Sunday, October 25, 2009

The “New” FM Watch is…The Old FM Watch; Welcome Back

I am going to play Paul Revere this week and call, “To arms, to arms, the ‘new FM Watch’ is coming.”

Yes, if you didn’t read about it last week, the old coalition--which very effectively helped the Bush Administration sink Fannie Mae and Freddie Mac--once again is registering to lobby against the current secondary mortgage market cripples.

The mystery is why this anti-housing gaggle—not exactly as how they would define themselves but accurate enough--has emerged now. There has to be some reason beyond the fact that FM Watch lobbyists want to send their grandkids to college on the old GSE issue, since they’ve already sent their children?

It's the Money!


The one thing about the “new,” which also applied to the “old,” is that this step is all about MONEY.

Either Fannie and Freddie, in their current nascent modes, still represent threats to the “new FM Watch’s” businesses or in the future, a revamped Fannie and Freddie holds the promise of keeping mortgage markets efficient and consumer costs down, two results which the FMWers would rather see not happen.

Those also are the two reasons why the Homebuilders and Realtors should always find themselves opposing the “new FM Watch.” Add to that, the former GSEs are the only TARP recipients which the Bush Administration managed to ban from lobbying and therefore they can’t protect themselves on the Hill. (When the Bushies decided to zip the GSEs lips last year, famed constitutionalist Dick Cheney was rumored to growl,”Screw their first amendment rights, but can I take them hunting, first?)

With their swords still beaten into plowshares and since few congressional campaigns will take farm equipment as contributions, do Fannie and Freddie represent any congressional threat to their old adversaries? I wish that were the case, but sadly the answer is “no.”

It can’t be the current revenue the former GSEs are taking out of the market. Neither company is pricing their goods and services for optimal business returns.
Although Freddie did report modest earnings last quarter, Fannie still hasn’t and there is that nagging 10% interest—due annually—on their near $100 Billion in Treasury indebtedness which both owe Uncle Sam.

Covering Their Own Weaknesses

Maybe the answer to why these “termites” have returned is that the best defense is a good offense, since the “new FM Watch” member organizations have done a lame job in supporting the mortgage market.

The old FM Watch had mortgage insurers, big banks and mortgage companies as members. I suspect the new group does, too, which means the new FM Watch hardly is going to qualify this year’s “Nobel Mortgage Prize for Market Integrity.” (I think President Obama has a leg on that, as well as the Heisman Trophy and Cy Young awards.)

Is it that Fannie’s and Freddie’s mere existence, even under conservatorship, is a threat to these paragons of finance? Hmmmmm??

The FMWers have reached the same conclusion I have. It is inevitable Congress will consider breathing new life into the old GSEs, because it is clear that the nation needs some dedicated mortgage investors to prime the pump. A partial return to that element of the past mortgage market operation could give the primary market lenders a jump start and revive a needed non-government segment of the mortgage world.

So, why now?

It must be that the structurally crippled former GSEs, being managed by the Treasury Department, scare the bad guys and they want to try and deep six them ASAP before Congress awakens to the fact that F&F could be part of the mortgage solution.

So, I'm left to conclude that the FM Watch spoilers hope to strangle, at the “bassinet stage,” any positives which could produce the “new Fannie and Freddie” (or whatever the Obama Administration and Congress chooses to call them, when the White House and Hill finally pay attention to the nation’s mortgage market.)

There was a time not too long ago, when Fannie and Freddie were like “swans.” Everybody loved them (FM Watch, aside). Everyone wanted to be seen with them, swim in their ponds, and be part of their success. Everyone wanted to be gifted with the swans’ beautiful feathers.

The former-GSEs no longer are swans. But, they might be in the ugly duckling stage and we all know what happens to some ugly ducklings.

Who Cares?

But does anybody, except the predators, care about these current ugly ducklings, since the new FMWers just want to step on them before they become swans, again, and kill the chance that official Washington will love the mortgage giants anew.

That strategy will require congressional enablers. Surely, the FMWers will skulk back to their old GOP congressional allies, like Dick Shelby, John Boehner, Michelle Bachman, Jed Hensarling and the like, not to mention the AEI and certain media.

This time they won’t have the support of a Bush Administration hosting them at the anti-Fannie/Freddie table. The “new FM Watch” should encounter some resistance from Barney Frank, Maxine Waters, Nancy Pelosi, Chris Dodd, Jack Reed, Chuck Schumer, and others.

Cold Shoulder Downtown

The Obama Administration will not be as accommodating as its predecessor in damning the former GSE leadership and business strategy, since today everything Fannie and Freddie do—as well as their senior management—carries the stamp of Tim Geithner’s Treasury Department.

Money is fungible, but it truly would be ironic if some TARP money—sitting in large bank balance sheets--has trickled into the new FM Watch coffers from their “new/old” members. I am sure the group’s lobbyists will answer those kinds of question once asked by the media or the Congress.

I’m glad the FMers are back, since it’s been too quiet on this front since they left and their activities should stimulate some in the real “housing coalition” to respond and demonstrate their understanding of the value of dedicated national mortgage investors.

God, it's almost enough to make me want to haul out my old combat uni, sharpen my katani, and oil my Glock.

Maloni, 10-26-2009

7 comments:

Gzonic said...

Bill,

It's beginning to look a lot like the good old days with anti-GSE stalwart Hank Greenberg hard at work constructing AIG Jr. with refugees from his former shop since the welfare checks don't cash no more.

Wouldn't surprise me none to hear old Hank resurrect the line about why Fan and Fred are such huge threats to the system.

This could be fun!

Bill Maloni said...

I meant it when I welcomed them back, since--professionally--they were worthy opponents and they won, at least they achieved their objectives and the old GSEs didn't. So, for many people around town, there's a "payback" motive and I think that number is greater than the FM Watch guys know.

In the intervening months, since their last lobying interation, I suspect their members have built an even uglier profile re what's good and proper in the mortgage industry as opposed to what is selfish and self serving.

The Obama Admin, whose creatures are the subject of FM watch's new attacks, D's on the Hill, or other housing advocates have to rally the opposition to the FMWers.

Maybe all of those "preferred holders" out there--who think they are in the catbird's seat--might realize that their potential gold mines are subject to Washington's political whims, like eveything else about the former GSEs.

At one point, before Hank Paulson pulled the rug from under them, there were a ton of banks who were encouraged to buy the GSEs preferred stock and then the valuations wiped out by Paulson and friends (wth FM Watch cheering them on).

Wouldn't some of that capital look good now on those banks books, not just for the financial institutions, but for the small business and mortgage loans, those billions could leverage. That would help the Obama Administration and the national economy.

Anonymous said...

FM Watch's best offensive IS offensive. Their vision is an industry captive GSE

Bill Maloni said...

I don't know what all of their fears are and--as more than one person pointed out to me--the Glass-Steagall wars put money in lobbyists pockets for years and years. Maybe this is just an effort to do that.

Of course if I was an MI, I'd worry that my products might not be needed in a "new" Fannie/Freddie mortgage world.

There is nothing written in stone which says if the two companies ever got resurrected, they would have to operate in the same way. In fact, their new managements might just look for ways to payback some of their old foes, while enhancing the mortgage transaction for consumers.

The former GSEs' "deal" with the Paulson Treasury already has then downsizing their mortgage portfolios over the years and that will create operational changes.

I suspect that the new/old FMW lobbyists will be busy pumping out lots of spin about Fannie/Freddie activities and what the Obama Admin and the Congress "might" propose for them.

Anonymous said...

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