Apparently it also runs through the office of Freddie Mac’s CEO:
As CNBC’s Diana Olick notes, the issue is write-downs of of all that toxic mortgage paper that Freddie is saddled with. Financial houses from Australia to Wall Street are writing down the vale of this debt as much as a reported 90%. How much has Freddie written it down?
I think Armando Falcon, a former head of OFHEO, said it best when I interviewed him yesterday:
“They’ve only written them down by let’s say five or 6% total over the past few quarters. If those were sold on the market they would get maybe 50 cents on the dollar for these securities. At some point they can’t delay the inevitable about having to mark these assets down to their true market value. They are now holding them close to book value, based on the theory that these are temporary impairments. As the market continues to decline into next year, it will be clear that these aren’t just temporary impairments. Then the government will not be able to allow this forbearance on recognizing losses much longer.”
Reality Disconnect, anyone?