Freddie Mac Admits Exaggeration

Freddie Mac Admits Exaggeration

WASHINGTON, Nov. 21, 2003


(AP) Mortgage-market giant Freddie Mac disclosed Friday that it had inflated its earnings for 2001 in financial reports by $1 billion, the first time in its months-long accounting crisis that it acknowledged overstating profits.

The disclosure came as Freddie Mac said its overall earnings are being restated higher by $5 billion in a long-awaited adjustment. The underreported earnings of $4.4 billion for 2000-2002 were close to what the government-sponsored company had estimated in September. In addition, Freddie Mac said that $600 million had been underreported for periods prior to 2000.

Prior to Friday's report, Freddie Mac had only acknowledged understating its earnings, giving the company a unique status among other big corporations embroiled in accounting scandals. While other companies may have overstated earnings, Freddie Mac executives have said it understated its results for several years to smooth out volatility in profits and uphold its image on Wall Street as a steady performer.

It said the $1 billion error in its 2001 earnings was due to failure to account for losses from derivatives, the financial instruments that Freddie Mac and larger rival Fannie Mae use to hedge against swings in interest rates. (snip/...)

http://www.cbsnews.com/stories/2003/06/09/national/main557688.shtml

I swear it! The "permissive atmosphere" that Clinton's penis created is responsible for ALL our probelms!

Prior to Friday's report, Freddie Mac had only acknowledged understating its earnings, giving the company a unique status among other big corporations embroiled in accounting scandals. While other companies may have overstated earnings, Freddie Mac executives have said it understated its results for several years to smooth out volatility in profits and uphold its image on Wall Street as a steady performer.

when they say "smooth out volatility in profits", i read that as saying they were going to understate their profits in one period, and overstate them in another. if their intent was to "uphold their image as a steady performer", then it seems to me that is a gross deception, regardless of whether they used understatement or overstatement to achieve it.

The profits look good now, with all the refinancing. When interest rates rise they will go belly up. All those defaulted mortgages and overvalued real estate as collateral.