Tuesday, November 13, 2007

I Prefer John Wayne, Ward Bond, and Victor McLaughlin

Wow, what a dream sequence. The leaders of North Korea and Iran get into cat fight, slapping and scratching and pulling hair. One hits the other with his purse. A retaliating kick to the shin answers the Gucci smack. Hiss, snarl!

The combatants morph into Andrew Cuomo and Jim Lockhart, more hissing and snarling, even a growl.

I’m tempted to break it up just like Ward Bond contemplated--as Father Lonergan, the wise village priest in “The Quiet Man” movie--when John Wayne and Victor McLaughlin went knuckle sandwich on each other. But, “Father Lonergan” wisely decided not to intervene in such a lovely fight, which was good enough for me.

New York state Attorney General Andy Cuomo’s rumble with OFHEO Director Jim Lockhart never will rival the Wayne/McLaughlin tiff, but the two officials are off to a fun start.

In my dream, I wonder if both guys can lose. “If there’s a God, boy.” I hear Ward Bond rumble in my subconscious!

They Did What?

If you still are in a stupor over the shrinkage of your 401(k), you may have missed that Andy is investigating mortgage lender Washington Mutual’s loan appraisal systems and he has some “concerns.” He thinks they may be inflated or fraudulent and believes there might be some blame to share with Freddie Mac and Fannie Mae, both of which buy loans from the west coast financial institution. Cuomo has subpoenaed the companies for information which he believes is germane to his probe.

Fannie and Freddie have agreed to comply and also name an independent source to double check their systems to see if they were violated.

Is it possible that WAMU--with criminal intent or in collusion with the GSEs--slipped improperly appraised loans past Fannie’s and Freddie’s automated underwriting and detection technology, even though WAMU’s GSE contracts make it financially liable for underwriting errors and put the GSEs on the hook for credit losses from securitized defaults?

Sure. But, I doubt it.

Why Would They do That?

First off, why—after recovering from years of lost business, political and media abuse and suspicions, spending well over a billon dollars on every conceivable back office upgrade, firing anyone who had anything to do with the “bad old times,” proudly displaying their corporate transparency, and touting their return to being “SEC compliant”--would the companies knowingly do anything so outrageously audacious? What reward could possibly justify that risk?

I think the speed with which the GSEs complied with Cuomo’s requests—noting their doubts with his allegations—also argue that they are not afraid of what his inquiry will show.

Lockhart, to his credit, fired back at Cuomo—almost like a good GSE regulator would—and questioned the state AG's understanding of the mortgage securities market, as well as Cuomo’s failure to communicate, coordinate or cooperate with OFHEO in his inquiry. (Lockhart’s response momentarily stymied Cuomo’s staffers when they couldn’t discern which of AC’s hundreds of press releases and dozens of subpoenas issued last week angered OFHEO.)

I assume that Lockie’s response was driven by the GSE operational protections his agency watched installed; AC’s modus operandi; Andy’s political persuasion; the fact that Andy’s is a media hog; and--importantly--because there is some OFHEO-peril in Andy’s fishing trip.

Everyone knows that since Lockie went medieval on them and shackled Fannie’s and Freddie’s business operations, with bureaucracy, additional capital and severe limits on their portfolio purchases, OFHEO has been running the GSEs!

Did OFHEO revert to form, issuing bellicose press releases and threats (Hey, sounds like Andy), while being asleep overseeing the GSE operational switches? When you take de facto control over a company, as Lockie has, YOU make the big calls or have they all run by you. The buck stops at your desk!

Someone might ask if Andrew is onto something, how could this happen under OFHEO’s stifling watch?

But, my chips are on OFHEO and the companies.

Andrew Cuomo is a “#%@#*&#$@!”

Serious political observers know the two words used most frequently to describe Andy Cuomo—at least the words which can be repeated to your mother—are “grandstander” and “irresponsible.” In “Cuomoland,” getting it out always has been more important than getting it right. Apologies always can come later, plus they don’t generate as much news coverage.

Knowledgeable mortgage industry sources still are trying to figure out Andy’s angle. How can Fannie and Freddie make money by cheating themselves and securitizing--or putting in their portfolios--loans with inflated appraisals and, therefore, not worth their face value, especially in the current environment?

Cuomo long has been a politician “on the make,” always looking for any press attention, actively seeking footholds and stepping stones to the next higher office. Given his outsized ego, it’s a wonder he leaves any oxygen in the state for other public officials or the general public.

I often wished that Andrew’s parents had just named their son “Governor, Senator,” or President” and saved the world AC’s constant campaigning for those jobs?

Andy is a GSE opponent—despite what he may claim—starting when, as Bill Clinton’s Secretary of HUD, he developed a severe case of “mortgage operations envy.” It bugged him that the two companies--for which he was part overseer--could do so many positive things so easily, while he had to go through bureaucratic hoops and Congress. He viewed himself as the country’s number one low income housing advocate and he was galled by all of the positive press and attention the GSE executives continually received. His personal dispute with one senior GSE exec didn’t improve his temperament, either.

Andy got his latest “Warhol 15 minutes” last week, at the expense of the GSEs and some Washington public officials. He assisted in tanking the market a bit and probably helped shake up the country's faith in the mortgage finance system, all the while trying to maintain his “choir boy” look. I suspect if his investigation produces anything, it won’t be worth the collateral damage he’s already generated and still might cause.

Someone needs to remind him that the GSE people and cultures he disliked are long gone and his “bull in a china shop” antics may not further his political career.

Like a shark, Andy is drawn to media opportunity, when he smells blood in the water. He has WAMU and now he thinks that going after Fannie and Freddie might make him look more like an avenging angel and also keep the world reading his press utterances. If he’s wrong, he’ll iron it later, having some flunky issue a statement with a prominent “but clause.”

Go Get Him, Lockie!

He also might be crossing a line here, if Chuck Schumer (D-NY), the Chairman of the Senate Housing Subcommittee, who already has been working responsibly and intently on most of these issues, decides that he doesn’t need Andy Cuomo’s “help” to figure out what is appropriate federal policy in the mortgage and GSE areas.

Maybe Lockie should get his tail up to the Hill and work with Senator Schumer on their common interests, one of which might be keeping Andy Cuomo as far away as possible from their business?

Lockie, you are playing with fire, but “Fire” is trying to burn your children and your home. If you are in for a dime, be in for a dollar and fight hard! You don’t want to leave town with your scalp hanging from Andrew’s belt.

KnowhatImean?

(Happy birthday today to Bill Maloni, a great guy who is smart, friendly, responsible, humorous, compassionate, and a good husband, father, grandpa, and friend. Sounds like a great epitaph!)

Maloni 11-13-2007

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