Capital is supposed to measure a company's ability to survive losses and pay off creditors. It's normally a simple calculation: assets minus liabilities, also known as shareholder equity. However, that's not how the government measures capital at Freddie and Fannie.
Instead, its primary capital measure is something called core capital. It's possible a financial institution could be broke -- with liabilities exceeding assets -- and still pass the government's core-capital test.
This is Argyn's blog. I comment on topics of my interests such as software, math, finance, and music. Also, I write about local events in Northern Virginia, USA and all things related to Kazakhstan
Wednesday, November 28, 2007
I'm not sure if the author's right, but it's an interesting claim:
Posted by Argyn at 1:32 PM