every week, but this one is based on a short-term municipal debt index. The securities act like short-term debt and are appealing to money market funds that need to be able to sell their investments quickly.
This time, though, the banks removed some of the weak links from auction-rate securities and variable-rate demand bonds. Instead of banks or bond insurers acting as a guarantor or buyer of last resort at the auctions — which they were increasingly forced to do last year — the borrower itself promises to accelerate repayment. The borrower has seven months to repay.
Let’s review some of the driving forces and principles behind this new “Porky Pig” designated as “Windows” or “X-tender” securities:
1. Muncipalities are increasingly unable to finance themselves via the long term debt market. If municipalities can finance themselves, the rates are extremely high. This “pig” offers them a vehicle to sell into the deep, short term money-market arena with a “promise” by the municipality to repay these obligations if auctions fail.
2. The banks and brokers remain on the hook for tens of billions of dollars for not having lived up to the same ‘promise’ in the previous iteration of Auction-Rate Securities. That said, they are more than happy to facilitate this version and collect the fees for doing so.
3. Money market funds are flush with cash from investors who are increasingly risk averse. How will the funds that purchase these “pigs” market the fact that they are taking this degree of risk in the fund? Will brokers and managers fully highlight that fact, or will it be business as usual and keep the investors in the dark?
Wall Street and Washington are, once again, willing to oblige this version of a Ponzi scheme because there is lots of up front money to be made. The WSJ offers as much:
Despite the risks, the Securities and Exchange Commission blessed the instruments, allowing money-market funds to buy the debt.
Banks are also taking advantage of pent-up demand from municipalities that need money. Outstanding issuance of variable-rate debt has shrunk by approximately $100 billion in 2008 — a 20% drop, according to Municipal Market Advisors. The banks are now estimating as much as $10 billion in such “Windows” deals could hit the market over the next six months. So far, at least two municipalities have sold the debt and another deal is close to completion.
Sense on ¢ents strongly encourages investors to take the following approach:
1. Stay as far away from this product as possible. I am willing to bet this product will not be sold directly, but will strictly be ‘buried’ inside money market funds. Be careful!!
2. Ask your brokers or advisers if they are aware of this product; bring this to their attention!
3. If a broker or adviser is pitching a money market fund to you, make sure the fund does not have exposure to this garbage.
Oink, oink!!
LD
Business as Usual
Posted by Larry Doyle on June 19th, 2009 7:28 AM |
“That’s the way we’ve always done it!!”
How often have you heard a person answer in that fashion when asked why something is done a certain way? A lot, I’m sure. Why? Change is stressful. Adjusting to change is perhaps even more stressful.
As we are forced to adjust to the Brave New World of the Uncle Sam Economy, we will certainly witness many individuals, business units, and industries resist change. I’m seeing them all around me. Let me share a few with you:
1. FINRA: at a time when our economy is screaming for increased transparency and accountability, this Wall Street self-regulatory organization has not yet released its 2008 Annual Report. Why? I view it as unacceptable.
The facts, figures, and transactions for 2008 are in the books. A mere accounting should be simple and straightforward. With the exception of Bloomberg, do you even hear of FINRA from major media outlets?
Rest assured, I will review the FINRA Annual Report thoroughly, with particular focus on their investment activities, and question them as need be. At some point, perhaps, the mainstream media may want to engage them as well.
2. Wall Street: why do banks so badly want to pay back TARP funds? The primary reason is compensation. In fact, in recently speaking with a number of colleagues on the street, banks are again paying “guaranteed” contracts to recruit personnel. Certain of these banks remain flush with government funds.
What propels banks to do this? Because they can, meaning there is no transparency or accountability. Additionally, they do not want to “cede turf” to startup firms which can offer opportunity but no guarantees. In layman’s terms, the large banks are flexing their muscles to impede smaller organizations from gaining a foothold in their ‘hood.’ Fair and open competition is one thing, but using taxpayer funds to pay guaranteed contracts is an entirely different issue.
3. Banking: why do banking industry execs feel compelled to maintain the perks of prior years? Ego. The Wall Street Journal highlights CEOs of Bailed-Out Banks Flew to Resorts on Firm’s Jets.
Business is business and executives, whether working at firms flush with government aid or not, need to compete. That said, if the executives are at firms still in receipt of government assistance . . . “back of the bus, pal.”
