Monday, September 17, 2007

Greenspan’s Book

“The enemy of my enemy is my….. er, enemy?”

I was surprised to read about former Fed Chairman Alan Greenspan’s heavy criticism of President Bush’s fiscal policies or lack thereof in AG’s new book, “The Age of Turbulence. (No, I haven’t bought/read the book, yet.)

Maybe there is hope for the Maestro, yet.

I expect that congressional Democrats will jump all over the tome and force the GOP to defend “W” or attack Greenspan. I wonder how GOP presidential candidates will handle it, probably dodge, noting that Greenspan wasn’t strong enough on abortion.

How will those people, who oppose President Bush’s policies and also think Alan Greenspan did not walk on water, react to the central banker’s criticism?

I just described myself, so I guess I’ll answer and apply a little “situational ethics,” realizing that Greenspan is gone and Bush is still here, suck it up and say “Go Greenspan, get Bush!” (My endorsement doesn’t apply to AG’s Neanderthal GSEs views, however.)

But, the facts lean heavily to Greenspan.

IMO, Bush—with a huge electoral and political mandates--did nothing to restrain the Republican Congress’s violations of orthodox GOP tight fisted budget responsibility and limited deficit spending. He refused to buck the assault on fiscal discipline or any of the excessive spending the House and Senate overlords demanded. (“Hey Karl, what’s this here veto pencil thing? Why does it say, ‘Do not use unless Karl approves?’ ”)

Yes, President Bush found himself in a costly war. But it was one he created, once he chose to invade Iraq based on a false premise.

In those five years since, President Bush has yet to pay for the war with spending cuts or new taxes. Instead of shutting down Uncle Sam’s spending spigot, he actively drained it at both ends, backing more spending plus more tax breaks. No wonder Greenspan’s nailed him.

I would hope that Democrats—if they ever controlled both the Congress and the White House—would use this sorry example and do a much better job.

Speaking of which, I wonder how Greenspan’s enthusiasm with President Bill Clinton’s approach to federal spending will spill over on presidential candidate Hillary Clinton, who likely is Bill’s intellectual equal? If Bill Clinton had the resolve to achieve balanced budgets--he did it twice, with Frank Raines as his Budget Director--can a “new” President Clinton match or exceed that, even though she will start from a much deeper deficit position? I wonder what AG thinks?

GSE Week and a Message for My GSE Friends

This will be a big week for “GSE talk,” with mortgage market hearings, an FHA markup in the House, and a Fed decision on short term rates.

In the near term, both companies could benefit.

As the fall unfolds, I just hope that both Fannie Mae and Freddie Mac remember that “they do well when they do good.”

Each company needs to follow through on what I believe will be new charter support from Congress with regard to their mortgage activities and operational freedom. With this little help from their friends, the GSEs can reestablish the core value which their diehard supporters believe they represent, but which the companies still need to display for some skeptics.

I know it is difficult to manage, on a day by day basis, the conflicting charter imperatives of safety and soundness, return for shareholders, and mission, especially when your regulator isn’t making it easier and seems to be playing a major “two faced” game.

So, let me try and help my GSE friends with their tough choices.

MISSION, MISSION, MISSION. Get grungy, get sweaty and dirty, try and do the really hard to do mortgage work and then the other things, neatly, will fall into place.

(I could try larger type face, if “yelling” will help make the point easier to understand.?)

“Walk the walk” and the home buying public, your industry business partners, the GSE supporters in Congress, the investment community, and--surprise--even the media will rise to protect your back.

When given a chance to show they were up to replacing you, your foes failed miserably and in a spectacular way. The GSEs now are in a position to remind all of those who only vaguely understand your role and value to see it first hand. Without getting too poetic, the housing “good guy” mantle is there for you to retake and wear it justly and proudly.

The best result of stepping up your mission work, big time, though, will be that your success will consistently deny your enemies traction, since the bad guys and critics will be with you as long as little babies are cute.

Totally vanquishing the GSE opponents isn’t realistic, but shutting them up for a long time is a very real possibility.

“You can book that, Dan-o” (Oh and Dick, too)!”

Maloni 9-17-2007

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