piece on the FHLBs. Later I was contacted by the FHFA (the
regulator for the FHLBs). They pointed to a factual error in the blog
and asked me to publish a correction.
I said the following. It is not correct that the FHLBs will suffer total
losses of $100b:
"Fannie and Freddie will cost us at least $400 billion. Add in another
$100b for the FHLBs."
The FHFA provided a link to a balance sheet of the FHLB’s. The following
is a slide of that report. As you can see there is a line item marked
investments of $284B.
I relied on a the following sentence from an FHFA report to evaluate the
investment portfolio:
FHLBanks' investment portfolios consist primarily of MBS
securities, chiefly Agency MBS or highly rated private-label MBS.
When I think of the term, “Private label MBS” I immediately think
losses. And it is correct that the FHLBs have and will continue to
suffer losses from these holdings. But the amount of the PL MBS in
portfolio was substantially less than I had assumed.
The clarification provided by FHFA on this is as follows:
As discussed, the key point is that private-label MBS are
$46 billion (not the $284 billion you had in the blog), and that the
FHLBanks have already recorded credit charges and non-credit
other-than-temporary impairments on these securities.
Some thoughts on this:
-I try quite hard to stay on track with my writing and this was a pretty
serious error. I used a number that was not properly vetted and this
resulted in a bad conclusion.
The broader issue of the Blogs and the accuracy of what is in them has
been raised on a number of occasions. I have no editor that is looking
over my shoulder. Nor do many of the other bloggers who produce the
200-300 articles on finance that are appearing every day. Yet the blogs
are proliferating. I, for one, get more useful information and ideas
from the blogs than I do from the MSM. I think that the blogs do a very
good job of providing information and the error rate is fairly low.
-I know that when someone writes a piece that is not grounded in fact
the comments will explode. There are too many smart people in the
audience. When writers like me make a mistake it is rare that the
readers do not bring them on the carpet. That was the case in my blog
post. The following are some comments from readers:
Anonymous said...
Just to be clear - of the $284B of investments, only $152B are MBS
and of that $152B, only about $47B are private-label MBS. The problem is
much smaller but still a potential problem for some banks, such as
Seattle, Pittsburgh, Chicago, and Boston.
Anonymous said...
The comment above is right, you have the numbers completely wrong:
the private label mbs are less than 50bln, AND those securities have for
the most part already been impaired and written down substantially.
Clearly these folks had a better handle on the facts then I did. I
tried to get these individuals to contact me so that I could get the
numbers straight. It was my intention to do a clarification but the
commentators (no doubt it was someone from the “inside”) did not come
forward. If they had I would have done the rewrite.
-I am concerned that this will be used by either the MSM or the
government agencies to discredit the blog’s contributions to the public
debate on the critical issues we face. It shouldn’t. The proper takeaway
should be that bloggers do make mistakes and that readers should always
look at the comments to see if there has been a challenge on the facts
as presented. There is often more value in the comments than the blog.
-I am well down on the list of bloggers. Less than 15,000 people read
the piece in question. But it got the attention of the FHFA and they
basically insisted on a correction. My positive spin on this is that the
“deciders” are reading the blogs. Possibly we should
re-double our efforts.
-The sentence. “Fannie and Freddie will cost us at least $400
billion” was not objected to by the FHFA. I specifically asked them,
“Could you confirm that the only objectionable/incorrect aspect of
this piece was the statement on the magnitude of loss for FHLB?”
Their argument was with the FHLB loss, not the Fannie and Freddie
numbers I used. I am left wondering about that.
-I apologize to the FHFA/FHLBs and the readers for the error. Thanks to
the FHFA for bringing it to my attention.
Considering that the massively well funded MSM (along with the government itself) deliberately and regularly publishes as fact things they KNOW to be completely false/fiction, I don't think they can point fingers at inadvertent errors by poor bloggers.
Dear Bruce,
Kudos to you for your candor. The MSM would not necessarily have retracted a misstatement in the detail in which you have nor would the MSM have given the retraction the prominence that you have.
For whatever my two cents are worth, I do not believe that the final chapter has been written on the FHLBs and would not be the least surprised to see more losses yet to come.
Bruce,
>>"I am concerned that this will be used by either the MSM or the government agencies to discredit the blog’s contributions to the public debate on the critical issues we face. It shouldn’t. The proper takeaway should be that bloggers do make mistakes and that readers should always look at the comments to see if there has been a challenge on the facts as presented. There is often more value in the comments than the blog." <<
Dont fret too much. People know blogs offer commentary from people who are passionate about a subject, AND editorial commentary from people who are passionate about a subject..... And what are professors in school but people passionate about a subject, but dont "work" in the area, but are paid? They are held up by the press and those with interests as "experts" worthy of authority. It really says a lot doesnt it. Like holding up a professor of baseball, who never played in the pros...