LD
The Name’s Bond, James Bond
Posted by Larry Doyle on June 18th, 2009 6:11 PM |
I truly marvel at the lengths some people will go to “make a buck.” Perhaps marvel is too generous a term in dealing with thieves, but I am fascinated by the human psychology of criminal masterminds. In this spirit, conspiracy theorists have been running wild with a story of two Japanese nationalists who tried to smuggle $134 billion in U.S. Treasury bearer bonds into Switzerland.
Who could these people be? With whom were they associated? What were they trying to accomplish? Is there some sort of national subterfuge at work? Well, this story has plenty of material for a good movie but I think that is all we will get out of it. Bloomberg exposes this intrigue in reporting, U.S. Says Bonds Seized in Italy Are ‘Clearly Fake’:
U.S. government bonds found in the false bottom of a suitcase carried by two Japanese travelers attempting to cross into Switzerland are fake, a Treasury spokesman said.
“They’re clearly fakes,” Stephen Meyerhardt, a spokesman for the U.S. Bureau of the Public Debt in Washington, said yesterday. “That’s beyond the fact that the face value is far beyond what’s out there.”
Italy’s financial police last week said they asked the U.S. Securities and Exchange Commission to authenticate the seized bonds, with a face value of $134 billion. Colonel Rodolfo Mecarelli of the Guardia di Finanza in Como, Italy, said the securities, seized in Chiasso, Italy, were probably forgeries.
Meyerhardt said Treasury records show an estimated $105.4 million in bearer bonds have yet to be surrendered. Most matured more than five years ago, he said. The Treasury stopped issuing bearer bonds in 1982, Meyerhardt said.
Had the notes been genuine, the pair would have been the U.S. government’s fourth-biggest creditor, ahead of the U.K. with $128 billion of U.S. debt and just behind Russia, which is owed $138 billion.
According to the Italian authorities, the seized notes included 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, as well as securities purported to be “Kennedy” bonds. Meyerhardt said no such securities exist.
Nowadays, Treasury securities are issued electronically. The U.S. started converting all of its marketable debt from paper to electronic form in the 1980s.
Put this one in the category of “never steal anything small.” Beyond that, this may provide fodder for a James Bond flick, but likely nothing more than that.
LD
Treasury Supply Surprises Market
Posted by Larry Doyle on June 18th, 2009 1:34 PM |
Wall Street as an industry hates surprises. Whether it is expected earnings, economic data, or government information, Wall Street much prefers getting a sneak peek, positioning itself accordingly, and then profiting when news is actually released.
Well, Wall Street was surprised today with the release of the sizes of next week’s 2yr, 5yr, and 7yr Treasury auctions. The street expected the same sized auctions as May: $40 billion 2yr, $35 billion 5yr, $26 billion 7yr.
Bloomberg reports, Treasuries Fall as Reports Point to Growth, Debt Sales to Rise:
The Treasury will auction $40 billion in two-year notes on June 23, $37 billion of five-year debt the following day, and $27 billion of seven-year securities on June 25, the department said today. The total is $3 billion more than when the government last sold notes of similar maturities and the most since the U.S. began sales of this combination of maturities in February.
One may think that only $3 billion more than expected should not be a big deal. Well, not unlike a company missing earnings by .01 and having the stock plummet, the change in the size of these auctions is a lot more significant than merely $3 billion Treasury notes.
The larger auctions are an indication that tax revenues are less than expected, while spending is greater than expected. Additionally, if this round of auctions are larger than expected, Wall Street will ratchet up the expected sizes of future auctions as well.
How is the market responding?
Interest rates have backed up by 10-15 basis points across the curve. The 10yr note is back up to a 3.83% putting it once again near that 4% level. In my opinion, it is only a matter of time when the Treasury market breeches that level and stays above it regardless of what happens in the economy or equity market. Additionally, I expect mortgage rates will move above 6% and stay above that level as well.
Barack’s bond bus is working very hard to stay on the road, but as the government bond bubble is bursting under the weight of all this supply, the economy will have to work ever harder to regain its footing.
