Tuesday, December 28, 2010

Some Observations in the Week between Christmas and New Year’s


The White House and the Congress have done the hard part, which is getting majorities in both chambers to pass “Don’t Ask Don’t Tell.” Now they should undertake something easy, inviting all of those former service men and women--who were booted from the military services, when they disclosed their sexual orientation—to rejoin the Armed Services and bring their skills back into the fold.

I have no idea how many individuals are involved, who they are or where they served, but I remember hearing how enforcing DADT—and discharging gay men and women--cost the military lots of their interpreters including their Middle Eastern language specialists.

That’s a good place to start fixing skill gaps with a retroactive “DADT” amnesty approach.

If that is/was the situation, let’s get that talent back, since the obstacle to those men and women serving now has been removed by an act of Congress.

“The Dream”

In killing “The Dream Program,” in the Senate, how does the GOP hope to erase its consistent sorry record on Hispanic priorities? (To be fair, a Democrat handful voted “no,” making it easier for the Republicans to scuttle the plan.)

The GOP can cheer the latest census numbers but Hispanics are the fastest growing ethnic group in the nation and the Republicans keep dissing them and politically handing them to the Democratic Party on a platter. Those new “Texas congressional seats” might produce new Democratic congressmen rather than GOP.

I wonder how all of those GOP business groups—who manage to hire so many immigrants—would be supportive if the GOP seriously advanced some of the more outrageous anti-immigrant proposals, especially of the Tea Party variety. Lots of American businesses thrive on that source of high quality but low cost labor.

The “Dream Act,” which would permit children of “illegals” to automatically qualify for citizenship if they have managed to get into college and meet other minimal age and character criteria.

President Obama vows to bring it up, again, in the 112th Congress and he should.

Good Duck

As a citizen, I would love to see the sprit and record of the “Lame Duck” congressional session move forward, where the Congress did so much in so little time and with obvious political concession on both sides producing that success. I just can’t believe that the ascending GOP will want to give President Obama too many opportunities to look successful and statesmanlike.

They want to tarnish him so that he loses interest in seeking a re-election or marches on as a much weakened candidate. As I’ve written, the Republicans are going to have to accommodate, if not overcome, the very conservative slug of new Senators and Members who won in November’s elections.

We’ll quickly see if that group is a “fresh breath” voting on spending and budget issues as they campaigned or just more warmed over “same-o, same-o.”

Cut the Money, Kill the Regs

The Republican plan to attack, in 2011, legislation they failed to stop in 2010, by trying to deny appropriations and stymie the necessary regulations need to go with the new laws, is an understandable strategy, but could be short sighted.

While they may be targeting lots of different issues, the GOP announced that definitely they are going after the new independent Consumer Office set up in the Fed and regulations association with the new healthcare law.

Once again, the beneficiaries of the proposed Republican attacks are the big financial institutions and the big insurance companies. Surprise, surprise!

I am sure the GOP will wrap their assaults in rhetoric chastising big government and claiming they are helping the American people. But a good slug of the American public will get medical insurance when none existed before and potentially have their health care costs drop. There also is a good chance that the vipers on Wall Street and the banks on Main Street could see some of their predatory actions blunted by the Consumer Affairs office initiatives.

Maybe the “public” will wake up before November 2012, to who seems to benefit most from the GOP’s actions.

Good Drones

I don’t know about others, but I wouldn’t care how POd Pakistan’s North Waziristan gets over CIA drone weapon attacks. Those targeted missiles seem to be a very effective against Taliban Terrorists. The fact that they complain about the bombing campaign shows me it’s having the desired effect.

Bad News for Fannie Bashers

I just had an opportunity to review some Fannie Mae (and Freddie Mac) lending data, from public sources (most importantly a recent St Louis Fed study), which details the types of loans that were in their portfolios in the period that the GOP and others excoriated them for being loading up with anti-consumer subprime mortgages.

The facts are that neither company had large holdings of the 2-28 and 3-27 “killer mortgages,” or Hybrid Adjustable Rate Mortgages (ironically nicknamed “HARMS”), which had very small initial interest rates but leaped to market rates in 2 or 3 years, depending on the version the borrower chose (or talked into).

The new loans with much higher interest rates led to record numbers of defaults and foreclosures.

These crippling mortgage loans were originated in the hundreds of thousands by Wall Street and others. Fannie and Freddie didn’t buy or securitize many of them. The former GSEs “crimes” were buying other Wall Street subprime securities.

Speaking of Fannie and Freddie, “All the Devils Are Here,” the Bethany McLean and Joe Nocera book about the financial meltdown—which spends pages showing why Fannie and Freddie hardly were in the forefront of originating subprime loans—has jumped to #2 on the New York Times “Business Best Sellers” list.

I’ll have more to say on the St. Louis Fed study in coming weeks.

Maloni, 12-28-10

Sunday, December 19, 2010

Poutrage, The GOP and Fannie & Freddie, Redux


The New York Times on Sunday produced a list of new words and phrases coined intentionally or unintentionally by Americans in 2010.

One was “poutrage,” which the paper defined phony outrage usually offered up for personal, political, or financial, gain.

I was taught “use a new word three times and it’s yours.”

Did you see all of the GOP “poutrage” when the Senate voted to extend the Bush tax cuts to all tax payers, including the nation’s wealthiest, which was a non-negotiable demand by Republicans.

The “poutrage” was accompanied by more spinning than a top about why it was a bad bill for budget and other reasons (never mind the GOP leadership fashioned it), and you wondered why—if it was so-bad—the R’s would put it over the top with their votes? (Hint, hint, because it, unlike earlier bills, included tax cuts for the rich guys, their core constituency.)

Ludicrous “poutrage” seems to find a ready home in conservative circles.
It’s mine!!

Yay President Obama

And while I am at it, kudos to President Obama for winning this vote and a second one with the Senate repeal of “Don’t Ask Don’t Tell.”
Will Obama enter 2011 poised to discover his “inner lion” and lead the nation and the next Congress onto serious bipartisan policy successes which the American people seek?

Not bad for a kid born in Peru! Opps, I mean……

And So It Begins…Again.

The GOP dials Fannie and Freddie into its crosshairs, and then…”fire, ready, aim!”

This time the four Republican members of the President’s Financial Crisis Inquiry Commission (FIRC) seeking answers to the 2008 financial collapse, decide to front run the group’s planned report, issue their own and—surprise, surprise—blame Fannie and Freddie--and, naturally, the government's support of low income housing—for all of our financial woes and the 2008 meltdown.

This behavior, reflective of previous Republican rushes to judgment, is easy for folks who don’t bother with facts, but crave the sound bite. “Fannie and Freddie” sounds so “inside the Beltway” kinky and nobody knows what they do or did—other than something “bad”—so the Grand Old Party can beat the hell out of them and expect to get away with it.

Why not, the conservative Right has been doing it for years?


The party of phony “death squads,” weapons of mass destruction” in Iraq, the imperative to give “tax relief to the rich,” which labels healthcare for those who can't afford it "socialism and un-American," and the believes that bank regulators should be industry cheerleaders not scrutinous, now hopes the public will buy the fantasy that federal affordable housing programs (with the implicit racist suggestion that poor black people should not have help to finance mortgages) caused all of the financial failures and losses of the past three years.

The R’s report’s own words takes a great flight of fancy and fantasy because it nowhere mentions “Wall Street,” “derivative securities,” or financial executive compensation.

These truth-slayers expect the American people to believe that government’s affordable mortgage efforts --and especially low income families securing homeownership needs--was what caused Wall Street to go medieval-crazy and rape and pillage not only the American financial system but those of every other major country in the world.

Puh-leze, Speaker Boehner, Chairman Bachus, and Senator Shelby keep hewing to that hoary line.

I can’t do much but point out your village skewed financial perspective, but maybe some of those Democrats in DC and elsewhere will see the calumny of your position and make you pay politically for this kind of narrow minded scapegoating and whoring

How can anyone seeking to explain what happened to the American people, look at the past several years and refuse to mention Wall Street or derivatives? Did the millions in Street political contributions flowing into Republican coffers last month purchase your honestly and blind the GOP to objectivity and reality? If so, how cheaply you sell out, although I assume that last election’s spending just was a political down payment on 2012.

I’ll repeat it, how can anyone seeking to explain what happened in this nation, not even mention Wall Street and derivatives.

Who is behind this bit of chicanery?

The FIRC Four

Lets see, the four R’s on the Angelides commission include two long time GSE haters, Peter Wallison and Keith Hennessey, two GOP operatives who have spent years inside and outside of Republican administrations trying to “get” Fannie and Freddie. The other two are former GOP congressman Bill Thomas and Doug Holtz-Eakin, former head of the Congressional Budget Office (CBO), when the R’s were in power and who presided over several anti-GSE CBO reports.

