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To: Deuce
If I understand it, it sounds awful Orwellian. Is this guy looking for the power to declare a GSE unviable without specifying what concerns he may now have or what basis restrict this power if and when he should want to invoke it.

Falcon recently authored a report on systemic risk (see my links) at the GSEs. In it he describes a scenario in which the GSEs could take down the entire financial system via their counterparties.

Now he's just asking for the authority to part them out in the event they fail.

Naturally since bureacrats are a far-sighted, pro-active bunch, who never ever close the barn door after the horse has left, this proposal is a pure theoretical exercise with no relation to the thinly capitalized, opaque and extraordinarily indebted GSEs.

9 posted on 06/05/2003 9:54:27 AM PDT by AdamSelene235 (Like all the jolly good fellows, I drink my whiskey clear....)
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To: AdamSelene235
I like the quotes at the top of your home page. The links to the systemic risks report does not work, however.

You identify JPM as a potential receivers of Fannie. Which do you suspect has the riskier portfolio: JPM or Fannie? Based on bank secrecy laws we will never know, of course. You could say JPM is more diversified, perhaps, but Fannie's operations are relatively plain vanilla relatively speaking. Also, JPM has the HUGE special accounting privilege (accorded only to banks) to mark its assets to market, selectively. In other words, even when JPM reflects viability, you can never be sure. Give Fannie, or any other entity the ability to selectively mark to market and no problems will ever exist---on paper. The real world will be a different story entirely!

10 posted on 06/05/2003 10:26:26 AM PDT by Deuce
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