LD
The Fault Lies Not in Our Stars but in Ourselves
Posted by Larry Doyle on June 18th, 2009 11:24 AM |
Just as Cassius could not serve both Caesar and the republic, neither can our political leaders today serve two masters. Who are these masters? On the one hand, politicians claim to serve the public interest, while on the other the politicians are beholden to the big money showered upon them by lobbyists representing large financial interests.
Unless and until these conflicts are exposed and extirpated, in my humble opinion, our nation will never regain its stature. The evidence is overwhelming. The gall of the politicians is unending. The media is largely beholden to the same interests and enables the charade to continue.
The Wall Street Journal touches upon these issues in writing Hope vs. Financial Experience:
The main idea behind the Obama Administration’s new financial revamp is essentially this: With more power and a modest reshuffling of the bureaucratic furniture, the same regulators who missed the last credit mania will somehow prevent the next one. If nothing else, this concept is certainly true to President Obama’s campaign theme of “hope.”
From my experience, “hope” is always a lousy hedge. What do I mean? If I, in whatever role I occupy, am relying upon hope rather than thorough preparation, discipline, and ethics to achieve my desired goals, then I am in an unenviable position. As a nation, we occupy that unenviable position currently. Why?
We “hope” the financial system and reforms will serve our national interests. However, those charged with developing and implementing these reforms are conflicted. How so? They feed from the trough of those supposedly being regulated while supposedly representing the interests of the public, i.e. those they are supposed to be serving. No man can serve two masters.
President Obama and his Congressional colleagues from both sides of the aisle would promote the concept that our financial regulatory system had gaps which banks profitably penetrated. The promotion of that concept is pure pandering. Those gaps were created and paid for by the massive flow of lobbying dollars that went from Wall Street to Washington. In turn, the politicians hoped the gaps would not be detected or overly expensive. They “hoped” and we as a nation lost. Where is the acccountability?
Many would say there is much blame to go around for this financial crisis. However, if we do not call those in Washington on the carpet for their culpability in this turmoil, we are doomed to repeat it.
As I watch the Congressional testimony of Secretary Geithner this morning, my blood boils. Seeing the likes of Senators Chris Dodd, Chuck Schumer, and many others pretending to represent the national interest is very hard to swallow. Why?
All we need to do is review the names of those who facilitated the financial fraud that occurred at Freddie Mac and Fannie Mae. President Obama himself, in his short stint in the U.S. Senate, was a huge beneficiary of the largesse from Freddie and Fannie and the financial industry at large. Make no mistake, the intentional “cooking of the books” at both those agencies was fraudulent and criminal behavior. Washington enabled it and profited from it.
The WSJ addresses this very point in the process of reviewing Obama’s proposed regulatory reforms:
This “gaps and weaknesses” theory has the political benefit of ignoring the role that Washington played in creating the credit bubble. There’s not a word in the 85 pages about the Fed’s years of negative real interest rates, and the only mention of Fannie Mae and Freddie Mac is a placeholder paragraph noting that reform of those housing giants will come later. Also nowhere in sight is any explanation for how the Fed, which had every power imaginable to regulate Citigroup, could have allowed Citi to sell tens of billions of dollars of off-balance-sheet mortgage products.
Thus, the debate in Washington will continue. I view that act as a mere sideshow to the main play going on behind the curtain. That “show” burdens the taxpayer, both now and in the future, with an enormous and unknown cost!!
LD
Financial Derivatives, Prescription Medication, and Designer Drugs
Posted by Larry Doyle on June 18th, 2009 8:38 AM |
Derivatives….where does one even start? Can you touch it? How do you know when you’ve seen one? What does it look like? Is it edible?
The fact is, we have derivatives throughout our economy. From consumer products, to medications, to new technologies, one could make the case that almost all new developments are derivatives in one way, shape or form.
Wall Street developed financial derivatives under the guise of mitigating risk. Regrettably, the guile and greed of those on Wall Street abused the development of derivatives and many of these financial instruments were not risk mitigants, but risk propellants. Let’s navigate the derivatives landscape and see why Wall Street will not cede this turf without a fight.
The base products on Wall Street include government securities, agency securities, mortgage-backed securities, corporate bonds, municipal securities, short term bonds, emerging market bonds, foreign currencies, convertible bonds, preferred stock, and common equities. Each of these “cash” products is a large market in and of itself. That said, the “wizards on Wall Street” connected to each of these product lines have manufactured products “derived” from the cash flows of the underlying “cash” product. Welcome to the world of derivatives.