Why did they release now their observations, report, views or whatever they call them?

Simple, the FIRC’s final report wasn’t going to pin all of the blame on the former GSEs and the Republican members figured they better get out with their same old story and try to prep the terrain. The dozens of stories that will put F&F in a bad light will dig the whole deeper regarding the truth and might cause the other Commission members to fight other issues rather than the GOP distortions of the Fannie/Freddie history.

Having been abused by their former colleagues, the Commission’s majority just might try and set the record straight regarding how F&F fit into the picture in the years leading up to 2008 and afterwards.

The seeds of the 2008 debacle were sown starting about 6 or seven years ago and reached a crescendo in 2007 when Wall Street firms led by large banks, investment banks, and rating agencies---whose unparalleled greed, in creating, packaging and selling high risk and poorly underwritten subprime mortgage loans”---was the single greatest source of blame in the downward financial spiral which attacked financial institutions all over the world.

Psst. PLS Came From New York!

Fannie and Freddie neither created, guaranteed, distributed nor sold “Private Label Subprime” mortgage securities, but did buy them for their portfolios, succumbing to the same damning fate as dozens of other financial institutions in the United States and other countries.

Let me leave right there, except to say that Democrats are going to have their hands full, unless they do a Pontius Pilot, and ignore the GOP perfidy when it comes time to legislate a new national mortgage finance system,

They may not want to say nice things about Fannie and Freddie, but they can and should rebut—with the ton of available facts—how wrong the GOP view, as reflected in this FIRC “minority” report. (See the debate over just what the sponsors call this document.)

If people want to get an objective and less politically biased view of what started the market’s 2008 disassembly, I recommend the following articles, documents, and one book, which should help those seeking to understand what truly caused the downfall, contrary to what the FIRC Republicans (who deserve to be called the “FIRC Four”) wrote.

Some FIRC FOUR Rebuttals

Let’s start with the book, “All the Devils Are Here,” by Bethany McLean and Joe Nocera. The pair follows their “Enron” book with a solidly researched explanation of what caused the 2008 breakdown and the history leading to it.

Fannie and Freddie hardly escape responsibility in the McLean-Nocera tome, but the authors make crystal clear—in the current best seller and independent article each wrote this week (see list)-- that neither Fannie nor Freddie created subprime financing, was in that segment of the mortgage business when it got started, nor sold the poisonous and failed securities throughout the world.

Shhhhh! All of that belongs to the Street, “which shall go unnamed.”

The next item is the wonderful Harvard student paper written Anna Katherine Barnett-Hart more than a year ago, a young women who later went onto to work on Wall Street, but objectively penned a stunningly accurate paper—as time has shown--for her Harvard honors Economics course.

In sharing her opinion of what happened, the reader won’t find one single reference to Fannie Mae or Freddie Mac.



mortgage-meltdown.html?s_cid=rss:scott-galupo:government-not-solely-to-blame-for-subprime-mortgage mortgage-meltdown





These won’t shut down the GOP’s anti-GSE distortion machine, but should give people looking for fair analysis an option to the the Republican bull pucky.


Happy holidays and Merry Christmas to all of my friends, family, and readers. Here’s wishing you a healthy and happy New Year. Yes, even some of you GOP rascals!

Maloni, 12-20-10

Sunday, December 12, 2010

Tax Deals and Oinks!

The Obama GOP Tax Deal

I am disappointed, but will withhold my final opinion of the President Obama’s willingness to extend all the Bush tax cuts, which at least he packaged with additional unemployment compensation for the jobless.

Barack Obama might be a seer, but he easily could be a GOP foil who was snookered.

No, it doesn’t make sense during a recession with high unemployment to take money out of the middle class’s hands, but the highest earning US tax payers don’t need greater tax benefits.

Therefore, the key for me in evaluating how good this deal is for the nation won’t come until next year, when we see—in return for the President’s tax package endorsement-- how much the GOP works with the Democrats in 2011 on deficit reduction involving historic GOP sacred cows, i.e. agriculture subsidies, business tax breaks, Pentagon weapons systems, etc. etc.

I am politically uncomfortable with how quiet the GOP has been since President Obama announced his acquiescence to the extension package, which White House and some D’s call an “economic simulative.”

But, anyone who ever has negotiated, played cards or figured out the answer to a difficult puzzle--before anyone else--knows how much you want to announce your good fortune on your own terms.

I think the GOP has been flabbergasted how easy and how much they came away with in its negotiations with the White House: a two year across the board delay in tax cuts; a large estate tax “safe harbor” and a reduction in the estate tax rate; and other enhancements to business tax breaks.

If the R’s said anything now, it would sound like a victor’s chortle. That’s the stuff NFL referees call “excess celebration” and throw a yellow flag.

A round of GOP high fives also will encourage opposing Democrats to dig in their heels and stop final action, which still is needed before the end of 2010.

But for now, despite the Administration rhetoric, President Obama continues to look directionless and in need of a backbone, which is not what most of us who campaigned and voted for him in 2008 thought would be the issue two years after he was elected.

What’s Up with Wells??

“Oink, oink,” said the big bank, “Oink, oink.”

In public comments on proposed federal regulations, Wells Fargo Bank is out to get rid of consumer loving low down payment loans (and the MI industry which exists to support those small money down arrangements) and—separately--suggest that Uncle Sam create a new secondary mortgage market structure which would—despite all the banking industry’s talk about returning “private capital to the mortgage market”—still has the federal government on the hook for risky mortgage finance, which I assume the big banks will provide.

“Oink, oink,” said the bank……

Wells has taken an extreme position on what it believes is a lower risk “qualified residential mortgage” (QRM). Federal regulators need to define this term in the context of what constitutes riskier mortgage loans, as per this year’s Dodd/Frank bill.

The idea is the riskier the loan the more capital needed or more of the loan itself, lenders would have to keep on their books. The still-to-be-defined criteria will constitute the elusive “skin in the game” element regulators believe lenders must have to make them safer and more responsible.

The industry agrees on the general point, but Wells is freelancing away from the herd and hoping that a “QRM” should have at least a hefty 30% of the sales price as a down payment.

Many smaller lenders believe—if Wells convinces the Administration on this large a down payment--middle income borrowers and their mortgages will be left behind, while Wells and other lending behemoths skate on capital and risk because they made “jumbo” loans to people who usually can and do put down more than 30%.

It also hasn’t escaped most of the smaller lenders—which compete against Wells-- that those higher down payments are not uncommon on large “jumbo loans” where borrowers generally move out of expensive houses into more expensive houses, thereby making it much easier to come up with a major down payment lowering the effective loan to value ratio (LTV) of the mortgage and—in Wells view—making additional (and costly) bank insurance/protection unnecessary.

“Oink, oink, oink……!”

Wells, Again

Several weeks ago, Wells Fargo also weighed in on what the successor national mortgage finance system should look like, if Congress decides to limit, diminish, or totally disassemble Fannie and Freddie.

It was Wells idea, which they then submitted to the Obama folks, but it also was advocated by the Financial Services Roundtable and its Vice Chairman John Dalton.

I critiqued the Dalton (and Wells position) in October, noting that their scheme still relies on “federal reinsurance,” which means Uncle Sam still is on the financial hook, no matter how much the banks claim their plan will attract “private capital” (which banks' FDIC deposits is not!).

The proposal also may be redundant, because it looks mirrors powers banks have now to issue “private label mortgage backed securities,” which—in my October review--I reminded all was the major element in the 2008 financial meltdown.

Another day, another oink at the trough!

FHA Versus FHFA (Fannie and Freddie)

News broke this week of an internecine struggle between Fannie’s regulator, the Federal Housing Finance Agency (FHFA), and HUD’s Federal Housing Administration (FHA).

The dispute is over whether Fannie and Freddie should join in the FHA’s new underwater mortgage restructuring program, which would rewrite “performing” conventional F&F loans—coming from F&F--where the principal is higher than the home’s value but the mortgagor is paying their note. These formally non-government insured mortgages would then be turned into new government insured FHA mortgages with lower interest rates and principal amounts.

Normally that would make sense and show inter-government cooperation but—like it or not—the federal government is running the former GSEs in a “conservatorship” mode, which means nobody should knowingly leap into an arrangement guaranteed to produce losses on restructured conventional mortgages, meaning more guaranteed red ink for Fannie and Freddie.

The losses can’t be hidden, the ‘hot potato” has to rest somewhere.

That is not “conserving” corporate assets and likely would open the companies’ conservator to legal actions from somebody, if not the existing common and preferred shareholders.

