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This article doesn’t support your original claim at all.

cryptonector 8y ago
> This article doesn’t support your original claim at all. Could Fannie’s officers really have been accurately disclosing the risks the firm was taking shortly before its sudden collapse? It is here where the case got complicated. While he was chief executive, Mr. Mudd said that subprime mortgages accounted for about 2 percent or less of the mortgages Fannie Mae was insuring. The commission’s case largely rested on the fact that this percentage did not include the insurer’s longstanding programs for low-credit score borrowers, Expanded Approval and MyCommunityMortgage. The theory about the Alt-A loan disclosures was also not that Fannie had not disclosed that it was in the business. It classified a number of its loans as Alt-A, and told investors as much. But it did not disclose that it had instructed lenders not to classify certain other loans as Alt-A, even though they were also supported by low documentation. ... The 2008 crisis definitely involved some sort of fudging or failure to disclose. But it also involved failure to see systemic risks building.
- resters 8y ago
  The fudging was intended at first to make the books look a bit better and juice the profits. Then, once it became clear that there was a lot more risk than they had thought, the goal of the fudging became preventing the markets from finding out about the risk, to keep prices high and avoid financial loss.
- digitaltrees 8y ago
  Management fudging numbers is a big difference form “they weren’t allowed to disclose”
resters 8y ago
I'm quite sure it's true, but I can't seem to find the original citation. There were congressional hearings in 2005 because the GSEs couldn't produce financials.
- JumpCrisscross 8y ago
  They were, to put it bluntly, fudging their numbers [1]. (From what I can tell, they were releasing timely statements to investors.) This was disclosed by the Office of Federal Housing Enterprise Oversight and rectified well before the financial crisis. Taken together, it is a bad analogy for the systemic mid-reporting of economic data by China. [1] http://online.wsj.com/public/resources/documents/ofheo20060523.pdf http://online.wsj.com/public/resources/documents/ofheo200605...
  - resters 8y ago
    It was not rectified. It is analogous because it was a heavily leveraged lie — lots of policy consequences flowed from it. It’s not the size of the lie, it’s the degree to which you can leverage it. For policy makers, the best practice is to use plausibly deniable, small, but highly leveraged lies.

> This article doesn’t support your original claim at all. Could Fannie’s officers really have been accurately disclosing the risks the firm was taking shortly before its sudden collapse? It is here where the case got complicated. While he was chief executive, Mr. Mudd said that subprime mortgages accounted for about 2 percent or less of the mortgages Fannie Mae was insuring. The commission’s case largely rested on the fact that this percentage did not include the insurer’s longstanding programs for low-credit score borrowers, Expanded Approval and MyCommunityMortgage. The theory about the Alt-A loan disclosures was also not that Fannie had not disclosed that it was in the business. It classified a number of its loans as Alt-A, and told investors as much. But it did not disclose that it had instructed lenders not to classify certain other loans as Alt-A, even though they were also supported by low documentation. ... The 2008 crisis definitely involved some sort of fudging or failure to disclose. But it also involved failure to see systemic risks building.

resters 8y ago
The fudging was intended at first to make the books look a bit better and juice the profits. Then, once it became clear that there was a lot more risk than they had thought, the goal of the fudging became preventing the markets from finding out about the risk, to keep prices high and avoid financial loss.
digitaltrees 8y ago
Management fudging numbers is a big difference form “they weren’t allowed to disclose”

resters 8y ago

I'm quite sure it's true, but I can't seem to find the original citation. There were congressional hearings in 2005 because the GSEs couldn't produce financials.

JumpCrisscross 8y ago
They were, to put it bluntly, fudging their numbers [1]. (From what I can tell, they were releasing timely statements to investors.) This was disclosed by the Office of Federal Housing Enterprise Oversight and rectified well before the financial crisis. Taken together, it is a bad analogy for the systemic mid-reporting of economic data by China. [1] http://online.wsj.com/public/resources/documents/ofheo20060523.pdf http://online.wsj.com/public/resources/documents/ofheo200605...
- resters 8y ago
  It was not rectified. It is analogous because it was a heavily leveraged lie — lots of policy consequences flowed from it. It’s not the size of the lie, it’s the degree to which you can leverage it. For policy makers, the best practice is to use plausibly deniable, small, but highly leveraged lies.