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Fannie Mae - Freddie Mac Compared to Enron in WSJ

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Jim Bartley

Senior Member
Jan 20, 2002
Professional Status
Certified Residential Appraiser
I could not link to the editorial as you have to be a subscriber, but the following from www.briefing.com summarizes the story.

8:51AM Fannie Mae and Freddie Mac compared to Enron in WSJ editorial (FNM) 78.45: WSJ editorial compares "government-sponsored" mortgage entities Fannie Mae and Freddie Mac (FME) to Enron, based on 1) increasing dependence on derivatives, 2) 60 to 1 debt to equity (5x avg bank), 3) interest rate risk, 4) suspect financial disclosure. Worth noting that WSJ penned article earlier this month reporting that FNM and FRE needed to convince skittish investors that their hard-to-decipher financial statements and heavy use of volatile derivatives are not new sources of risk in the post-Enron/Tyco era. Neither stock experienced any meaningful reaction to the Feb 7 story.
Jan 16, 2002
Fannie and Freddie have been "cooking the books" before Enron ever thought of it. The real value of their portfolio is only a fraction of what they are showing. Are the investors hoping the problem will go away before the truth get outs ?
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