The FHA push, which must be coming with the blessing of the Treasury shows that a near term positive for mortgagors could hold long term financial damage for the former GSEs, with Uncle picking up that tab. I hope soon to be Senate-approved FHFA Director Smith realizes that conserving Fannie and Freddie assets is one of his core objectives.
The frustrating thing here is that I believe that F&F can do a much better job than others in the general restructuring of underwater loans, but to help the FHA they would be sacrificing themselves.

(Also, see Gretchen Morgenson’s Fannie-Freddie column in yesterday’s NYT Business section.)

GSE Cutbacks

BTW, the rumor of thousands of jobs leaving the former GSEs is more about how contract employees have been classified as “Full Time Equivalents (FTEs).” So, when it is reported that Fannie and Freddie will shed thousands of positions, that news gets means losing lots of recently added “contract” FTEs.

It may be a distinction without a difference, but both companies, after 2008—especially Fannie—ballooned their ranks with contract employees and most of the early 2011 departures will be these superfluous jobs. But, they won’t be the last, as both managements try and save major overhead costs.

Sr Championship Post Script to Last Week

Here is why we are lucky that FIFA chose Qatar and the Russians to host the next two world cup soccer championships.


Too Delicious to Ignore

"But obviously, we've got to stand with our North Korean allies." --Sarah Palin, after being asked how she would handle the current hostilities between the two Koreas, interview on Glenn Beck's radio show, Nov. 24, 2010.

Maloni, 12-13-10

Sunday, December 5, 2010

It’s Beginning to Look a Lot Like Christmas

If I was President Obama……

I’d be far more interested in taking the recommendations of the Bowles-Simpson Deficit Commission—which did a good job of bursting economic balloons on both ideological camps—fashioning them into a comprehensive deficit reduction plan and using the next year and a half to push and fight for it in toto or in pieces (and maybe saving his own candidacy in 2012) then fretting about losing the hosting of a soccer tournament!

BFD. If a sports tournament is played elsewhere in the world. Does the aggravation, security and cost of hosting all of those countries, their teams and fans equal whatever goodwill or praise the tourney generates?

I say “no.”

How many Americans really care whether the Internationale de Football Association (FIFA) recently voted to send the next two soccer world championship to hosts Qatar and Russia?

Hasn’t the President learned not to get involved in these matters since his maiden effort on trying to get the next Olympics sent to Chicago? George Bush ticked off the world with his tin ear and hardheadedness and now Obama reaps his share because his political influence is waning. Stay away Mr. President, your help doesn’t help!

Most of the FIFA voting countries and their citizens will run to the US for assistance when their chestnuts really fall into the fire and in the coming era of strained budgets and curtailed government spending we’ve likely saved ourselves from all of that phony hype and soccer “hooliganism.”

We should thank FIFA!!

Alan Simpson

Speaking of the deficit Commission’s recommendations. Its co-chairman, former Wyoming GOP Senator Alan Simpson, is one of the most cynical and funniest men you’ll ever meet or hear. He has a favorite story, which he’s probably told a thousand times but which still makes his audiences laugh.

It seems that an old Wyoming rancher had married a very comely young wife. One morning, at about 3 AM,the farmer answers his phone, listens, and then screams into it,
“How in the hell should I know. That’s a thousand miles away!”

His bride asks him who was calling and the farmer said, “I don’t know, some &^%$# guy asking me if the coast was clear.”

It Might Happen, but I Am Not Holding My Breath

Back to deficit cutting and our President. I desperately want President Obama to be less laid back, tougher and more inspiring. Yes the November elections were a setback, but not one without political precedent and not one that a strong leader can’t overcome (see Bill Clinton).

I can only speculate at how a Lyndon Johnson or a Ronald Reagan would have responded to this red ink era. Johnson, personally, and Reagan through surrogates behind the scenes but upfront nationally in the media, would have tried to forge a political coalition to achieve as many of the deficit cutting proposals they could, while ostracizing their opponents, political party friend or foe.

Put in a political context, I believe they would have seized on the deficit and the public’s unhappiness to force policy changes and establish a stronger foundation for jobs growth. (For Obama that might mean screwing the trial lawyers, labor unions, and some senior citizen advocates, but so what?)

His own tax and spending priorities would get a far better reception, if he shows that he can kill some Democrat sacred cows as he prioritizes.

That’s what a leader does and that—to me—is Obama’s key to winning in 2012, unless he opts to not run for reelection (which wouldn’t surprise me).

Playing patty cake or political volleyball with the Republicans is not where victory will be for this man. He needs to discover or rediscover his “inner Lion” and ROAR on behalf of those he wants to lead.

I believe there will be an end of the congressional session deal to extend the Bush tax cuts. I hope President Obama gets something in return from the GOP for his support.

“North Korea is Too ‘Nuclear’ to Fail!”

Harrowing thought, but that whacko country--led by a very reclusive and bizarre man, Kim Jong-il, who seems intent to hold onto power through his son, even after the father croaks--likely has nuclear weapons, the means to deliver them widely, and a neurotic willingness to unleash them if pushed one inch the wrong way.

Kim,no matter how provocative his country’s actions, never seems to incur the wrath of China, the only nation which might influence him.

While the Chinese may dislike Kim and his tantrums, they certainly don’t want a democratic and western- leaning South Korea running the North, if a reunification ever occurs. But, the Chinese government seems reluctant to exercise any restraint on its neighbor client.

The North which starves and denies its own citizenry basic freedoms seem to have little concern for its populace save keeping it controlled.

The United States speaks loud and seems to carry a tiny stick, while South Korea only speaks loud but waivers because its modern society has too much to lose in a shooting war with the backward North.

Options are few when dealing with aberrant nations.

Here’s one thought. The next time North Korea kills a southern soldier or civilian in an obvious act of war, the US should drop enough nukes on the North to break Kim’s—or his son’s--control and then let nature take it’s course when the northern and southern Korean population mingling. Some of the North’s citizens will try and flee to China and we then should let the Chinese worry about them, reflecting the nation’s early indifference to the monster is harbored.

That should take care of the United States’ “North Korea” problems for a generation or more and also send a strong signal to other bellicose nations (see “Iran”), that even President Obama has a tipping point. It probably gets Barack re-elected in 2012, too.

“So That’s Where the Money Went,” Gretchen Morgenson

One of my favorite financial columnists is the New York Times' Gretchen Morgenson, who does a fine job of getting to the heart of most issues and pointing out fascinating and often embarrassing things about her topics.

She didn’t disappoint in her Sunday column’s discussion of a slightly tardy Fed report--issued last week--detailing which firms, foreign and domestic, got most of the money distributed by the Fed when it was bailing out the US’s financial services markets in 2008-2009.

Naturally, Morgenson suggests that the very large financial conglomerates, commercial bank/investment banks, took down most of the funds and returned the least for the Fed’s help.

Here is an excerpt from her commentary and a link to her Times column.

Better late with the data than never, of course. And the release of these figures just ahead of Friday’s grim employment data — the jobless rate rose to 9.8 percent in November — makes them even more compelling. Clearly, the federal government was much more willing to deliver mountains of money to big banks that made big mistakes than it was to lend a financial hand to rank-and-file Americans struggling through foreclosures.

Federal officials have always argued that plowing money into errant banks and trading shops was the best way to rescue the economy, but to Edward J. Kane, professor of economics at Boston College, details of the Fed’s largess are reminiscent of a famous Winston Churchill quotation.

“Never have so few owed so much to so many, and given them so small a return,” Mr. Kane said. “We see, for example, how little these institutions have given back to troubled homeowners whose houses are threatened with foreclosure.”

Mr. Kane’s point is important. Certainly, the low interest rates the Fed charged to institutional borrowers during the disaster translate into a significant subsidy, indeed a gift, to many of the firms that set the financial collapse in motion.


Maloni, 12-6-10

Monday, November 29, 2010

Cats and Dogs

Post Thanksgiving Humor

I am sure that the link below has been pounded by all of those offended and even those not offended by the Transportation Safety Administration’s new “hands on policy.” Enjoy the laughs.


As funny as the slogans above are, if you’re into financial services issues, you shook laugh until you cry listening to the description of the Fed’s latest “Qualitative Easing 2.”

“Benanke,” indeed!


Ed Yingling

My favorite banker, Ed Yingling, is retiring as head of the American Bankers Association and reportedly joining a DC law firm (possibly one in which Ed’s late father, Jack, was once a principal).

Ed’s successor is going to be former Oklahoma Governor Frank Keating, who once was in HUD’s’ general counsel’s office, when Jack Kemp was Ronald Reagan’s Secretary.

