Twenty Something Sense

I read a quick opinion article from the WSJ yesterday that I wanted to share.  The article describes how Jamie Dimon (current CEO of JP Morgan Chase) spends a good portion of his 2008 ‘Letter to Shareholders‘ discussing the failures of Fannie and Freddie and the effects it had on JPMC.  Here are a couple quotes:

“Perhaps the largest regulatory failure of all time was the
inadequate regulation of Fannie Mae and Freddie Mac
The extraordinary growth and high leverage of Fannie
Mae and Freddie Mac were well-known. Many talked
about these issues, including their use of derivatives.
Surprisingly, they had their own regulator, which clearly
was not up to the task.”

“The systemic regulator needs the ability to anticipate risk
and do something about it if necessary … This regulator also might have been able to
limit the leverage of Fannie and Freddie once they
were deemed to pose major systemic risks. Such a
regulator might have been in the position to recognize
the one-sided credit derivative exposures of AIG and
the monoline insurers and do something about it.”

Reading the entire 28-page letter can be a bit overwhelming, but offers a unique perspective from one of the largest banks that has held its own while navigating through unprecedented times.  Has anyone else seen articles discussing how people in the industry view Fannie and Freddie?