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 About Donald

Don founded Kamakura Corporation in April 1990 and currently serves as its chairman and chief executive officer where he focuses on enterprise wide risk management and modern credit risk technology. His primary financial consulting and research interests involve the practical application of leading edge financial theory to solve critical financial risk management problems. Don was elected to the 50 member RISK Magazine Hall of Fame in 2002 for his work at Kamakura. Read More

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Kamakura Blog

Jul 23

Written by: Donald van Deventer
7/23/2009 12:59 AM 

Yesterday's blog post on the need to audit rating agencies' self-assessments on ratings accuracy has provoked a lot of comments.  What do you think should be done in the KRIS version 5.0 credit modeling exercise with respect to FNMA and FHLMC? 

On today Sheila Bair of the FDIC mentions them specifically as failed firms that the government is bailing out.  In another link on to, the total bail out expense for FHMLC and FNMA has reached $100 billion.  Most of our clients say (a) the common stock price has gone to zero, (b) preferred stock dividends have been halted, (c) shareholders have no control rights, and therefore the firm is a defaulter even if the government has decided to bail out debt holders (but not common or preferred shareholders).

Others say "S&P and Moody's were right--they expected a bail out and it happened."  What do you think?  Please let us know at  In a blog post next week we'll talk about how to separate the probabilities of (a) failure and (b) bailout, given that a failure has occurred.  We'll also talk about the bad things that happen if you can't tell those two probabilities apart!

Donald R. van Deventer

Kamakura Corporation

July 23, 2009