Replies to post #355551 on Fannie Mae-No Politics (FNMA)

[brandemarcus]

Let's just use common sense. As an example , we have the 2009 audited reports (10K) for fnma. Of the 95 billion in expenses for Fannie mae, 73 billion represent credit loss provisions. How can you express any opinion on the statements as a whole if you have no duty to look at 75% of the expenses.
We talking about problem loan books from 2005, 2006 and 2007. There is plenty of historical and actual data to look at. Then in 2012 , we can already tell how pristine the loss experience of the new loan books (2009 and after ) are after reform.
Again the question ,no peer companies are required to set up such conservative loss reserves. Just think the government is standing by all the investment banks, and all those Fdic guarantee companies. Did those banks have different macroeconomic forecasts ? Did those different standards have anything to do with a 10% net worth sweep on all phony "losses" that could be created. Just a coincidence? Sure! Use your common sense .

[whipstick]

And yet the PMs of these holdings have to project for all of these factors. The Auditors have to sign off on the reasonableness of the reserve projections on the book I run so they ARE in fact, by proxy, signing off on those assumptions.. Do you run a book of MBS? Doesn't sound like it to me.

So really what you're ham handedly attempting to do is give the gov't the excuse of 'crisis oh no crisis' as a cover for them putting unprecedentedly large loss provisions on their holdings because of a TBTF bank crisis.

In other words the analysis was 100% downside from the mgmt and the auditors said sure whatever without any thought of a recovery.

Why would you reserve this way ever? Oh I know - you want to 'prove' a failed buisness model.

Guess what? The business model didn't fail, instead the GSEs were beaten to death and forced to buy, AT PAR, private label poorly underwritten and defaulting resi MBS and then pointed at for saying they did a bad job on their underwriting, which if you look at the empirical evidence, they didn't. Their loss rates were far far lower than any of the private label issuance.

The TBTF bank shareholders got the benefits of TARP, PPIP, and QE infinity.

The GSE shareholders were left holding the bag thru a series of sly moves by the Treasury (basically all former Goldman alums btw) in a blatantly obvious power play to get the resi mortgage market out of the GSEs in into the private banks, who BTW, are ALSO operating with a government guarantee which is FAR MORE explicit than the GSE guarantee because they actually failed and actually needed a bailout. The GSEs had adequate capital to operate for at least 18 months when they were forced into the conservatorship and take bailout money.

You can say x or y is not in the law but the regulations dictate the actions and the actions have consequences.

That's the story. So don't pretend like you know more than me about how this works because from what I can see you're apparently not that familiar. Thanks for the smugness - really helpful to everyone here. shows you know more than the rest of us.. not.

[brandemarcus]

If you want to be "safe and sound" for future events 5 years later, then you charge 5% and you allow the companies to pay back. You certainly don't charge 100% of all net income in the name of being "safe and sound" on money" we think you might need some Day".
Use common sense. The means do not justify the ends. I don't even care that you might find some place in Hera , that in your opinion says an accountant is not justified in examining over 75% of the expenses of a company he is auditing. By precedent that means all statements of Banks or Insurance companies are worthless. Who would rely on them?!

[Donotunderstand]

yes to

To me, "safe and sound" conservatorship could surely and legally include building a firewall of security where any error in judgement to reserve "too much" would clearly be preferable to "too little" amidst so much global uncertainty.


yes

but

if it is a firewall - or more than SOP - it must be noted as such

all IMO

[Donotunderstand]

yes to

To me, "safe and sound" conservatorship could surely and legally include building a firewall of security where any error in judgement to reserve "too much" would clearly be preferable to "too little" amidst so much global uncertainty.


yes that is for sure kosher

but

if it is a firewall > SOP then IMO the role of an auditor is to point that out --- even if it is to note that there is an over reserve firewall for reason A B C .... they are to put their name to the condition of the company - and for a "lender" that must include the status of reserves for losses - to include comments like the company has 2-3 times the amount needed in normal times as a conservative firewall given recent events (wording offered to them for free - ok?)

all IMO