OK, I added that last piece, but this is the tip of the iceberg. The 2008 Senate investigations around the Real Estate Industrial Complex and the goings-on at Fannie and Freddie will be amazed at the level of corruption.
Execs were exposed as inflating the numbers to make their bonuses. Jail time will be served in addition to the fines. And Congress will fundamentally change their go-forward business model and ability to make profits.
The stock has been halted all day. It'll be interesting to see the market's reaction if and when it reopens
Employees at mortgage giant Fannie Mae manipulated accounting so that executives could collect millions in bonuses as senior management deceived investors and stonewalled regulators at a company whose prestigious image was phony, a federal agency charged Tuesday.
The blistering report by the Office of Federal Housing Enterprise Oversight, the product of an extensive three-year investigation, was issued as the government-sponsored company struggles to emerge from an $11 billion accounting scandal.
Earlier, a person familiar with the situation said that Fannie Mae was being fined between $300 million and $500 million for the alleged manipulation of accounting to facilitate executives' bonuses, in a settlement with the housing oversight agency.
"The image of Fannie Mae as one of the lowest-risk and 'best in class' institutions was a facade," James B. Lockhart, the acting director of OFHEO, said in a statement as the report was released. "Our examination found an environment where the ends justified the means. Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing."
May 23, 2006
FLASH: Fannie Mae stock halted, $500 Million fine for accounting scandal, limits on future business, financial meltdown of America pending
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Congress created Fannie Mae and McLean, Virginia-based Freddie Mac to expand homeownership by increasing mortgage financing. The companies own or guarantee about 40 percent of the $8.5 trillion residential U.S. mortgage market. They are the biggest borrowers in the U.S. after the federal government.
Former Federal Reserve Chairman Alan Greenspan has said the failure to rein in the companies may lead to ``systemic risk'' in financial markets.
If this doesn't collapse the stock, then something fishy is going on
http://tinyurl.com/zhpyp
Fannie Mae (FNM), the mortgage financier recovering from a $10.8 billion accounting scandal, used its political ties to interfere with and discredit an exam by the firm's regulator, according to a report released on Tuesday.
The Office of Federal Housing Enterprise Oversight report says Daniel Mudd, the current chief executive, attended meetings at which lobbying strategies were discussed. Franklin Raines, the former CEO, and Thomas Donilon, a former executive vice president, determined Fannie Mae's political policies and were well aware of efforts to use Congress to discredit Ofheo, according to the report.
The Department of Housing and Urban Development's inspector general was asked by Sen. Christopher Bond, R-Mo., to conduct two investigations of Ofheo in 2004, including one focused on whether the agency had improperly leaked information about Fannie Mae to journalists. Duane Duncan, Fannie Mae's top lobbyist, testified under oath that Bond had asked for the second investigation at the request of Fannie Mae, according to the report.
"I think the company at the highest levels thought that the HUD inspector general's report would discredit or show the lack of objectivity in the Ofheo report in September or at least the preliminary report," according to an interview with Duane Duncan, Fannie Mae's top lobbyist, that was included in the Tuesday release.
Add Toll Brothers to the companies in all out collapse:
“‘Demand, while obviously diminished, has not disappeared,’ he said. ‘We believe many customers currently feel a lack of urgency to purchase due to their uncertainty over the direction of home prices. This has contributed to keeping many potential buyers on the sidelines.’”
don't worry, the US Govt (us taxpayers) will bail out Fannie and Freddie.
Can't have the 800 lbs Gorilla in the room pass out.
i read somewhere that GLD had bought some 135 tons of bullion but that during the latest price run up there were only 4 tons added. i do not think that they are issueing shares based on the amount of bullion actually held, plus a fee (premium). The price may not reflect owning actual gold. CEF was acting the same way so I bailed.
You want gold? Go buy some. Coins, krugers, leafs, whatever.
Then maybe get some PVC pipe, make a nice little sealed container with end caps and bury it somewhere safe, along with a gun or two and some ammo.
They will not be able to steal it if you can keep your mouth shut.
time to withdraw your money from the bank. stash the cash. detach from system.
$300M to $500M fine, $800M in new accountants, corruption and book cooking.
The stock get halted.
It pops huge when trading resumes.
