Summary
The government sponsored enterprises like Freddie Mac and Fannie Mae have obviously been under close scrutiny lately due to accounting irregularities. Congress is considering legislation to create a new independent regulator for these agencies. Federal Reserve Chairman Alan Greenspan testified recently that Fannie and Freddie may pose a risk to the financial system because of their rapid growth, although both companies are financially sound. From a bond portfolio management perspective, it is still important to remain diversified in a variety of GSEs in order to further mitigate your risk from any temporary price declines or lack of liquidity that may occur in the future. Many banks, for example, set percentage limits on each GSE in their investment policy. One of the most basic and important principles of investing is diversification. With bond prices at historical highs, now is an excellent time to review the GSEs you own.
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Extract
How Many Baskets Are Your Eggs In?
The governmentsponsored enterprises like Freddie Mac and Fannie Mae have obviously been under close scrutiny lately due to accounting "irregularities." Congress is considering legislation to...
See the full content of this document
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