Monday, December 15, 2008

“Hey Dawg. You got Soul!”

It’s all in the telling and in the video, but is it possible that this frustrated Iraqi journalist--who fired his size 9 Florsheim shoes at President Bush—is being condemned incorrectly? Maybe, he just was trying to praise President Bush for “W’s” ghetto humanity?

Or did the man really think that Bush was a heel?

Arab custom would indicate that the thrower was not happy with our President for the current state of his country, but then we aren’t either. Yet we don’t throw our clothing and accessories at the guy.

Well, when in Rome or when in Baghdad….

I don’t know about you, but I feel sorry for President Bush and hope that he stops taking global victory tours and just stays home. Possibly he could visit Texas multiple times and then show those videos in the countries he wanted to visit before he helicopters from the White House lawn on January 20.


Virginia, it’s the holiday season, right?

Have the large commercial banks—with their coffers full of Uncle Sam’s money--started lending to anyone, individuals, businesses, other banks, to help break up this credit logjam? Tell me sweetheart, what are they doing?

What? They are sitting on their assets?

Ho, ho ho. Don’t they know it’s soon Christmas and Chanukah?

Do you think the three bank regulatory kings, “Ben, John, and Paul” might suggest to their commercial bank minions, “Keep the frankincense and mir, but loosen up on the greenbacks and start circulating them the way you once did, by “L-E-N-D-I-N-G!”

Speaking of gift giving, I am sure that all of these financial services company execs, who lined up for their dole of federal wassail, are thanking their lucky stars that the Bush folks—as reported in today’s Washington Post—added a sentence in the final bailout legislation, to not force those poor souls to take compensation haircuts if their Uncle bails them out.

Where are my damn shoes when I need them and I mean the smelly sneakers??


Democratic biases aside, I have been very impressed with the Obama nominations and how the President-elect has carried himself during this “transition.”

He has chosen to surround himself with some very talented future cabinet appointments and senior staff, all of whom will be necessary to support this President as he tries to lead this nation out of a profound and very deep economic mess, not to mention a variety of other domestic challenges and the global issues facing us, as we fight two wars.

But, at my monthly poker game this week, I asked a GOP friend his opinion of Obama’s choices, his cabinet and top staff.

He said, “Oh you mean the old Clinton crowd? “

It’s not a new line, but it underscores a point—in a much different way--that I made several times in opposing the McCain presidency.

Had John McCain won the election, he would have turned too many of the same people or their clones who had served George Bush.

That would have been doubly tragic because McCain never showed the vision to change the GOP priorities which produced such carnage in Bush’s eight years.

“There is no moderate GOP talent pool,” I wrote and while some/many of the Obama nominations might have worked in past administrations, two things are different. Obama is in charge and setting the direction and tone and the instincts of most of the individuals Obama has named seem far more in concert with what America wants in its public officials than many of the conservative extremists/wing nuts who worked for President Bush.

Not every Republican appointee was out of the mainstream, but enough were to heavily color in the negative Bush’s two terms.


Alan “The Bear” Abelson

Barrons Alan Abelson seems “bearish” 12 months of the year and in every business cycle. He’s the Great Grizzly, a curmudgeon and says so, but he’s a fabulous writer.

You don’t have to read him for market advice, since his advice always seems to be some variation of, “Bad times are here or bad times are coming, so get out or stay out of the market.”

But, Alan Abelson is a superb writer and he should be read for his wit and observations of human behavior, garnered from decades of his work on and with Wall Street.

Of all of the stuff written about Governor Rob Blagoevich and his tawdry behavior, nothing was more clever than this line of Abelson’s:

“If it emerges that Mr. Blagoevich did proffer the seat to anyone with the itch to be a senator and the scratch to purchase it, he merely was following in the footsteps of his immediate predecessor, a Republican named George Ryan “

I am sorry, I find Abelson punning phrase just exquisite, like most of his column’s other petard hoistings!


Just so Fannie and Freddie and their fans don’t feel ignored, the “Houser of the Universe,” also known as FHFA Director Jim Lockhart. Told a Washington luncheon of the Women in Housing Finance that the US soon would have access to 4.5% home mortgages, with Fannie and Freddie playing a major role in financing them?

Really, Jim??

Exactly how do the late lamented GSEs borrow money that cheaply—even ignoring the 100 basis points the companies traditionally would add to the rate at which they borrowed to protect them over the loan’s life--without Uncle Sam’s stamp all over their debt?