Good time to be very cautious with your wealth and health. Something is very very wrong. The crooks are gonna try all they can.
those pipes leak. get a good camera case... like a lunch box/ toolbox type... stash guns ammo and cash/gold
The pipes don't leak if you seal them with PVC sealer. But then you have to saw it open.
There is NO popping the RE bubble. FNM a great buy. TOL a steal even though insiders have sold.
WTF??? Lotta green here. Sorry about the long link.
http://finance.yahoo.com/q/cq?s=^HGX,FRE,FNM,HOV,TOL,NVR,MDC,BHS,CTX,DHI,KBH,LEN,PHM,WLS,MTH,DHOM,BZH,JOE,MTH,RYL,LOW,HD&d=v1
We are screwed...lets face it!
this is only the beginning.....sit back and watch.
In 2005 Congress put Fannie May under the direct supervision of the Federal Reserve. Greenspan knew back then what we are seeing now. The Fed has a $20B-$50B slush fund it can use to bail these yokels out of their jam. If it costs more than that, they will have to go begging to Congress for the funds. That would be really bad news in the derivatives markets...
Add Toll Brothers to the companies in all out collapse
Then who big this pig up 5% at one point today? Personally I consider the stock toxic waste but the company not bad at all with the caveat of their mortgage division which has potentially large unknowns. Toll is massively profitable and flexible, bk is not in the cards.
institutional holders have so much invested in fnm that they can't let it fail. same with the chinese and the us government
but fail it will. lipstick on the pig. delaying the inevitable.
here's a headline - "Fannie Mae in 100 trillion scandal, CEO worships satan and cannot pay their employees"
stock might still go up 5%.
Markets azzkicked again. Someone needs to add some lipstick to the pig DOW and pig NAZ. Got a 401k? Diversified? Ouch. Want to retire via your 401k? Forget it.
cash is king. cash rocks after a crash. even the dollar should tread water for a bit here.
cash, waiting to deploy. cash, nice and safe. cash, ready to pounce.
thoughts?
Keith,
I am not a money brain like your bloggers, (that is why I am hooked on HP) and, I thought cash would crash too? It is such a circle, economics. What to do with my $90,000.oo?
Trade some of that green for tamiflu, amantadine and whatever else you can get. Welcome to pandemic level 4.
I learned to keep my fright levels in check during the Y2K and SARS scares.
Now Bird Flu? What ever....Humorous post, though.
Seriously, don't I need to buy a house now if the dollar is falling..., even if the price of a home drops by 50%, but so does the dollar, same difference, I reckon.
Or, I could just put the cash under my mattress.
This blog makes me feel so inadequate.
Whenever there is a good HB rally, I short a HB. The overall down trend always gets me a profit. I have yet to take a loss on a short, but it is like playing with fire: It's all fun until someone gets hurt.
I was surprised by the FNM rally in late trading. At least it is down in after hours. I'm only yielding 3% from a FNM short now. The HB shorts have provided 6-10% returns thus far, so I'll stick with them until the mortgage stocks start getting the beating.
FNM is completely rigged. Any other firm would have been delisted for all the shit they have pulled. I mean really, no financials in how long? Don't bother trying to trade the stock/options. FNM is enblematic of the corruption that is entrenched in DC and NYC.
They didn't accuse FNM of fraud in the mortgages used to back the MBS it sells. That's all that matters to bond market people.
The manipulation of expenses etc, doesn't affect the bonds. They are pass through securities, it money passes thru FNM from the mortgagees.
As far as their "systematic risk" and "reigning them in", that refers to their INVESTMENT portfolios, not the credit risk (mortgages) they guarantee. No one has said they are doing that wrong. All the nonsense has to do with accounting for derivatives used to manage their INVESTMENT portfolios.
Will the executive have to cough up the illegally-earned-bonuses? The former top guy "earned" more than 50 millions over 4-6 years.
everytime there is a giant Bubble?asset inflation, whether in stocks,housing, or whatnot, there seems to emerge some gigantic financial scandal. We has the S&l loan scandal of the eighties, the Enron Debacle of the 90's, ad nauseum. i think that we will witness quite a few more RE financial loan scams and scandals oozing out of the slime as the RE bubble collapses.
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