Freddie Mac---Carmen (fast)
>> freddie mac is in the middle of an internal investigation as to how executives accounted for several hundred thousand derivative products during 20002001 and 2002. the company was basically trying to smooth earnings over a problem of riches rather than trying to hide losses. coredrir who has been buying freddie mac bonds for the $135 billion in fixed income he helps manage at prudential investment. freddie mac will need to restate between $1.5 and $1.4 billion which will lower future earnings growth. banc of america capital management which manages $275 billion said the restatement concerns them but it does not change the view of the company’s fundamentals.
>> we do believe that it’s a pretty good-byes overall. we don’t think there is any permanent impairment to the business or their ability to operate and grow. we think they’ll get this behind them.
>> the restatement has called from critics saying fannie mae and freddie mac should face greater regulatory oversite. the two shareholder owns don’t have to make regular filings with the securities and exchange commission. the congress held hearings today on that issue. ansell says he’s not expecting any major changes, though.
>> if congress were to do anything drastic to the g.s.e.’s it could have a material impact on the housing markets in this country. that may not be wise in a period when we are trying to get the economy going a little faster.
>> freddie mac shares have fallen 14%. the company said on june 9th it ousted its three top executives amid the internal investigation. credit suisse first boston says the restatement does not change the way they feel about the stock . the stock was undervalued before this and they are maintaining their buy rating on it. bank of america says the fact that the company uncovered the problem itself is a positive and diminishes the likelihood of future problems. as a note, they do not own any shares of freddie mac.
>> carmen roberts. today’s congressional hearing explains concerns at freddie mac are part of a wider structural problem. the head of an independent ratings company says freddie mac deserves the a plus credit rating, not the aaa rating fannie mae gets from moody’s, fichs and standard & poor’s. the unusually high ratings prevented investors from getting a fair picture of freddie mac.
>> 10 analysts came out positive one negative after the disclosures of the accounting issues. that’s a structural problem. the fact that the rating firms, major rating firms are all paid by the issuers and get the bulk of their compensation from these major issues, that’s a problem. regulation has typically lagged. it would be terrific if you set up a huge regulatory body, maybe get better disclosure. but it has to go beyond just that issue, if you are going to protect these firms in the future and protect investors.
>> while some people fear increased regulation would hurt the housing market, federal financial an litics’ analyst disagrees. she says putting fanny and freddie under s.e.c. oversight will not restore confidence.
>> good regulation would reduce the funding costs of the gse’s and that would make it easier for them to reduce home ownership costs particularly at the most struggling ends of the market.
>> richard baker, with 20 of 25 votes to shift oversight of fannie mae and freddie mac to the treasury department. the price of crude oil in new york had the biggest gain in seven weeks after a u.s. energy department report showed inventories declined unexpectedly last week. it rose 4% to close at $29.95 a barrel. the resumption of iraqi oil exports and sagging economic growth could weaken crude prices in coming months. that’s the finding avenue bloomberg survey of analysts at a dozen banks an securities firms in london and houston. they predict new york prices in the prices in the second half will be 19% lower than the first half. a survey suggests oil will slip to $23.24 a barrel. it was the best of times, it was the worst of times. our next guest isn’t quoting dickens. its his assessment of the economy.
