Financial Sense: The 4Rs: Realty Reality Recommended Reading 10/01/2004

GLOBAL REAL ESTATE MARKETS FORUM
4Rs: Realty Reality Recommended Reading
with Editorial Comment

REALTY REALITY FSO ARCHIVES
~ FANNY WATCH ~

Justice Investigating Fannie Mae: Report
A criminal investigation and an informal SEC probe beset the giant mortgage company, with a congressional hearing to come.
by Stephen Taub @ CFO.com
October 1, 2004
See: link

EDITOR'S COMMENTS
by Ole Bear

Author Taub makes reference to the WSJ article from September 30, 2004 in his opening paragraph:

The problems are piling up at Fannie Mae. On the heels of a federal regulator's report detailing earnings manipulation and other accounting problems, the Justice Department has launched a probe into possible accounting fraud at the giant mortgage company, according to The Wall Street Journal.

We picked up yesterday's WSJ just for grins and read what they had to say. By golly, under What's News -- on the very front page we have:

The Justice Department opened an investigation of possible accounting fraud at Fannie Mae. The move comes in the wake of a report by Fannie's regulator that the mortgage company may have manipulated its books to meet earnings targets. (Article on Page A2) -- WSJ, September 30, 2004

Fannie Mae's stock got hammered about $2.85 yesterday. Today, as of this writing it's up about $2 Bucks and small change, currently trading over $65 Bucks a share. Somehow or another Enron keeps popping in my head. At $65 Bucks a share, and them not having much cold cash to cover their assets, we think Fannie Mae stock [FNM] is pretty pricey still. Falling knives can be difficult to catch, much less juggle. Enron now trades as ENRNQ on the Pink Slips -- having had highs in the $80 and $90 per share range. Currently trading at 4 cents a share, that's a significant tumble -- crash and burn.

This whole GSE mess must be keeping Chairman Greenspan up at night possibly giving him an ulcer. Serves him right in our view. He's part of the problem urging folks to take out ARM loans, and telling folks that real estate can't be in a markets bubble. Where this GSE mess is going to end, no one knows for sure. However, if you follow the full meal deal on the Enron Scandal -- things could be pretty dicey for the Fat Cats at Fannie Mae. We know that Jesus really could walk on water. Perhaps I will be just as surprised as everyone else when Mr. Raines does the same...

Ole Bear, Editor
Realty Reality