Here is/was the real threat to the housing bubble. Question is, how come no one did any thing about it?

From: DR@agora-inc.com Thursday, September 23, 2004 9:56 PM



*** Flash Alert ***

“...executives of Fannie Mae apparently rigged books just to trigger bonuses...”

- NY Post

Dear Daily Reckoning reader,

“Fool us once, shame on you,” Rep. Richard Baker said this morning, “Fool us twice, shame on us.”

The honorable Mr. Baker is the chairman of the watchdog committee charged with policing Fannie Mae – the nation’s second largest financial institution.

As we’re sure you’re aware by now, Mr. Baker’s committee released a report last night stating that “cookie cutter” accounting irregularities at Fannie Mae “raise doubts about the validity of previously reported financial results...and the overall safety and soundness of the enterprise.”

How, dear reader, the federal oversight office - with an annual budget of $38 million and 180 full time snitches on the payroll – missed this one, is... well, beyond us.

But the financial implications could be disastrous. Fannie Mae has over a $1 trillion dollars in assets. And that’s only the beginning.

The firm has originated nearly $4 trillion in U.S. home mortgages — which is about three of every four. Even the slightest hint of instability could have a disastrous effect for millions of mortgage holders in the country.

As we reported earlier this year, when a high-ranking official issued a report about the uncertain financial condition of Fannie Mae - he was summarily dismissed. And the report became very difficult to find on the Internet.

Here at the Daily Reckoning, we’ve been warning you since the Federal Reserve began raising rates in June that the mortgage and housing market could scarcely withstand an era of rising interest rates. The Fed raised rates by 25 more points yesterday.

Now... Fannie Mae is being probed by the SEC. Shares in Fannie Mae are down 12.9% over the last 4 trading days. Small prediction: That’s just the tip of the iceberg.

Beware. A scandal at Fannie Mae could be the harbinger of a bust in the mortgage-housing markets... just as Enron spelled the end of the good times on Wall Street four short years ago.

Best of luck,



Addison Wiggin,

The Daily Reckoning

P.S. For a full accounting of the threat Fannie Mae poses to the mortgage market - including the potential affect it may have on the price of YOUR home - I suggest you read Daniel Denning’s special report:

Total Destruction of The Housing Market

http://www.agora-inc.com/reports/DRI/housing910Here is/was the real threat to the housing bubble. Question is, how come no one did any thing about it?
Bureaucracy operates very slowly at the best of times, and in times of extreme need, it does not operate at all.