Thursday, May 17, 2007

Hoof N' Mouth

It had to happen and thank you, Barney Frank.

“Two Gun Jim Lockhart,” the new GSE sheriff in town, wanted--early on--to draw a distinction between himself and his predecessors, whom he saw as weak and too close to the GSEs, so he talked a lot of tough regulator talk. But, recently, he got called out because he was talking too much about “his” intentions as GSE regulator.

Shortly after he was nominated, Lockhart, who got his new job--in part--because he was a “friend of W’s,” started lambasting the GSEs, their operations, their leadership, and whatever else he could gets his words around. He boasted of his intention to manage Freddie’s and Fannie’s portfolios, when it was unclear whether he had the legal authority.

As justification for his verbosity, Lockhart was quick to cite the Federal Reserve’s “systemic risk” studies and his own agency’s work, re the GSEs’ mortgage portfolio risk. He threw in each company’s recent accounting problems, as well.

But, those issues have been losing cachet, both in fact and as this Administration and many of its appointees have had been exposed for their willingness to step over, beneath, around, and through, the laws of the land.

(When you read the media reports of Andrew Card trying to con a bedridden AG John Ashcroft into violating his oath, remember in which blog you read the possibility that an unhappy Card--or some other senior White House politico---- may have “sicced” the SEC on Fannie Mae, in 2004, when former Fannie Mae officials got too identified with the then surging Kerry campaign.)

This week, in commenting on pending House floor action on his legislation to create a new GSE regulatory bill, House Financial Services Committee Chairman Barney Frank pointed to Lockhart’s public statements and GSE threats as the primary reason why a bipartisan group of House Members plan to support the “Bean-Neugebauer” amendment to Frank’s bill.

The amendment, which the Administration opposes and which Frank will vote against, is sponsored by Financial Services Committee members, Melissa Bean (D-Ill.) and Randy Neugebauer (R-Tex.).

Their proposed change would provide the GSE regulator with interdictory powers similar to those of other federal financial regulators, not the more open-ended authority the White House sought. The two Members would prevent the GSE regulator from using issues outside the ken of the two corporations, as justification for taking regulatory actions against them.

Frank pulled no punches in pointing to Lockhart as the reason why this one feature--in a bill on which the House Chairman cooperated closely with the Administration--could be altered on the floor, despite Frank’s and the Administration opposition.

Not that it requires translation, but Chairman Frank was telling Lockhart that he overplayed his hand and worried both sides of the aisle with his threatening rhetoric.

Whether Bean-Neugebauer passes or not (or the Senate decides to adopt the idea in its GSE draft), Barney Frank called attention to a problem. Jim Lockhart has acted less like a thoughtful regulator and more as de facto Chairman of both companies, which he isn’t and can’t be.

With great self-justification, OFHEO, under Lockhart, has been making decisions for the Fannie and Freddie on issues which, heretofore, had been the exclusive province of management.

Twenty five years of House and Senate floor statements and report language, telling the GSE regulator not to get involved in the ‘day to day’ business decisions of the GSEs, seemingly have been ignored by Lockhart.

Irony of ironies would be if Lockhart’s braggadocio and chutzpah resulted in legislation too weak for the Administration to support.

That would leave OFHEO and Lockhart--with his public record stating what aggressive actions he would initiate against Fannie Mae and Freddie Mac—still facing, not just the unhappy House and Senate authorizing committees, but their appropriations committee counterparts, as well.

In retrospect, I wonder if President Bush ever advised his friend, “Buckaroo. Don’t do like me. Keep that hoof out of your mouth?”



Maloni, 5-17-07

No comments: