Gaymard said Asian countries with huge dollar reserves will be punished and long-term interest rates in the U.S. will rise without coordinated action around the world.
The dollar also weakened on the expectation that the Bush administration will not change its policy of "benign neglect" towards the dollar in 2005. The greenback fell to a record low against the euro Thursday and dropped vs. the yen.
While a severe, rapid decline in the dollar could roil the markets next year, another recent development has the potential to upset stocks, too.
This week, Fannie Mae's (FNM) Chief Executive Officer Franklin Raines and Chief Financial Officer J. Timothy Howard were ousted from the company after the Securities and Exchange Commission said the company broke accounting rules.Fannie Mae now has to restate its earnings to incorporate $9 billion of derivatives losses. Raines said Fannie had "always made good faith efforts to get its accounting right," but