Editors are good, but commentary from blog followers is really, as a whole, just as good. It's just post mortem, which has a nice effect of ensuring humility on the part of the blogger.... something paid colmunists and "reporters" are protected from by their editor.
So Bruce, dont worry. Be like President Reagan, have faith in the American people. We many not know as much as those passionate about a subject, but we can smell dishonesty, avarice, and most importantly PRIDE, much better than most in the press believe.
God Bless, carry on proudly and thanks for the errata.
HCSKnight
Way to 'man up' Bruce.
Mistakes happen ... just ask Bernanke.
hmmm ... on second thought don't ask Bernanke, you won't get a straight answer.
Still the clarification is appreciated and your integrity, at least with me, remains intact.
My bullish USD warnings since 2009 on weekly and monthly charts have not changed and further USD strength and thus EURO weakness is still expected, so USD rally and EURO downtrend will continue.
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
Dear GS, Your posts are great and the charts are fantastic. But could you please keep your posts to the most relevant pages. You are now posting on every single article and the over exposure is beginning to smack of outright self-promotion and beginning to feel more like junk mail than the valuable information that it really is. Thanks.
You made a mistake that was not intentional. The MSM intentionally lies to us everyday and never makes corrections.
Please keep writing, Bruce, as I have learned much from your articles. Thanks.
The G-men have never served the public at large. The real SOP is to deceive, and create a diversion for us to look the other way all the while manipulating markets, programs, countries, numbers, assassinations, you name it- for their own enrichment. The pubic at large will believe whatever drivel on CNBC, MSNBC and the like.
"other-than-temporary impairments"
Temporary under what metric? Geological time?
And who decided it was "temporary"?
Do some digging into FHA .. It is there where you will find the potential for 100bb in losses. Barcley's put out a good piece on it last month .
thanks for the correction and more the courage and integrity to make it. agree with the consensus that your contributions are among the most valuable and interesting on this site (and by that i mean anywhere).
How do you project a loss on an asset you cannot price in a market with no buyers. Its not about proper disclosure, its about the needed balance sheet flavor of the month.
The impetus on fair reporting used to be tied to a private firms ability to present its true position under the real threat of insolvency.
When you remove the risk of insolvency, your books are what you want them to be.
When the government removes all risk, the books are just fantasy.
Do I trust their numbers, no.
Do I trust the government to uncover fruad, no.
Do I thrust the legislators in doing the financial prudent action, no.
Do they care what I think, hell no.
Mark Beck
+1
USA: Prosecution Free Zone
Bankers Welcome!
Bruce, integrity, clarity, transparency, and fresh information from the shadows may not be liked by Govment Men. A too well educated and informed population has always been a problem for Kings/Dictators/Politicians. You are now a proud nail and you need to watch for the hammer. OH, maybe that was a hammer they dropped on you. Appreciate your effort and hope you can keep it up.
Why doesn't the govt lay everything out so a reasonably educated person in the industry could easily figure out the state of affairs?
It is our government, and it should be responsive to us, should be working in our interest, should make information readibly available so we can exert democratic controls, it should not act like a bad business partner, burying information.
"The state is made for man, not man for the state...
That is to say the state should be our servant and not we its slaves."
Albert Einstein
a suspect in a couple years many will change their tune ,,a bout gold and monetary soundness
but from a bed of broken dreams it will come
better to buy some gold ,
a foundational bedrock for honest numbers
it surly doesnt take long .. here to sweep away the junk from the Keynesian alter boys and their brain washed ideas
from the remarks from those who understand the concept of freedom and the ideal of Austrian economics ;\\ofcourse no one concept can be intirely clean ,,
but any time food is mixed with even a little poison . the outlook is not bright
and how can one not look out and see what has caused the problem and yet these same folks want to double down to solve ,,lol
I think it is great someone on the inside is reading the blog(s). They can see first hand the frustration and distrust due to the lack of access by the people. The on and off book items, the intragovernemtn loans, the unfunded liabilities. Loans baised on mortgages (another loan) to/from banks that can take $100 and turn around and claim it's value is $1000..really we are so far down the rabbit hole with layers upon layers...I'm not sure anyone knows the total bill/liability.
Well said.
Wheels within wheels.
I wonder,... if Goldman was helping Greece play numbers games to obfuscate it's true financial condition, is there any chance it did the same with the US government or assorted US government agencies/departments?
Naaaah. Our politicians and bureaucrats are way more trustworthy. Right?
Tick tock.
yes even the off the cuff remarks and tidbits from the posters have more truth than the public relations of the information screening
main stream media is used for propaganda and brainwashing. i have trouble listening to an obama speech. whatever the sockpuppet says is meaningless just more rah rah rah.
I remember when Woodward and Bernstein misstated one fact among many true facts.... the White House and its apparatchiks came down hard on Bradley trying to make him doubt their credibility and silence them.