It’s the US Treasury which is borrowing 10 year money for around 2.5 percent, not Fannie and Freddie. Or, do you have a double secret plan to turn that arrangement around? And if so, when are you going to tell us…...before you leave town in a few weeks, I hope?


Shawn Donovan

I don’t know Shawn Donovan, the New Yorker whom Barack Obama plans to name as HUD’s new secretary, but I hope, when Donovan was invited to serve, he asked the President-elect, “What was first prize?”

Just teasing.

HUD is the Aegean stables. It needs a massive clean up removing lots of dead wood, dead programs, and dead ideas. Try and restructure everything that moves, Mr. Donovan. It can only result in the department being more efficient.

A few of my friends who know and have worked with Donovan claim that he is “first rate and up to the job.”

I wish him nothing but the best in a post which grinds up top people.

Maloni 12-15-2008


Harry Tong said...

Thank you for another excellent blog Bill.

How likely do you think that the GSE's will be removed from conservator-ship and have their warrants removed? Lastly, does a public utility model of the GSE's sound realistic to you?

Thank you very much for your time.

Bill Maloni said...

I have no timetable for that development, Harry.

As I noted in the last blog's comment section, it all depends on what the Obama team wants to do with them.

Congress seems to have "OD'd" on the GSEs and unless the former GSEs find a major advocate--which could be the Obama Administration, although there is no sign of that, yet--nobody in town has the nerve to stand up and proclaim, "Hey maybe Paulson was wrong and these companies can help us out of this mess."

Intellectually, absent a total handover of the primary and secondary mortgage markets to the commercial banking industry, if some version of the GSEs are to survive, it likely would be the old model,with contraints on growth and profits. But still relying on their ability to provide major "liquidity" to the mortagge markets.

That could be the "utility model." Yet, even that raises the question of how they would fund themselves?

As noted, it would be an easier task if someone could peal away the multiple layers of GSE demonization which has obscured for some their systemic value. Market observers seeking answers just should look at Fannie and Freddie from a, "What did they do to make our markets work better?" angle.

The answer to that is, "They were dedicated mortgage investors, that standardized and bought product 24-7 from lenders, in every community in the nation making the terms and products common to US consumers in all markets.

That's what the mortgage market needs, not necessarily the existence of the two companies.

In my humble 40 year perspective on Washington, however, I believe that it would be easier for an Obama Administration to "fix" Fannie and Freddie then to re-create them.

But, absent one of those those two options, you have to wonder what bank lenders will charge to originate and hold 30 year FRMs, with no F or F to buy/securitize them, or even if they would be available?

Long answer, Harry, but that's what I believe.

Harry Tong said...

Thank you very much for sharing your incredible insight.

As you mentioned that the GSE's future all depends on what the Obama team wants to do with them.

That is why I am very bullish on the GSE's future. The Treasury is pledging to pump $600 billion dollars to buy their debt, along with $100 billion credit line for each company. There is not one company other than the GSE's that have so much government support. Also, President Obama is the second highest endorsement from the GSE's. He will not kill the goose that is laying is golden egg.

Finally, both the GSE's common stock was traded around 87 at it's record high. Today it is below 1.00. Even if the stock goes to 1/10 of its record high in a few years will make the GSE's a great investment.

Harry Tong said...

I can be very wrong Bill.

But I see a perfect storm for the GSE's. By having Obama in office soon, with housing stabilizing in summer of 2009, with the 70% of new mortgages applications going through the hands of the GSE's, and interest rates at record lows. This is why I am bullish.

Bill Maloni said...

Harry--From your lips to God's ears.

Remember, however, anything that Paulson promised is not binding on his successor and Paulson's GSE promises, IMO, have been hollow.

There is not much joy in either company and I doubt whether that much federal support has been offered to them in any ironclad way.

Remember, parts of our government just LIE or "change their minds," as in the plan to buy underwater mortgage assets with the TARP money and to make recipient bank exces face possible compensation cutbacks.

Neither of those things now are operative, under Paulson's recent pronouncements and some last minute Administration requested changes made in the stautory sections designed to force recipeint execs to bank officials to undergo comp "haircuts." This latter development was a front page story in this Monday's Washington Post.(Dumb Democrats!).

So, keep the faith but don't make too many big bets on the GSE stocks, until you see them coming back or hear some good news from the Obama Admin.