The ABA‘s selection committee must not have realized that “Governor” Frank Keating cooperated with Fannie when we opened an Oklahoma “Partnership Office” (PO) and was one of the easiest governors with whom to work on housing matters. In reality, the list of Republican elected officials who at any time supported Fannie actually is quite long. (Don’t worry guys I won’t mention any names. Haff, kaff, harrumph, “John Boehner.” Oh crap, excuse me.)

I first met Ed Yingling when he was a young man working with his renowned lobbyist father, Jack Yingling, principal in the law firm Yingling and Shay, later Barnett, Yingling and Shay. Jack (and Ed) represented City Bank (nee Citicorp), among others.

At one time, before matrimony and fatherhood snatched away the handsome younger Yingling, Ed was a regular player in our infamous “poker game," which now has run for more than 40 years with a constantly changing cast of “characters,” with emphasis on the latter. (Suffice to say, it is a far more innocent gathering than rumor has it.)

While I’ve disagreed with bankers and with the ABA, I always liked and respected Ed. In his ABA time, while I was at Fannie, we worked on any number efforts to get Fannie officials and ABA leaders together and build understanding and mutual support.

I wish him all of the best and the same to Frank Keating, who is fortunate to have the very talented Dianne Casey on his association team.

Good Fors…

Good for Jennifer Grey and her dance partner
. The Palin kid never was that good. While I begrudge her no spotlight, ABC would have looked idiotic if the worst dancer took home the prize not because of her dancing skills but because of her last name. Suggesting her own victory would represent a “giant middle finger:” to the people in America who “hate her and her mother” Bristol reflected just the appropriate immaturity of someone her age.

Good for the San Francisco City Council
overriding the Mayor’s veto and insisting that fast food meals for kids had to pass minimal nutrition tests. We are a fat nation and unhealthy. Our kids will get after unless some tough things—like this and many others-- are done.

Good for the Pope
. I’ve dumped on the Vatican enough to recognize that “Yay Pope” is appropriate when he appears to endorse condom use if one of the partners has an active HIV condition.

Good for Rep. Spencer Bachus (R-Ala.), who reports to friends that the House GOP Caucus will name him Chairman of House Financial Services, despite all of the GOP unhappiness with him when he was ranking member. All of there Lilliputians, seeking to chop Bachus off at the ankles have gone onto other things. (Keep walking Michele Bachman (R-Minn)!)

I’ve suggested that Bachus will rule over a restive Financial Services Committee with his party dying to tear apart Fannie and Freddie, but not being able to do so until they have a viable alternative in place and “therein lies the rub!”

Good for GOP Senators Jim DeMint (R-SC) and Tom Coburn (R-Okla.), who are trying to organize their Republican brethren to vote against the $5 Billion ethanol subsidies. Lead gentlemen and they (the GOP Senators and enough D’s) might follow!

Bad Fors…Tom Delay and Charlie Rangel

This next one is going to cost me and I don’t know how to construct it into a “good for.” I don’t share the animus or anger at former Representative Tom Delay (R-Tex) that many of my Democratic friends do. I worked with him, when he was the Minority Whip, because he was willing to support Fannie Mae. I also respected the effort he put into helping abused kids and families.

His political abuses were the equal of what I had come to expect in Washington and similar to what I saw on both sides of the aisle. Yes, he should be punished for the crimes which the Texas jury convicted him, but I hope an extreme prison sentence is unnecessary, as some have demanded.

I also hope that Charlie Rangel (D-NY) does not stain his career standing in the well of the House and being officially reprimanded. Reportedly, he wants to serve in the 112th Congress, but I hope—after proving that his Harlem constituents still support and respect him--he retires before then.

Maloni, 11-29-10

Sunday, November 21, 2010

My First Political Fantasy re 2011

I confess I’ve always been a dreamer, so let’s dream share.

No this isn’t the one where I lead the Pittsburgh Steelers to the end zone in the last minute of play--to a win seventh Super Bowl--when a 300 pound frog, complete with “real” pictures of the “Maestro” in action, enters my huddle and begins pitching lurid tales of Alan Greenspan and Ayn Rand.

Our dream may not be that realistic ("go AG"), but it will be hopeful.

It starts when the political Left stops decrying the flood of new conservative Senators and Representatives to the GOP, worries about the House Democrats homogenization into a more “progressive/liberal” group (because of the losses of the Blue Dog Democrats and others), and shakes its collective head and sighs at the Obama White House’s continued bewilderment and failure to settle on a message let alone policy.

In this whimsy, we hope against hope and eschew the predictions of “two years of partisan gridlock”-- although there are understandable and substantive reasons for those predictions--and instead look at the Nov. 2 congressional election results as a clear message from an unhappy American public that it truly wants “change” (which it thought it was getting with the Obama election in 2008) and is tired of Washington’s posturing, finger pointing, and business as usual.

America uses the new Tea Party pols, in the fantasy, to send a missive to both parties, “Produce for us or lose your jobs.”

Rand Paul

My flight of imagination started gelling when I heard and agreed with something said by newly elected Senator Rand Paul (R-Ky.), who was endorsing federal spending cuts and what that could mean.

Paul said (paraphrasing), “There aren’t enough ‘welfare expenditures’ in the federal budget to cut and balance it, even if you did away with every penny. No, we are going to have to go after lots of other things, including military spending and…..”

Anyone worth their partisan salt knows that neither party has draped itself in glory for the past 10 years, Both D’s and R’s, House and Senate, and the Bush and Obama administrations share in our national budget mess and upside down priorities.

After listening to Paul, I began to wonder if this influx of conservatives—which many of us have derided because of some of the extremists and extremes among that group—could force a major bipartisan reevaluation of government spending and priorities. Would that all be negative?

For instance, could the new Right—intent on deficit reduction--challenge the political underpinning of the two wars we are fighting in Afghanistan and Iraq, because they want to save some of the hundreds of billions of dollars we are spending there and elsewhere militarily and bring our soldiers home?

That fresh thinking--and resulting cost savings--would be a financial and progressive windfall and all because a bunch of right wingers believe Washington finally has spent too many taxpayer dollars unwisely and that the practice needs to end (an opinion easily reached but not grasped by any previous congressional majority going back a decade).

Goodbye UN?

As part of a quid pro quo, could the GOP Tea Partiers force previously “unthinkable” policy changes like having the United States drop out of the United Nations or at least force the UN to relocate its headquarters elsewhere? We could plant the UN’s “blue and white” center of operations in Haiti, Kosovo, Myanmar, Sri Lanka, Kabul, Baghdad, or…..

Just like B'rer Rabbit, when confronted with B’rer Bear’s briar patch recommendation, I thought, “Twist my arm, twist my arm…..where do I sign to expel the UN from our shores?”

Why are we paying the UN hundreds of millions and hosting a bunch of angry foreigners who seem to hate us and delight in pulling Uncle Sam's beard, except when they need help money or medical and food supplies?

Let them headquarter in France, England or Russia. (If tossed from the US, does anyone think the entire UN membership would refuse to talk to one of—if not the—richest and still most militarily powerful count
ries in the world?)

Most of the Tea Party and its sympathizers are Republicans, but I’ve heard enough TP unhappiness with the stodgy GOP to suggest that Republican graybeards can’t take these newbies for granted. I think the new House leadership will have to earn their trust and “walk the walk,” not just spew forth the TP rhetoric.

In my dream--potentially “our” dream--the 112th Congress goes after some political untouchables, like agriculture subsidies, social security and Medicare, legalizing marijuana (saving billions in wasted law enforcement and imprisonment), and wasteful and unnecessary Pentagon spending, just to name a few?

As cynical and hard nosed as I have become, I will give these folks a chance to force some major, highly necessary and desirable changes in how this nation does business, including how it treats “big business.”

Corporate America puts their money where it will do it the most good and always has and always will.

Historically mostly that has meant contributions to the GOP, but with the Obama presidential campaign, a brief shift started and ended abruptly during the past election, when seemingly zillions publicly and secretly—thanks to the Supreme Court—funneled into GOP campaign coffers.

Tax Code Ripe for Pruning?

Repaying big business and other special interests, both parties have overloaded and made more confounding our tax codes. Why not get rid of some of these much valued tax exemptions--most of which represent just past favors handed out to favored industries or interest groups, forgotten and seldom reviewed--in exchange for overall reduction in tax rates for individuals, families, and corporations?

Just because some of these tax bennies have been in our federal tax code for years doesn’t mean they still are justified. (Before my tax lobbyist friends go bananas, cleaning up the code would allow you to bill clients for years to re-insert those goodies. You can work until you are 90, if you desire!!)

