Fannie Mae and Freddie Mac’s accounting branded a ‘house of cards’

US mortgage giants Fannie Mae and Freddie Mac’s accounting rules have been
branded as a ‘house of cards’ by a senior US Senator.

The criticism was made by Senator Richard Shelby, a Senate Banking Committee
member, after a briefing by US Treasury officials, the Irish
Independent
said.

About half of the troubled mortgage lenders regulatory capital was made up
of deferred tax credits, which could be deducted from taxes on profits.

‘That’s not even real money,’ said Senator Shelby. ‘They found out they had a
house of cards.’

But the tax credits are worthless unless the companies are generating
profit.

Fannie Mae and Freddie Mac have posted four consecutive quarterly net losses,
totalling a combined €10.5bn (£8.4bn) and have warned of more losses in the
future.

Once they got someone looking closely at Fannie and Freddie’s books, they
realised there just wasn’t adequate capital there.

Further reading:

Fannie
Mae investor sues five banks

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