Wall Street is focused on a non-event. "'The Rudman report does a very good job at laying bare the earnings-at-any-cost culture that had developed over many years at Fannie Mae,' Treasury Undersecretary for Domestic Finance Randal Quarles said. The portfolio should be cut back to reduce risks to the U.S. financial system, he added."

But this story has stayed out of the spotlight. "Investment bank Friedman, Billings, Ramsey Group Inc. said on it swung to a fourth-quarter loss, hurt by write-downs in its portfolio of mortgage securities. The company posted a fourth-quarter loss of $271.6 million, compared with earnings of $86.6 million a year earlier."

"The mortgage-backed securities (MBS) and merchant banking portfolio write downs and losses realized during the fourth quarter of 2005 totaled $261.6 million. Included in that figure were: $180.1 million in write-downs, net of hedging gains, of mortgage-backed securities, $7.0 million of realized losses on sales of mortgage-backed securities, and $74.5 million recognized in the write-down of nine equity investments to reflect 'other than temporary' impairments in the firm's merchant banking portfolio."

"'There is no question that 2005 was a difficult and disappointing year in many respects,' said Eric F. Billings, CEO. The adverse interest rate climate contributed to the difficult environment for non-conforming mortgage lenders in the fourth quarter. The compression between funding costs and coupons in the non-conforming mortgage business continued until late in the year, leading to deteriorating sale prices for mortgage originators throughout the fourth quarter."

"Nonetheless, the environment remains challenging in the gain-on-sale business. FNLC is taking the necessary steps to quickly return to profitability, including headcount reductions in many areas and other cost reductions throughout its origination business, while continuing to serve its broad base of mortgage brokers and retail customers. For the full year, FNLC originated a record $6.0 billion in mortgages, an increase of 81% over 2004."