The public should think of those tax breaks as the equivalent of annual “earmarks” (special protected congressional spending for favored constituents or groups, which House and Senate Republicans just said they would oppose), but which annually drain Treasury billions.

Not all of those tax fixes are bad,but if rates were cut and the code simplified, the nation could get by, quite easily, without a majority of them. Nobody until now, possibly, has had the incentive to sit down and voice major support to jettison those tax provisions which may no longer truly necessary or politically favored.

Could the newest congressional class, sworn in next January, force both parties to do just that, along with some of the other spending cuts/savings they’ve endorsed specifically or generically?

The President’s “bipartisan” Deficit Commission, headed by Erskine Bowles and Alan Simpson, gives a handy starting blueprint and savings list. Most of the Commission's yet unapproved findings have been leaked to the press, so the choices are out there for public consumption and the fresh advocacy.

Maybe its just the warm feelings of good dreams, but one result of Nov. 2 could be the best chance we’ve had in years to undertake some major budget cutting, with the TP-ers holding the GOP’s feet to the fire while the Democrats—especially those D Senators up for re-election in 2012-- begin to realize that promising everything to everyone is not the recipe for fiscal sanity or even political success.

If John Boehner pulls off reform in some of the above, even I’ll find a way to say nice things about him!

On a personal note, as the holiday season kicks off this week, I want to extend a healthy and happy Thanksgiving to you and yours from me and mine.

And, please try to contribute your time or money to groups helping people who have so little.


Fannie’s all hands meeting last week--timing sucks!--produced major budget and staff cutback bad news, possibly as much 40% to 50% (people and spending) beginning in 2011, along with concomitant cutbacks in outside expenditures.

Irony: After more than 20 years of sponsoring and leading annual “Help the Homeless” campaigns in the DC area, raising millions of dollars, if there is one next year some aid recipients could be recently dumped Fannie Mae workers.

Maloni, 11-21-10

Tuesday, November 16, 2010

Joe Smith

Many of the peripheral Mormon interests at Freddie Mac (yes, they once “ran the place”) thought that President Obama had answered their dreams (or fantasies) when he named “Joseph Smith” to be the new head of the Federal Housing Finance Agency (FHFA), Fannie’s and Freddie’s regulator.

Unfortunately for them, it is not “that” Joseph Smith of Latter Day Saints fame, just a plain old regular Joe Smith who has been North Carolina’s state banking commissioner.

I haven’t found a lot of people who know this Mr. Smith—and I certainly don’t personally—but one source said that he was a “consumer advocate,” which would be great assuming the Obama Administration lets him participate in Fannie and Freddie serious policy, at least until the 112th Congress chooses to put them in a shredder or whatever fate the powers in charge choose.

Assuming he gets confirmed, I think I can fairly state that none of Mr. Smith’s immediate predecessors approached their responsibilities with consumers as priorities. Armando Falcon, Jim Lockhart, and Ed DeMarco worried about their own image in town, F&F’s lobbying, F&F’s pr activities, F&F stock price and how to negatively impact those (see the late, lamented HUD IG report), F&F’s compensation (you get the picture), but not much about the “winners” in the GSEs mortgage activity, the American consumer.

So maybe FHFA Director Smith might consider those consumers and actually help F&F “conserve” resources, which supposedly is the job of the “Conservator.”

I hope someone alerts this Mr. Smith that he has some anti-GSE folks--and decidedly non-consumer advocates--among his inherited senior staff. Who are they? Oh he can just start looking at those who’ve been there the longest and I am sure he can uncover one or two (or maybe more) who fit that definition.

The new Director might be a convenient “beard” if the Obama Admin finds some reason to keep around the GSEs, besides the fact that they are currently funding 90% plus of the conventional mortgage market, and still waiting for the big banks to step up and play the secondary market role that F&F has.

Or, Mr. Smith could just be the funeral director of record, if the Congress and the Admin decide they need to abolish F&F and replace them with entities which don’t yet exist.

Stay tuned and here’s hoping that North Carolinian Joseph Smith is nasty street fighter, a fair regulator who wants to reinvigorate his GSE charges, and can appreciate that there was a successful Fannie/Freddie shaped mortgage finance world, before Wall Street created near worthless private label subprime securities. Post PLS GSE managers—along with financial service executives all over the world—bought the “garbage securities,” seeking elusive market share and yield, and undid a 20 year record of corporate good works.

My Team Appears to be Losing!

I feel like I am watching a slow motion train crash as the Obama Administration responds to steps on its story lines (when they exist) and flounders facing confrontational Republicans and Tea Party members two groups which never should be de-linked).

Fair questions for President Obama, since he seems to be on all sides of these matters.

“What is your view on the Bush tax cuts Mr. President? Just because the GOP won the House, does that mean we now can afford the lost revenue and disparity?”

“What does “tax compromise” mean, sir?”

BTW, which Democrats are challenging the new GOP winners over what the GOP's spending and deficit reduction priorities are?

The Republican agenda hasn’t changed since George W. Bush’s two terms and those ideas didn’t work then? Why are the D’s waiting until January to point out to the nation that the current GOP agenda is inconsistent and doesn’t have a snowball’s chance of passing mainly because they runs roughshod over GOP interests.

Does anyone really think all of those federal subsidies that the Republicans claim they want to ax really only go to Democrats or minorities?

President Obama, why wait until January to attack, the GOP isn’t waiting?

Watching this current ineffective political soap opera feels like my favorite football team trying, haltingly, to march down the field and score, but they keep being their own worst enemy, fumbling, dropping passes, or committing penalties game infractions.


During the 2008 Democratic primary, my wife was a major Hillary Clinton supporter. I liked Hillary but felt she had too many negatives and would lose.

Today, I can see where she might be a stronger candidate for President in 2012 than Barack Obama, even if the economy rights itself and unemployment comes down.

She has shown amazing toughness in a very tough job. She well could add Secretary of Defense to her resume, making her even more formidable. I also am not sure, if President Obama would want a second term.

Ironically, I don’t agree with the pair of pollsters, Pat Schoen and Pat Caddell, who suggested that Obama announce now that he will be a one term President and then just work on problem solving for the nation with no hint of any political priorities.

Sounds great but a “lame duck President” doesn’t have as much power as Messrs. Schoen and Caddell argue.

Who, in the Congress, would work with Obama if he announces early that he is out of the 2012 race?

“All the Devils Are Here”

I haven’t yet read “All the Devils Are Here,” the new book about the financial meltdown, by Bethany McLean and Joe Nocera, although Ms. McLean did interview me as part of her research. The book contains a good bit of insight on Fannie Mae and Freddie Mac and their political and institutional wars.

I have read several positive reviews of the work, including one that described it as the most detail rich of the growing number of books on the subject.

I told Ms. McLean that I hope her book is extremely successful and becomes a movie or a made for TV show, for very selfish reasons related to “feeding the cows to feed the crows.”

If the books goes TV or movie—I wish, I hope, I pray—and my tiny little part in this drama makes it into the final script, I want Antonio Banderas to play me.

Why? Because he’s Latin swarthy handsome, which I’ve been most of my life and he knows Selma Hayek and I want a personal introduction to Selma.

Remember them as lovers in “Desperado,” in which Banderas—as a vigilante—seeks to track down the Mexican drug king, who turns out to be his older brother? So, it’s simple, if Antonio plays me in an “All the Devils” movie, it’s a short step for me to ask him to introduce me to Selma. Book em’ Dano!!

Good luck to the McLean/Nocera writing team. Here's a wish for major book sales.

Maloni, 11-16-10

Wednesday, November 10, 2010

Midweek Musings

Nancy Pelosi

I doubt if many voters in Pennsylvania and Ohio—plus other states where the D’s lost big—had Nancy Pelosi (D-Cal.) on their minds when they went into the voting booths and supported more Republicans than Democrats, at all levels of government.

It just doesn’t work that way.

The GOP and its conservative allies tried to make her an “issue.” I don’t think they succeeded but she did become one of many Democrats and D policy positions, which the GOP demonized successfully and which carried their party onto numerous victories last Tuesday.

Many people who know the former Speaker much better than I talk about her selflessness and dedication to Democratic Party ideals, traditions, and platform.

Even with that as a given, I don’t think Rep, Pelosi should run for the leadership of her House party.

She obviously has chosen otherwise. I think she is making the wrong decision.

Fair or not, she has become too much of a lightning rod for those who dislike the party and its platform. ‘San Francisco liberal,” was one of the mildest epithets they threw at her, but in some congressional districts in this election it had the sting of a scorpion.

Congresswoman Pelosi should not seek the Minority Leader’s job,
because she just is asking for more of the same personal and institutional political abuse.

