| Freddie
report highlights new CEO’s questionable role
By Jon Macaskill
IFR Magazine - International Financing Review Issue
1494, Jul 26, 2003
Law firm
Baker Botts’ report on accounting errors at Freddie
Mac, released last week, found that Freddie Mac’s management
decided that derivatives accounting standard SFAS133 should
be
“transacted around” when it was implemented at the
start of 2001. This included a move to depress the valuation
of
the agency’s swaption portfolio at the end of 2000.
Industry
officials are not convinced by the explanation in the report that
Parseghian thought all these trades were in compliance
with accounting principles. “That just does not pass the
smell test,” said Janet Tavakoli, president
of Tavakoli Structured Finance. “Greg Parseghian’s
face is probably on the Freddie Mac shareholders’ playing
card deck (for future lawsuits).”
Tavakoli echoed concerns expressed by bankers that the report
detailing accounting abuses by Freddie Mac, including the parking
of mortgage assets in securitisation vehicles for a few hours
in elaborate moves to reclassify portfolio holdings, could further
erode confidence among regulators and shareholders in the structured
finance market, and derivatives accounting in general.
END
OF EXCERPT
Janet Tavakoli is the president
of Tavakoli Structured Finance, a Chicago-based firm that
provides consulting to financial institutions and institutional
investors. Ms. Tavakoli has more than 20 years of experience
in senior investment banking positions, trading, structuring
and marketing structured financial products. She is a former
adjunct professor of derivatives at the University of Chicago's
Graduate School of Business. She is the author of: Credit
Derivatives & Synthetic Structures (John Wiley & Sons,
1998, 2001), Structured
Finance & Collateralized Debt Obligations (John
Wiley & Sons, 2008).
Janet Tavakoli's book on the global financial
meltdown is Dear
Mr. Buffett: What An Investor Learns 1,269 Miles From Wall
Street (Wiley 2009).
Clients of Tavakoli Structured Finance have the benefit of proprietary consultation,
which is not available in any other paid or public forum. Clients also commission
proprietary research and analysis.
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