On Thu, Oct 14, 2004 at 05:31:31PM -0700, Gautam Mukunda wrote: > be but won't be is Franklin Raines. He's got caught in the Fannie Mae > scandal, though. It's a real pity.
Yeah, well, I'd say he's partly responsible for the huge taxpayer swindle that Fannie Mae continues to run. There is no way Fannie Mae could borrow money at the rates they do, as ridiculously leveraged as they are, except with the implicit government guarantee that everyone assumes (i.e., the government would very likely bail Fannie out if bankruptcy loomed). If Raines were a responsible CEO, he would have been slowly de-leveraging Fannie for the past several years at least. Now he is probably going to be forced to do it quickly. I just hope he is forced to bring the leverage down to a reasonable level. And of course there was the earnings smoothing, to hide the actual large fluctuations due to the extreme leverage. And the insane complexity of the derivatives they use to try to hedge their exposures. Their positions are so complex that literally NO ONE can predict how their positions would behave when various crises hit. Warren Buffett has called derivatives financial weapons of mass destruction. How people have failed to learn the lesson of the perils of extreme leverage through derivatives from the failure of Long Term Capital Management, I'll never understand. -- Erik Reuter http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
