Chapter 2

http://www.financialpost.com/story.html?id=776005

Summary:

Last month, two of the largest mortgage companies, Fannie Mac and Freddie Mac, in the United States were facing a tremendous mortgage financial crisis. This second bailout was called on within six weeks of the first rescue towards the company. The U.S. Treasury Department took over Fannie and Freddie within six weeks of the first rescue – the second bailout. These two companies no longer have enough liquidity to support their debts in the housing industry. The Federal Housing Finance Agency (FHFA) regulators will be managing both of the companies temporarily. Fannie and Freddie own approximately half of the U.S. nation’s $12 trillion mortgages. The U.S. cannot bear to see these two companies demolish.

Connections:

Fannie Mae and Freddie Mac are the two largest mortgage corporations in the housing industry of U.S. In other words, each transaction recorded is most likely in an income or cash flow statement. Relative to Chapter 2, it is all about transaction analysis and how they are recorded. However, Fannie and Freddie must have their transaction analysis recorded poorly to lead to a downturn in their company’s mortgage debt. Also, the basic accounting equation is used in our daily lives. For example, in order for Fannie and Freddie to have successfully transaction analysis, they have to balance both sides so they will be equivalent to each other.

Reflection:

The events that led to the downturn of the company’s financial crisis deeply reflect to how they operate. For example, Fannie and Freddie should be recording every single transaction and go through it intently. Also, although there are no deep relations tied to the mortgage expenses. Because of this, the company faced a financial crisis through the Vancouver government industry. Therefore those who followed the accounting cycle will have both sides equivalent. I think the company deserved a downturn, sooner or later, despite the fact that they owe their creditors a whole lot of money. Fannie and Freddie have an abundance of mortgage payables and might not have the superior powers to pay their debts.

Article Summarized by
-Jillian Mak