When properly used, derivatives – much like new, approved medications – can be amazingly helpful in augmenting returns and managing risk. However, not unlike “designer drugs,” the abuse of these financial instruments can be deadly. Wall Street has made enormous sums of money across the board on these “medications.”
Now we learn that under the Obama financial regulatory reforms, derivatives will be traded on an exchange and thus monitored much more closely. This is a good thing, right? Please focus very carefully on this point because this is where Wall Street has largely already won the derivatives battle.
“Standardized” derivatives will be traded on an exchange. “Customized” derivatives, much like prescription drugs or designer drugs, will not trade on an exchange. Why is this such an important point?
Products traded on an exchange have total transparency and limited profitability. Products traded away from an exchange have much wider bid-ask spreads, much greater profitability, much greater risks, and much greater likelihood for abuse. The Wall Street lobbying machine has already been fighting this battle in Washington and winning it.
Financial derivatives can be amazingly beneficial if properly used. That said, even legal and prescribed medications can be deadly when abused. The cops on the Wall Street beat will remain seriously challenged to monitor those “designing,” “marketing,” and “selling” the “customized derivatives.”
LD
Uncle Sam’s Dirty Little Secret
Posted by Larry Doyle on June 18th, 2009 4:36 PM |
If an agency is sitting on billions in losses but nobody asks about it, can we forget about it?
If an entire group of banks is sitting on hundreds of billions more in losses, and the media is not even aware of this banking system, can we pretend they don’t exist?
Oh, if only we could, perhaps our economic life would be so much simpler.
While Uncle Sam and the media can choose to overlook these institutions, the losses are real and will serve as a drag on our economy and nation for the foreseeable future. Yet, they receive very little attention. Fortunately, Bloomberg shed a hint of light on part of this problem today in writing, Fannie Mae, Freddie Mac in Limbo as Geithner Seeks More Time:
Doesn’t have time or doesn’t want to admit that these agencies represent an ongoing and enormous drag on our economy? How so? Fannie and Freddie hold 50% of the mortgages in our country. These entities are most likely sitting on hundreds of billions in embedded losses currently with limited prospects to generate real revenue. They have no viable business model at this point in time. As a result, rather than entering into an unpleasant and economically harmful dialogue, Geithner chooses to sweep this under the rug. How can Tim do this? Because Uncle Sam has allocated, if not necessarily set aside, funds for these agencies to offset future losses. As Bloomberg highlights:
Over and above swimming in a sea of losses, both Freddie and Fannie are effectively rudderless. Fannie Mae’s acting CEO, Herb Allison, was recently appointed to oversee management of TARP funds at Treasury. Freddie Mac’s acting CEO, John Koskinen, had resigned and only returned when beseeched. While Koskinen has committed to retaining the role of chairman of Freddie, he can’t get out of his daily Freddie Mac responsibilities quickly enough as the WSJ reports, Freddie’s Accidental CEO Tries to Shed Job.
The dirtier little secret hidden by Uncle Sam is embedded within the Federal Home Loan Bank system. Why? After Uncle Sam, the FHLB system is the second largest creditor in our country with approximately $1.2 trillion in outstanding debt. While Freddie Mac and Fannie Mae’s portfolios are chock full of agency mortgage-backed securities (MBS backed by conforming size loans), the portfolios within the FHLB system (12 regional banks) are stuffed with Jumbo mortgages, Alt-A, pay-option ARMS, and sub-prime. In short, lots of toxic assets and lots of embedded losses hidden by the artful deceit of the relaxed mark-to-market accounting standard.
Where are we going with these future wards of the state? I project that in 2010, we will see these 14 entities (Freddie and Fannie and 12 regional FHLBs) combined into one large government owned housing finance entity.
Shhhhh . . . don’t tell anybody!!
LD
Tags: Federal Home Loan Banks, fhlb portfolios, future of fannie mae, future of fhlbs, future of freddie mac, geither comments on freddie fannie, government support of Fannie Mae, government support of Freddie Mac, herb allison, john koskinen, losses in fhlb system
Posted in Fannie Mae, Federal Home Loan Banks, Freddie Mac, General | 3 Comments »