One of the takeaways from the entire mortgage meltdown and the current brouhaha over Freddie Mac's obscure hedging techniques is this: If you can't explain something, you shouldn't be doing it.

ProPublica and National Public Radio (NPR) reported on Monday that GSE Freddie Mac had invested billions of dollars in so-called "inverse floaters," an exotic form of interest rate hedge that pays off if borrowers become unable to refinance. For an entity with a mandate to support the housing market, and which is being kept on life support with taxpayer money, a headline that declares "Freddie Mac Bets Against American Homeowners" is obviously a bit challenging to explain away.

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