It was not successful then and it will not succeed now.
Forgiven, keep writing
+1 honesty integrity
When I visit ZH, if your name is on the contributors line it's usually the first thing I click, just like I did now. Readers are usually pretty good at vetting and like with anything mistakes happen and like with anything buyers should always beware. The important thing is integrity and there is no shortage of that with you or in the ZH family of contributors save for one or two who appear to be more interested in promoting their subscription sites than providing content.
The MSM is dieing in part because its readers/viewers have come or are in the process of coming to the realization that it lacks integrity. Other than those who have access to proprietary research, ZH and blogs like ZH are filling a void by providing timely and insightful commentary along with a venue for discussion and debate.
Your post above speaks volumes as to why (some) blogs are rapidly becoming a primary source for information, news, opinion and dare I say truth. It also speaks volumes that the FHFA are counted among your readers.
The fact that they specifically brought forward non-disclosed information in support of their attack on you suggests that we might get more information out of the govt. if we started pulling numbers out of the air and using them. At least then we might get better disclosure if they wanted to refute what's been written.
I like that you admitted that you were wrong, I don't like the fact that we're being kept in the dark by clowns and ass-monkeys.
As Rusty said, "come 100% clean or STFU."
my .02
"highly rated private-label MBS"
That's nice, I really like that. You know what I'm gonna do? I'm going to leave your words on my board for all my classes to enjoy, giving you full credit of course, Mr. Bureaucrat.
Highly rated by who? The rating agencies?
It would be simply if the FHLB, FNMA, FHLMC, and the FED just release a detailed list of their investment holdings. These agencies are public/private and therefore should have all financial transactions reported. This would include a full GAO audit. Thank you for correcting the information, but I blame the agencies for their blatant attempt to conceal the truth.
Anonymous posters from this Agency provided limited non-public information to counter your article. They consciously did not respond to your request for backup. Then the Agency formally asked for a correction.
The intent of the government agency was to trap you, hold you out to dry and discredit you. The intent should have been to dialogue with you, resulting in better and more accurate public knowledge of the matter.
Our government is working against us.
the government has been working against us, off and on (always on when it counted) since at least the war in vietnam, probably korea. they have their agenda and we are sources of money and, on occasion, votes and cannon fodder.
Bingo.
Come 100% clean or STFU.
True that MSM writers have editors looking over their shoulders, but more to make sure they stay on-message than to catch factual errors.
+1
And the message to the public is: You don't know shit. Keep eating twinkies and we'll save the day.
---
Bruce,
Didn't someone from the Treserve contact you a while back about an error before? I remember reading your comment about it and your additional message that "Yes, they have eyeballs all over these pages."
i don't know as that's true, but it sure sounds like it's true.
The is almost no fact correction in the bregular media, no fact checking, and worse of all they report any thing an official has to say as if it is news worthy and the truth,
Obama talking about financial reform when he has been against any real reform proposal. When they report what Obama says in his speech do they say what is is actively doing behind the scenes.
In truth there is an awful double standard. the Blogging community (those that go against the grain) are held to a higher standard. Those that go with the grain can often just use made up things without evidence. "financial innovation, liquidity, geither reporting costs of bailouts, etc. the list goes forever. the most frustrating thing is no matter how much evidence we have the oligarchy keeps control and does what it wants. It's one of the major reasons I think the US is a faied nation state. we we can't act for the good of the country at a time of crisis because of lobby money, then democracy is a faulure.
The United States may well be a "failed nation state" but only as a Democracy. We're succeeding quite well thank you as a Fascist State. And a terrorist one at that or so believes Noam Chomsky.
http://www.alternet.org/books/146815/noam_chomsky:_the_u.s._continues_to...
Thanks for the clarification. I also am now 100% blog based, the quality of work here, and the dozen or so other sites that have become my daily reading, has eclipsed everything else in the MSM, even the Economist, which I've finally given up after years because they are always two weeks behind.
On this subject it was fascinating, and somewhat sinister, to read the puppet Obama who used the new media to get elected, is now turning against it, and has been slamming it at several university speeches. I wonder how far behind will be the call for net-censorship?
lucky if it's only censorship he tries. remember he claims the power to assassinate american citizens anywhere in the world, off a battlefield, not in the act of committing a crime, but for what the executive branch, apart from any judicial proceeding, believes that citizen is going to do. is there a better litmus test for the police state? and i voted for the ....
Thanks for having the guts to issue a clarification. But as you stated, the comments often clarify any errors, and this is instructive as to why blogs are useful even if they are unedited prior to publication. I get nearly zero information from the MSM because of the constant slant or spin. That said, blogs, especially financial blogs, are always needed to blow the smoke out of the room and analyze things for what they are, not for what some politician wants to spin.