Freddie Mac restatement of results

Biz.Yahoo/Reuters ^ | November 21, 2003

[Starwind]

Freddie Mac restatement of results
Friday November 21, 9:48 am ET

 NEW YORK, Nov 21 (Reuters) -  Freddie Mac (NYSE:FRE - News) on Friday
provided the following table of restated results:
.                             Net Income
.                           (in millions)*
.                        As
.                    Previously   As
 Year Ended          Reported  Restated  Change
 December 31, 2000    $2,547    $3,666   $1,119
 December 31, 2001    $4,147    $3,158    ($989)
 December 31, 2002    $5,764   $10,090   $4,326
.                     Diluted Earnings Per Share
.                            (in dollars)
.                        As
.                    Previously   As
 Year Ended          Reported  Restated  Change
 December 31, 2000    $3.40     $5.01    $1.61
 December 31, 2001    $5.64     $4.23   ($1.41)
 December 31, 2002    $7.95    $14.18    $6.23
* The net cumulative effect of the restatement through December
31, 2002, also includes $0.6 billion for periods prior to 2000.
Included in 2002 results is $82 million of net income related to
events occurring in 2003 but affecting 2002. The $82 million of
net income is comprised of $155 million of tax benefit
attributable to favorable U.S. Tax Court rulings occurring in
2003, offset by $73 million in additional expense, net of tax,
related to adjustments in reserves and accruals due to events
occurring in 2003.

[Starwind]

Freddie Mac's full restatement is at Freddie Mac Announces the Results of Its Restatement

And the original investigation report is at Supplemental Board Report

[Starwind]

Fyi...

[OXENinFLA]

And this means what??

[LetsRok]

This means this is over. We're having a big party today at headquarters.

[Starwind]

And this means what??

Freddie has for the last 3-4 years deliberately misreported its earnings, ostensibly to 'smooth' results so as not to spook wall street with volatile earnings, the volatilty resulting from the derivatives markets.

Freddie used special purpose entities (off-book 'shell' companies like Enron's) to hide the gains/losses. Like Enron, the accounting was irregular (to put it charitably), Freddie's top management team was sacked, and this restatement begins to correct (theoretically) the financial reporting, accounting, and the SPE's.

The extent of the risk exposure from derivatives and the counterparties (and hence the systemic risk to the Mortage industry and the US taxpayer) remains a controversial issue.

The OFHEO's report on the systemic risk used to be at SYSTEMIC RISK: FANNIE MAE, FREDDIE MAC AND THE ROLE OF OFHEO, but oddly now, the ofheo.gov website isn't responding. If you do a google search on the title, you may find a copy elsewhere.

[OXENinFLA]

Thanks.