Comments on: Behind Freddie’s “profit,” rising NPAs http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/ Option ARMageddon Tue, 14 Oct 2014 13:06:34 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Rich http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-722 Mon, 10 Aug 2009 17:38:35 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-722 Rolfe: I enjoy reading your postings!
I thought Fannie and Freedie have balance sheets and guarantee Agency RMBS securities. What constituits their off balance sheets assets? Also, because they are in Conservativeship, are the taxpayers also ultimately on the hook for the Agencies off balance sheet assets/liabilities?
Thanks

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By: Andrew http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-717 Mon, 10 Aug 2009 14:15:08 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-717 What *I* meant to say is that I *think* that’s what Rolfe was trying to point out.

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By: Andrew http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-715 Mon, 10 Aug 2009 13:02:54 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-715 What Rolfe meant to say is that the AOCI charge inflated capital for the purposes of ratio calculations because companies get to add AOCI back into their Tier 1 case.

I don’t think that’s really a change from the previous policy either, its just a weakness that both policies have that allows an institution to make their capital look better than maybe it really is.

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By: tahjahall http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-711 Mon, 10 Aug 2009 01:47:36 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-711 infowars.com read up on the fleecing of America that is and has been going on.

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By: Kyle http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-699 Sun, 09 Aug 2009 16:47:06 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-699 Hah, maybe you are right. My initial [and continued] reaction when FASB “folded” back in March was that they changed stuff without ever changing anything, to get politicians [clearly displaying their lack of real concern or understanding of anything] off of their backs.

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By: Ward http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-698 Sun, 09 Aug 2009 15:38:14 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-698 Buzzkiller :)

Good job analyzing the notes. If more people had looked in depth at the smoke-and-mirrors corporate America has put out for the past 2 decades or so maybe we wouldn’t be in the predicament that we are.

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By: Rolfe Winkler http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-692 Sun, 09 Aug 2009 04:16:29 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-692 I want to agree with u. To anyone who pays attention it shouldn’t matter too much. But then why make the accounting changes? Because even a little obfuscation can fool the majority of observers…..

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By: Kyle http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-691 Sun, 09 Aug 2009 03:58:15 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-691 To channel Bill Clinton, I guess that depends on your definition of “hide.” I mean, anyone who looks at the F/S should be able to see the shift with a minimal amount of effort. Hell, you don’t even have to look for it, they’re required to spell it out for you. If Joe Investor is fooled because all he does is read the MarketWatch or CNBC headline, is that really important? He’s not moving the market anyway. To be clear, I’m not disagreeing with you on your last comment, I just can’t see how it truly makes a difference. Do money managers/other professionals actually not read the F/S or have such a poor working knowledge of accounting that this fools them?

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By: Rolfe Winkler http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-688 Sun, 09 Aug 2009 03:08:10 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-688 But the new fair value rules DO help companies hide losses by shifting them off the P&L, no? “Non credit related” OTTIs no longer impact EPS. Yeah, they’re still in AOCI, but the headline figures are massaged. Freddie is exhibit A. The headline from the Q2 report was that they turned a profit….

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By: Kyle http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-687 Sun, 09 Aug 2009 01:40:35 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-687 I just get kind of annoyed because people are ALWAYS parroting the FSP 157-4 change as this destruction of FV accounting principles, and clearly, it has had little to no effect. FSP 115-2 and 124-2, issued concurrently with 157-4, have certainly had “implications,” such as the one you present in this article, but I think anyone with a modicum of securities analysis or accounting education can identify where the changes occurred. Bottom line is that people (mainstream and blogosphere both) act like those changes (157-4, 115-2, 124-2) are hiding losses that would have been recognized otherwise, and that is quite simply not the case. Anyway, you just gave me a place to vent :-) I always enjoy your work, thanks!

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By: Rolfe Winkler http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-683 Sat, 08 Aug 2009 23:46:16 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-683 Thanks for the correction Kyle. Here’s the crucial paragraph from the earnings release.

On April 1, 2009, the company prospectively adopted FSP FAS 115-2 and FAS 124-2. The new accounting guidance revised the recognition, measurement and presentation for other-than-temporary impairments on AFS securities the company holds. As a result of the adoption, the company recognized a cumulative-effect adjustment of $15.0 billion to its opening balance of retained earnings (accumulated deficit) on April 1, 2009, with a corresponding adjustment of $(9.9) billion, net of tax, to AOCI. The difference primarily represents the release of the previously recorded valuation allowance against the deferred tax asset that is no longer required upon adoption of FSP FAS 115-2 and FAS 124-2. Thus, as a result of the adoption of the new accounting guidance, the company’s total equity increased by $5.1 billion.

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By: Kyle http://blogs.reuters.com/rolfe-winkler/2009/08/08/looking-behind-freddies-numbers/comment-page-1/#comment-677 Sat, 08 Aug 2009 18:06:58 +0000 http://blogs.reuters.com/rolfe-winkler/?p=3076#comment-677 Rolfe, how does shifting a loss from NI to AOCI inflate Shareholder Equity? Retained Earnings is still reduced by AOCI (and subsequently anything allocated to it this quarter), thus Shareholder Equity properly reflects these losses.

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