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Tuesday, May 06, 2008

I Am Going Through Fannie's SEC Filings

This won't be quick. The Investor Summary is 52 pages (pdf here). The 10-Q is 140 pages (pdf here).

I got to page 4 on the Investor Summary and started laughing out loud. EPS increased $1.23 from Q4 07 to Q1 08!!! Of course, that comes in the form of a drop in loss per share from $3.80 to $2.57. Heck, if they sell a bunch more shares, I'm sure they can report another EPS gain next quarter. To address market-related volatility of capital they proudly report that they used SFAS 157 and 159 to stop marking to market. Darn! That surely improves the fundamentals, doesn't it! What the heck - maybe we need to modify SFAS 157 and 159 to allow for write-ups! Then the happy days would be here again!

While I am spending this time with Fannie Mae's entry in the Comedy Club Mortgage Sweepstakes, I'd like to recommend some other reading.

Tanta at Calculated Risk wrote a fine post explaining why all these plans to expedite mortgage workouts are so much window-dressing. None of them address the problem of not enough money to do the job, plus the second-lien problem. The second lien problem is exceptionally important, especially when dealing with piggies used for purchase money. Nor can regulators write regulations cancelling the rights of second lienholders under the law. It's nonsensical, and it brings me back to my first theory, which is that Congress should write a law allowing bankruptcy cramdowns. It is the cheapest way out of many bad loans.

Since all of our presidential candidates are favoring a carbon cap and trade system (total economic insanity), and since the US federal government remains stubbornly in favor of the ethanol subsidy, even while the individual politicians bewail inflation, I thought Climate Skeptic's superb post examining Al Gore's theory that the US can generate all its electricity from solar panels would be a great read for anyone who cares about plausibility in government. It's only a matter of time until some economically illiterate politician gets on this bandwagon.

If you won't read the post, the bottom line is that just installation costs would be 21 trillion dollars. By the time it was done it would have cost more than 2 year's GDP (with inflation). Maintenance costs would add to that. For example, you have to keep the dirt off your solar panels for them to produce energy!!! And that doesn't address the problem of storing the energy (unless the nation is prepared to experience nighly blackouts), which would have to be done somehow and would cost a great deal extra.

The reason our politicians don't get anything done is because they don't spend the time to understand problems before they recommend solutions. This should worry us all. We are going to become a benighted civilization if we don't stop this trend. Someone should have called Al Gore on his increasing trip into fantasy a long time ago. No doubt the reason Al Gore gets away with his nonsense is the same reason that Nancy Pelosi walks around claiming that Social Security and Medicare can be paid from non-existent trust funds for many years to come. Our politicians are entertaining lunatics. They would be great for a sitcom, but we cannot run a country this way.

Update: FNMA Home Price Index:


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