Many thanks to old friend the Alex Pollock at the AEI for reminding me of that old bromide, which was real advice once, given to a prominent financial institution in New England, that was complaining about market conditions and competition.
It’s the kind of advice one would hope that our Treasury Secretary, Comptroller of the Currency, and Fed Chairman would give some of those big banks, feasting at Uncle Sam’s table, while forcing force the banks to do their part and thaw our national credit freeze.
The Fed and GSE “Receivership?”
Why would the leadership at the Fed be pushing for GSE receivership, as has been rumored “around town” this week?
I realize that is the large commercial banks “wet dream,” but doesn’t BB have enough on his plate and isn’t the ultimate Fannie/Freddie fate—two largely dead entities in the Treasury’s garage—the responsibility of the Congress, so given by itself in this year’s GSE regulatory restructuring legislation?
Of course forcing Fannie and Freddie into receivership would do away with any evidence that the companies were prematurely put into “conservatorship,” but that thinking takes us into fantasy land, right?
A better reason to delay final interment of the now non-GSEs is that nobody has come up with a viable mortgage market replacement, which presumably is what the congressional charge, to themselves for calendar year 2009, is all about.
Memo to Obama Transition Team
Speaking of rumors, while the Obama has been spending plenty of time with the Treasury Department (as they should!), insiders are saying that not as much time has been spent at the "new" Federal Housing Finance Agency (FHFA), the old "OFHEO." Big mistake. Unless the “Obamas” know they are going to recommend dumping the new agency because there won’t be any “Fannie and Freddie” left to regulate, someone needs to remind the incoming Administration that this “Keystone Cops” gang has presided over a whole range of regulatory disasters.
As recently as yesterday at the Waxman oversight hearings, it was noted that the OFHEO/FHFA troops have occupied the GSE offices and been onsight observers of about four years of management decisions.
If, as some claim, that management decisions were disastrous, what’s that say about the OFHEO/FHFA people who watched and blessed them?
Also, personal note to John Podesta, many of the senior FHFA managers have been GSE-haters from day one. Those aren’t good credentials for federal overseers.
Thank You, Barrons and “Nat from Pittsburgh”
Now maybe we can get some thoughtful action from Hank Paulson and his troops. They’ve stiff armed Susan Bair and the FDIC over mortgagor relief. They stiff armed the Congress over the same and then---with their wall-to-wall discretion-- decided to give money to banks which seem intent on using it to buy other banks, increase dividends, pay bank officials more, or just arbitrage it in their Fed accounts.
God forbid those banks should decide to lend it to individuals, business, or even other banks!
But, now, now Barrons has come out in its current issue—via an article by Jonathan Laing (certainly no great fan of Fannie Mae and Freddie Mac)—and called on the Treasury to initiative a massive mortgage refinance effort, utilizing the aforementioned “late” GSEs, to buy the loans.
High fives to Barrons, which now seems to agree with other great minds (me!) who claim that Treasury refuses to use Fannie and Freddie over some ideological hang-ups, totally ignoring the capacity and ability which those two “things” possess and their underutilized ability to help balance some of the mortgage market ills.
But, now we have a major New York financial publication--owned by the parents of the Wall Street Journal--calling for that result.
Barrons would have the Fed create a special lending facility, allowing Fannie and Freddie to borrow at near Treasury rates, which—after a small margin for overhead—would allow local lenders selling those loans or securitizing them with the entities, to offer a 4.5% or less loan rate to millions of American families.
(Ironically, the Barrons plan looks much like one that has been circulating in Washington for weeks, created by Nat Cohen, a Pittsburgh closing attorney. It’s not identical, but “close enough for grenades” and I know Cohen has been shopping his proposal to any number of mortgage market policy players in DC. I am sure that Barron’s didn’t “borrow” Cohen’s ideas. Instead, it must have been a case of bright people coming to the same conclusions about the same time, although “Nat from Pittsburgh” clearly was first!)
Go Barrons. I hope some of those deaf ears on the Hill might open themselves to you and your ideas. They make sense for the American people and the mortgage finance system, which is why Paulson et al might chose to ignore them. Solely, because it “wasn’t invented at Treasury or by this (outgoing) Administration.
This week over lunch a freind told me how moved/impressed he was with something Barack Obama told an interviewer, regarding energy conservation. Obama confessed to turning off certain lights in his home to save electricity and discussed other fairly easy to do things by which most families could conserve as well as cut down on their personal energy use and expenses.
My friend went onto describe all of the wonderful things that could happen if we truly got serious about saving energy, instead of just employing the rhetoric of same which has been the case for 20 years, and follow the President-elect's lead, here and elsewhere.
This caused me to go back to something I had hoped would evolve with an Obama win, the next President having the capacity, character, and vision to lead.
This may just be one of the times in history when the right man, with the right message,takes the right office at the right time, to lead this nation on a variety of successful efforts that sow the seeds for a much brighter future for all of us and our children and their children.
I think Obama has that wherewithal to achieve major environmental, tax, healthcare, education, financial and economic changes, in part because the American people—as they have shown time and again—will follow a thoughtful leader who lays out effective policy.
After eight years of disaster and “village idiocy,” I believe that the American people will insist that the Congress and the new President defang the special interests, who have found homes in one or both political parties io the detriment of all but a few, and bust phony barriers inhibiting future national greatness.
It's there for Obama to do and his early incilinations seem right on point.
Legal Times and Fannie/Freddie Books
The Legal Times had an article/interview this week with Beth Wilkinson, former Fannie Mae General Counsel.
Ms. Wilkinson, who the article notes is married to David Gregory, the new host of Meet the Press, discussed her time at Fannie and the specifically the Treasury and Fed meeting when both Fannie and Freddie were told that they were going to be put into conservatorship.
People who had read me know that I believe that decision was based far more on ideological and political grounds than market facts. *See earlier reference to fed and receivership.) But, what was done was done.
I think it’s fair to say that Ms. Wilkinson and I share a belief that when Fannie was taken down, in what I call Paulson’s “Sunday Smashdown,” the company had sufficient capital and market access to survive. I asked then why the Fannie board didn’t fight against this Bush Administration-led effort. Something Ms. Wilkinson was inclined to do.
I still haven’t found an answer to that question.
Maybe the writers currently working on Fannie Mae books--four at last count--can decide what really went down and why.