I have no doubt about Ms. Pelosi’s capacity, instead as one who has spent years trying to undo myths and untruths about the GSEs, I don’t believe that Pelosi ever will have enough time or facts—nor an objective audience—to correct the opposition and undo the damage they caused.

People steeped in sports culture like to point out, “There is no ‘I’ in team.”

But, if you scramble the letters in the word, there is a “me” and I think Ms. Pelosi’s understandable decision is more about her concerns for her legacy than what is best for the House Democrats at this juncture with the 2012 elections less than two years away.

I hope Nancy Pelosi reconsiders her decision and then defers to one of her capable House colleagues.

The Pauls, Pere et Fils (father and son for those of you who don’t speak Spanish!)

I think the odds are pretty good that we will see new Sen. Rand Paul (R-Ky.) serving on the Senate Banking Committee, just as his father, Ron Paul (R-Tex) serves on its House counterpart. I believe the “father son service at the same time” is without precedent, but I have a feeling that we will see a lot of “precedents,” when the House Republican majority takes over next January.

The poor Fed!

Kudos to Bachus, Don’t Waver Spence

Spencer Bachus (R-Ala.) uttered a very truthful statement back home in Alabama this week. But he now seems to be backing way from his candor (and bravery!).

Bachus, who aspires to be the Republican Chairman to the House Financial Service Committee, told locals that he felt Sarah Palin cost the GOP control of the Senate by endorsing Tea Party/GOP primary candidates who couldn’t win the general election races and, indeed, did not.

The backsliding I think makes Bachus look less astute than he appeared when he made the original comments. But, other R’s share that perspective. Few of them have generated the attention that Bachus has. Yay Spencer!

Fannie and Freddie

During a conference call for financial analysts, I was asked if Fannie and Freddie could exist in their same “conservatorship” model two years from now, when the 2012 presidential and congressional elections occur.

The short answer is “yes,” but behind that suggests a failure of the Administration to put forward a thoughtful budget proposal—which it says is coming—one which can generate bi-partisan support.

The R’s and many D’s already want to do heinous things to the GSEs, so you would think that there might be an area of agreement here.

Except, the very conservative House might hold out for total decimation and I don’t think it has the political support for that. The “new Tea Party/GOP” House majority might and could pass a draconian bill that the Senate won’t support or the Admin would veto.

In the meantime, the “conserved” Fannie and Freddie would just chug along, financing 90+ percent of the conventional mortgage market, paying back the Treasury a usurious 10% rate on its borrowings (large banks only paid and pay 5%) and nothing dramatic happens in this stalemate.

At some point, between now and 2012, Fannie and Freddie might start making money
and opening the way for a thoughtful restructuring, ala the National Association of Realtors proposal or even Hank Paulson’s “regulated utility” idea.

If the above scenario evolves, the GSEs become a decision for the next President and Congress in 2013.

Maloni, 11-10-10

Thursday, November 4, 2010

Some Post Election Observations

Boehner’s “New Tea Party”

Speaker Boehner, indeed.

Well John Boehner now has won the post to which he has aspired and kudos to him for realizing his dream to be House Speaker. Like him or not, he’s part of the boffo GOP success.

But, as they say, “Now that we’ve won it, what do we do with it?”

Let me establish upfront that I don’t think the House Republicans will be able to conduct themselves in any manner save to try and savage the Obama Administration and weaken the President and the Democratic party for the 2012 races. They’re too narrow minded and selfish, both of which they displayed when they ran the Congress from 2000 to 2006 when George W. Bush was President.

I hope all of that has changed and now wiser the R’s will seek some form of bipartisanship…..but I doubt it.

It just may be that all of the Democrats who stayed home on Tuesday and all of those Independents, who voted against Obama’s policies, need is two years of the “new Tea Party” unvarnished to realize how unrealistic, backward looking, and self serving the new House majority is.

Do the American people, John Boehner, really want to rollback the limits Congress just this year put on Wall Street and large banks? Other than the ton of campaign money the financial services types plowed into GOP campaigns, what has the American public gotten from these institutions—besides watching their executive compensation grow as their lending slowed down, while banks invested their excess funds not in loans but in overnight Fed funds.

This is the crew that Boehner vows to save and that’s his “good public policy?”

Wait until new Senator Rand Paul (R-Ky.) takes that home to Kentucky and tries to sell it. Paul yells, “The federal government doesn’t create jobs, large and small businesses do.” Yea, yea. But the reality Senator is a lot of federal money flows through those commercial entities to create those jobs. But, I’m OK with stopping all federal funds from going to Kentucky and I expect that a majority of Americans would agree

I am ever reminded of the Tea Party rally where supporters carried signs saying “President Obama, Keep the Government Away from my Medicare.”


Boehner brags that the GOP and not the Democrats represent the American public. Just how is the GOP going to cut the deficit? There isn’t enough “fat”—which is a relative term—to cut and balance the federal budget.

Of course, now Speaker Boehner can stop his Republicans—who ran wild when they last controlled the House and booked huge federal deficits—from approving any “earmarks.” Those nifty “little” appropriated funds that cost hundreds of millions—and represent gifts to friends and constituents--which are tacked onto to “must have” legislation and see no scrutiny by anyone save the requesting Member or Senator.

Man up John and stop those congressional goodies!

Maybe the House GOP can start with some other “wasteful federal spending.” How about agriculture food supports or cotton and wool subsidies, highway construction, timber, and dairy subsidies? That could be a lot of lost jobs, especially in red states, if the Tea Party is going to go after those federal benefits. That shouldn’t stop our virtuous new heroes, should it? Class, class, Bueller, Buehler….?

Oh, they likely mean cut the federal benefits which go to urban minorities, like federal food stamps, But, aren’t the majority of food stamp recipients white?

I know “the new Tea Party” should put its House muscle behind closing unnecessary domestic military bases and ending weapon systems that even the Pentagon doesn’t want.

Now there is a valuable target.

What are the chances that Speaker Boehner will lead his troops in that direction?

Class, class, Bueller….??

The House Democrats do look ideologically homogenized. Maybe they can get their act together as the minority party. Maybe they can give Speaker Boehner a little of what he meted out to them?

I am happy for America that Harry Reid won, mainly because Sharon Angle— the Nevada Tea Party favorite—was so lame. But the Senate Democrats might consider a fresh new leader, with Chuck Schumer and Dick Durbin (the “odd couple roommates”) being the logical choices. I’ll take either over Harry, who had his day in the sun and proved wanting.

If You Are Going to Walk the Walk, Then You Need to…

Come on Michelle Bachman (R-Minn.), you can’t identify even one federal program you would cut? I just listed several areas known to millions. All you can complain about is how much the WH is spending on the President Obama’s trip to India. Did you complain about any Bush trips, even the one monthers back to “the Ranch” in Texas? Do you think he went without staffers and Secret Service protection surrouding him?

Responses: Barack Obama or Howard Dean?

As President the day after the election, Barack Obama offered a reasonable rejoinder to the GOP victories of Tuesday (paraphrasing), “The buck stops with me and I know a good part of yesterday’s vote was a rejection of my policies, but I still am ready to work with the GOP on behalf of the American people, etc. etc. etc.”

Former Vermont Governor and Democratic National Committee chair Howard Dean approached it a little differently, suggesting (paraphrasing), “If the Republicans expect to cut Medicare and Medicaid and give tax cuts to the wealthiest in American, we will wrap it around their necks and beat the hell out of them with it.”

Dean, who some see as a potential Obama rival in 2012, is not liked or trusted by Obama insiders.

Barack Obama is in office for the next two years and no amount of GOP taunting will change that fact. He continues to have a bully pulpit. I would have preferred that he uttered comments closer to Dean’s.

The President isn’t going to win friends or voters cozying up to the divided Republicans in both the House and Senate.

Financial Services

Spencer Bachus (R-Ala.) or whichever Republican stabs him in the back and takes the Chairmanship of the House Financial Services Committee from him should find ranking minority member Barney Frank (D-Mass.) a royal pain in the butt to cross or ignore.
Barney doesn’t do “nice” very well, but he can tear the flesh from most dullards who seek to substitute rhetoric for facts.

The flip side is that Barney could be “tired” after all of his work in this Congress and might not want to “bust balls.” But should he chose to engage, he may not have the votes but he will make it tough for anyone wanting to put Wall Street and the big banks on their old lofty pedestals, which seems to be the new Speaker’s goal.

I don’t think the House R’s have the votes or the creativity to force a new mortgage market model, i.e. the “Fannie/Freddie problem” on the Obama White House. So that matter must wait whatever will be the Obama plan promised in the new budget.

