Fannie Mae - a Flood of Information
Many thanks to Twist who sent along several of the key links I’m using today. Analysts have been inundated with reports and stories about Fannie Mae and the greater MBS market over the last few weeks. Stories large and small have appeared, peaking Wednesday when three major plot-twists to the saga were revealed.
Most of the attention and hundreds of articles were devoted to two blockbuster events. First of all the Fed, while holding the discount rate at 5.25%, added the single word "substantial" to their accompanying comment. confirming the seriousness of the nation-wide fall in house prices.[1] Next, Fannie announced it was suing its longtime auditor KPMG (that was fired when the accounting scandal broke) for over $2 billion.[2]
The third event is a bit more subtle, and generated a mere handful of stories compared to the last two. Nevertheless, this one may be the more significant development. Think how the faint pop of a trench mortar was often of greater immediate interest to the participants than the thunder of artillery during WW I. As noted Tuesday on Doom, The New York Stock Exchange (NYSE) has for the first time set a hard deadline (even if more than a year in the future) for Fannie to complete its next (2005) 10-K annual financial report.[3] The NYSE has drawn a line in the sand with this deadline. If it’s too far in the future, they will lose respect and credibility. But if it’s too soon, they face the unthinkable prospect of delisting America’s second largest financial institution. Fannie Mae previously estimated [4] its ‘05 10-K would be ready three months ahead of the new NYSE deadline, and now the consequences of this billion dollar accounting exercise slipping further to the right would prove potentially dire.
