Fannie Mae: Like Enron, But About 20x Bigger

Just in case you need another reason to disbelieve the mainstream media, take a look at the Fannie Mae debacle: The accounting errors add up to about $11 billion; the Enron scandal involved about $567 million. Yet an analysis of the news reveals a big difference in the way these stories were treated by the media.

We compared how much coverage TV networks — ABC, CBS, NBC, and CNN — gave Enron versus how much they gave Fannie Mae. The analysis focused on the nine months around the breaking of each story.

Just doing a LexisNexis search produced 3,017 hits for “Enron.” A search of CNN alone produced 1,385 hits. During that nine-month period, Enron disclosed it had overstated earnings by $567 million since 1997.

A similar LexisNexis search was performed for the term “Fannie Mae” for those same media, from June 1, 2004, to March 1, 2005, again when the story was breaking. This search discovered a paltry 37 matches. Through those nine months, Fannie Mae was asked by its regulator to revamp its accounting practices, key executives resigned and about $11 billion in accounting errors were revealed.

Even Fannie Mae’s announcement it couldn’t deliver its 2004 financials and the subsequent 4 percent drop in its stock price weren’t enough to push the story on to the TV news. But Enron remains a staple for the networks — an interview with former Enron CEO Ken Lay was on “60 Minutes” on March 13.

This is a huge story. Why is it being ignored?

Is it politically incorrect to attack Fannie Mae because it sponsors home loans to lower-income people? Is the moral here that it’s okay to stuff your pockets with cash as long as you throw a few crumbs to the little people?

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One response to “Fannie Mae: Like Enron, But About 20x Bigger

  1. Fannie Mae and Freddie Mac are the ultimate fulfilment of government intervention. You can make some mumblings about “Republicans at the wheel”, but fundamentally no statist can attack the FMs because to do so you’d have to attach their foundation as government-sponsored lenders. A Bank of America or Chase could never get as big or lend as recklessly as Freddie Mac and Fannie Mae do. They only remain solvent because they are implicitly guaranteed by the Federal Government.

    A failure of either would take down the world markets in a fashion that would have made the LTCM debaucle look like chump change. The bond-owners know that too, but they also know that the Federal Government could never allow that, and that the Treasury and/or the Federal Reserve would make good any called notes. There’s no risk, so there’s no market forces to penalize that risk.

    David

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