Tim Johnson (D-SD), the likely new Senate Banking Chairman, Chuck Schumer (D-NY) and Jack Reed (D-RI) should be able to control Dick Shelby (R-Ala) and the Committee R’s. Look for Rand Paul (R-Ky.) to wind up serving on this committee.

But, once the R’s agree on who will be the House Financial Services Chairman or Chairwoman, thinking of Michelle Bachman (R-Minn.), I am sure that we will hear all of the same canned anti-GSE rhetoric again.¬¬

Last tidbit

Thursday’s American Banker carries a story quoting victorious Republicans on what changes they would like to make in the financial services area. Naturally they want to get Fannie and Freddie, but in the list of items they hope to accomplish is a recurring theme, end/limit new bank regulations on large investment and commercial banks, as well as the small guys.

The lesson of the George W. Bush years hardly was that we had too much federal financial regulation, but that we had too little and very few federal regulators stopped anything that Wall Street or the big banks wanted to do.

Now to be fair to the election winners, they’re giddy over their success and the implied power they have, but if their first steps are to reduce the height of the lion’s fence or remove it all together, people are going to get badly mauled and maybe lots of people.

Maloni, 11-4-10

Thursday, October 28, 2010

“Speaker Boehner?”

Steeling Myself for Major Setbacks

It’s hard not to anticipate major Democrat losses on Tuesday given both the poor job that Democrats have done at all three levels of government and the amount of distorting ads aimed at congressional Democrats which the GOP and the Supreme Court purchased third party money have produced.

But opposition to those in power always will be there in our nation and Republican/Right Wing money generation is well understood.

Democratic Party policy and political mistakes—in my opinion—have fueled the Tea Party and other right wing efforts far more than Karl Rove and his posse’s money raising.

Can anyone really explain where the “health care savings” are or will be?
How about how the regulatory reform law will help consumers and rein in Wall Street avarice or financial industry remuneration?

Those are just two examples or bad messaging and weak statute, both D responsibilities.

No matter what Tuesday brings, Democrats need to look in the mirror and, like Walt Kelly’s Pogo, realize that “The enemy is us.”

Democrats need to learn how to govern, not just win a lay-up election in the wake of a crappy, crummy GOP President.

Apparently, the Democratic Party hasn’t mastered that governing art, yet.
We’ll know on Wednesday if it will be “Speaker Boehner.”

Privatizing Gains

I have never understood the right wing allegation against Fannie Mae and Freddie Mac that they “privatized their gains but stuck the federal government with their losses.”

I challenge those who hurl that falsehood at Fannie and Freddie. Offer one example of that behavior, before the government slapped both companies into "conservatorship,” effectively federalizing them, and all but stopping any entrepreneurial behavior at the formers GSEs.

It’s a myth and great hyperbole which appeals to the Tea Party types, but when, where, how did it happen and what’s the evidence?

Having been in the “beast’s belly,” as one national newswoman described my time at Fannie, I cannot remember one company officer saying or acting on, “OK we can take these risks because Uncle Sam stands behind us and it won’t matter if we fail, because we will get bailed out.”

The truth was that any corporate official who ran his or her division on the assumption of a federal bailout would have been canned, since the business never worked that way and no rational executive officer would have permitted business plans based on that shaky contingency.

Not the Full Faith and Credit

Quiet the contrary, we operated on the opposite premise—because that’s what the charter said and that’s what was printed on all of our securities—that we were not the full faith and credit of the US government (which our higher than Treasury borrowing costs everyday re-enforced).

While many of us understand that the federal government had the authority to virtually do whatever it wanted in an economic or financial free fall, only a few of us had any direct experience working on the federal bailouts of non-government entities, Continental Illinois bank, New York City, Chrysler, or the Lockheed corporation, actions (which were far smaller than the TARP or picking up Fannie and Freddie’s tab).

Ironically, NYC, Chrysler, Lockheed, and CI all occurred when I worked for a senior Democrat on the “House Banking and Finance Committee,” its official title then.

In its pre-Paulson takeover days, Fannie incurred losses every year. Those weren’t magically passed on to the federal government but were consigned to the corporate balance sheet and outweighed by larger gains.

So, let me reiterate my challenge request or whatever you call it for anyone who has some specific example of Fannie Mae (forget Freddie for the moment) “privatizing gains while passing losses onto the government” to please show that evidence to me.

Too Much Housing and You’re Guilty?

I also am trying—desperately—to grasp the point now being made by some critics that the nation is over housed and that housing principals in the political, policy, media and housing industries (production and real estate) intentionally and for selfish and self aggrandizing reasons drove an unsustainable interest or desire to own a home, especially among those perceived as not financially able to afford a mortgage.

Wow, that is a major indictment—and mouthful—but that’s what some claim today.

Let me remind the Republicans—who generally, but not always, oppose federal homeownership efforts—that they are speaking about one fifth or more of our national GNP, each tiny element pursuing its own private market business interest. That hardly was some monolithic Democrat generated tsunami.

“Housing Mission” Was Not Subprime and PLS

It’s necessary, too, to call to the attention of current Monday morning quarterbacks that many conflate Fannie’s (and Freddie’s) low income “housing mission” --statutory requirement that 55% of its business must got o finance low, moderate, and middle income families living in central cities or other underserved areas”--with a different scenario, the subprime debacle, when senior GSE management brought billions of dollars of “Alt A” and Wall Street originated private label subprime securities (PLS).

Two different acts, albeit in same companies.

We know the subprime extravaganza went on to fail horribly, costing the GSEs and dozens of other companies who acted similarly—and those that pioneered the garbage—to cost the companies and the government billions.

But those who employ hindsight’s 20-20 backward look need to appreciate that GSE PLS subprime purchases was about market share and greed, not affordable housing missions.

Those actions deserve to be measured and evaluated separately.

From 1992 (when the housing goals became law) to 2005--roughly when Wall Street subprime sales to the world kicked into high gear--the GSEs low income housing mission work not only was the law of the land but it was lauded, expanded, and warmly welcomed by Presidents Clinton and Bush and Congress controlled first by the GOP and then later the Democrats.

Aberrant GSE behavior? Hardly!

Everybody was supporting more homeownership for the nation and greater inclusion of minorities in the owners group.

Yes, there were some skeptics, but when aren’t there? For those 14 years or so, Fannie believed in—and was encouraged to support—greater homeownership and to lead efforts to achieve that desirable national good. At least every time it did so, it heard wonderful things from those in charge of them, their charter, and their public support.

Don’t Forget: Homeownership is a Positive

I get tired quoting all of the studies which show the economic and social benefits of home ownership, but they exist in droves. (See link below to a recent National Association of Realtors study on homeownership and parenting.)


If you lived and, more importantly, worked "in the housing business” in that era—roughly the five or ten years preceding the economic fallout of 2008—you were part of expanding the American dream for all comers.

Fannie's and Freddie’s financial losses in those years were negligible, because the loans they underwrote, acquired or securitized were high quality “prime loans,” not the marginal variety which correctly earned the name “subprime.”

Which is why thoughtful need to distinguish between the early more positive GSE experience and afterwards, when they purchased large amounts of Alt A and PLS subprime securities.

I know that’s like asking Redskin and Steeler fans to pray for Dallas’ and Baltimore’s NFL success, but miracles do happen?


It doesn’t take much to be a GSE critic, just access to the Internet and some extreme opinions.

When you aggressively self promote, possibly overly so, you can add to your allure.

So, who is Craig Whalen and why are people reading him? (See preceding sentences for the answer.)

I noticed that Craig Whalen is associated with more unknown entities and their task forces or boards than any two Fannie critics. I guess I missed his “Croix de Guerre in MBS” or the “Iron Cross in Privatization”—awarded by Heritage or Cato--but I am sure that they are somewhere on his resume along with several University of Phoenix degrees or the equivalent.

There might be a group of more obscure institutions out there with which he could be affiliated, but it will be tough finding them.

Like others, he wants to do away with the GSEs (and the Fed?).

The GSEs and MI

He accuses the GSEs of perpetuating mortgage insurance and forcing people, who only can put down 5% or 10% on a mortgage loan, into an “Orwellian world” where F&F make profits by charging borrowers—through the lender network—too much money.

Hose this boy down, read him some history, and also remind him that the companies currently are being run by the regulator not management, so his complaint is with the Treasury.

Whalen should know that Fannie didn’t invent mortgage insurance. It was part of Congress’s plan in 1970 (long before Fannie had the “lobbying army that “won all Washington wars”) to help borrowers with meager savings afford a down payment.

The truth is that F&F didn’t like the MI industry and thought it was inefficient and costly.

Freddie went so far as to legislatively advocate a non-MI option for low down payment borrowers—which would have been far cheaper for them--which failed in the Senate, after initially passing. (Fannie, while sympathetic, stayed out of that fray. Ergo, only Freddie’s charter would have been changed.)

Craig, while I may disagree, I think your fanciful writing has earned you consideration for an award from the “Order of the Merkin” and I will gladly submit your credentials to that august society?

Russians in Afghanistan, Again?

Do I really want the Russian military back in Afghanistan and as part of a broader NATO effort??

No and no. “They’ll steal your eye teeth, if they are rooted in your mouth.”

In my narrow view, the Russians taint almost everything they touch and they
can’t see or work for anything resembling a “common good.” Plus, I suspect that, in Afghanistan, part of their security operations will be stealing US military and commercial secrets and suborning the Afghans, so they later dance to Moscow’s drummer, which no doubt will employ stolen US dollars to pay for the perfidy.

Sure Hamid Karzai would welcome the Russian, because that’s one more potential “donor” to his executive slush fund

I realize that my Russian views consign me to near John Birch thinking but so what, if that’s what my experience and instincts tell me.

How many times do we have to be hoodwinked by Putin and his thug homies before we wake up?

Anyone tired of seeing the long time “sleeper” Russian spies we arrested and deported being honored in their homeland. And does anyone think there still aren’t more in the US?

Although spy “Anna Chapman’s” (sic) cover photo on the Russian version of “Maxim” was revealing, so to speak!


Maloni, 10-28-10

Sunday, October 24, 2010

Ginni WHY!!


(I wrote this segment before it was reported by WJLA-TV and the Washington Post, that Clarence Thomas’s ex-girlfriend Lillian McEwen, with whom he once had a romantic relationship, has written a book accusing Thomas of behavior which parallels the sexual harassment charges Anita Hill leveled against Thomas when he was nominated for the US Supreme Court.)

Why would Ginni Thomas, the wife of Supreme Court Justice, Clarence Thomas,
Suddenly telephone Anita Hill, Thomas’s chief protagonist during his Senate confirmation hearings nearly 20 years ago, seeking an apology for her husband?

I can suggest a few answers, but rather than play that game, I’d ask why would Ginnie Thomas resurrect and force attention to that incident and her husband when most people have put it aside and moved on, allowing Thomas to carry on a very undistinguished judicial career on the nation’s highest court.

Thomas rarely questions lawyers who appear before the Court and predictably sticks to his very conservative interpretation of the Constitution or whatever is the latest Right Wing line and has been a perfect GOP judicial “cipher,” whose opinions mirror Judge Scalia and/or Chief Justice Roberts.

But, that is Thomas’s right and it was the first President Bush's (corrected from "Reagan," see "Comments right to appoint Thomas, seemingly getting just the type of justice that he wanted, a man smart enough to keep his mouth shut and not show the world just how little he knows or understands.

Hill won’t recant her allegations that Thomas sexually harassed when they worked together, just like Thomas now will never admit that he did so. There is no need for that except in Ginnie Thomas’s mind.

But, I wonder what came up in the Thomas’ household which made this an issue now? Only Hizzoner and Mrs. Thomas know and I’ll bet they’re not talking about it publicly.

(Of course, now we know that the “what” could have been leaked word of the McEwen book.)

Private GSEs

I’ve noted before that there are few “bad ideas” regarding our future mortgage finance system, even though I may not agree with them.

John Dalton, President of the Financial Service Roundtable and someone for whom I worked, briefly, when 30 years ago he was acting Chairman of the Federal Home Loan Bank Board, recently proposed letting Fannie and Freddie slowly evolve into any number of private “mortgage insurance securitizing companies (MISCs),” which he envisions as securitizing entities, that have the authority to package whole loans into mortgage backed securities and sell them to investors.

Dalton sees these institutions replacing F&F securities MBS activity and goes onto cite all of the virtue of “private institutions,” etc. etc., with the only little bit of federal help these companies would need being some federal “catastrophic insurance,” the premiums for which they would pay to the government. (I guess that makes them “mainly private,” but not quite. There is a "degrees of pregnancy" joke here somewhere.)

They would have a “strong, independent regulator,” (Everyone proposing something new seems to link those words when describing a novel financial regulatory arrangement!).

I welcome John Dalton’s contribution to the debate, but only would point out that some of his large bank members—or other interests his association represents—already have these powers in their bank holding company structure.

The banks can raise the money cheaply and their investment bank subs can securitize and attach their private label guarantees around the mortgage bonds.

The problem that Dalton must confront, but which eludes his rhetoric, is that Wall Street firms and banks did that very thing just a few years ago (see PLS subprime) and they did a horrendously poor job.

The banks and investment banks, which created and pushed PLS subprime mortgage securities across the world cost themselves, their company stock investors, the institutions which invested in their securities, as well as the federal government hundreds of billions of losses, not to mention the societal deficit from the massive failure, layoffs, lost family fortunes, etc.

I guess someone envisions the “strong, independent new regulator” doing a much better job then the Fed, SEC, FDIC and others did three or four years ago on private label securitization and it could.

But, the Financial Services Roundtable shouldn’t sugar coat the potential for losses here, too. You cannot hide the mortgage risk “hot potato.” Someone has to hold it, because mortgages and mortgage securities come with structural risks. At the end of the chain Dalton has the US government holding it.

Dalton called for his “MISCs” being in a “first loss” position as if that’s all that matter.

Fannie and Freddie were in a “first loss” situation—which isn’t unique—but that didn’t stop them from losing roughly $60 billion each in market capitalization, and approximately another $40 Billion and $30 Billion, respectively, in regulatory capital losses. Then the Treasury picked up their corporate red ink, which has added @$140 Billion to those amounts.

If John’s members want to do this and use their new financial execution as the latest remedy to Fannie and Freddie, more power to them, but do it cold turkey, without Uncle Sam’s backing.

I believe that would make those who create and operate MISCs far more responsible then they might be, with Uncle quietly standing behind them, since “federal insurance is federal insurance.”

Mr. and Mrs. Democrat

With the Democrats in power, normally the title above would go to the President and his wife.

Arguably, however, it really belongs to former President Bill and Secretary of State Hillary Clinton because of their national popularity within and outside the party, the gargantuan media appeal of each when they travel, and the professionalism and smoothness of how they interact and communicate with crowds.

Bill Clinton is the single best politician in my lifetime. One of my “grip and grin” pictures with him in right in the center of my office wall. (You see the left side of then President Clinton’s face in that photo and my full face, complete with adoration, but Clinton is “locked in.”)

I never have seen anyone work a room like Clinton or make every single individual he encounters in those four walls feel that eh is connecting exclusively with them and none of the surrounding throng. It’s a high art.

Hillary has much of that, too, and a tough cerebral quality to boot.

Bill Clinton’s strenuously working the nation on behalf of the Democratic Party is the best thing the current Congress and the White House has going for it, leading to the November 2 midterm elections.

Return of Cram Down???

Could the current hugely negative press and confusion being generated by mishandling of mortgage defaults cause a Democrat controlled Congress to consider “cram down legislation” in their lame duck session after the elections?

A bill allowing judges to restructure mortgage debt and reduce principal amounts owed lenders passed the House only to die in the Senate this year. It’s possible that angry Democrats—who lost their seats—or happy Democrats who held on and won re-election might choose to “strike a consumer positive” stance and move the House passed cram down bill, which naturally was opposed by all of the banks (a strong reason to vote for it, if that bank money negatively influenced that Senator’s or Congressman’s race).

Watch But Don’t Bet

--It wouldn’t tonally shock me if New York’s Chuck Schumer managed to win the Senate Majority Leader’s post if the D’s maintain control of the chamber, even if Harry Reid survives his race against the Tea Party’s Sharon Angle.

--It will come down to Schumer versus Dick Durbin (D-Ill), but don’t underestimate the wily Schumer (think Barney Frank-smart but with more friends).

--It can’t be good that Chairman Barney Frank (D-Mass) lent his re-election campaign $200,000. In my view it would be a stunning and disheartening defeat, if Barney didn’t prevail in his race.

Maloni, 10-25-10

Sunday, October 17, 2010

They Got “Punked!”

Yep, They Did

“Punked” is a contemporary phrase meaning that someone took advantage of you.

Growing up, I can remember using far more colorful language to describe “punked” victims, but that was kid trash talk.

However, to me “punked” certainly describes what the large commercial banks did to the Obama Administration once the financial institutions loaded up on their federal TARP slice.

As documented by recent Treasury Department reports, the banks neither lent it to small businesses, mortgage seekers, or very many others. In the main, the large banks have arbitraged the funds, invested it overnight at the Fed, making 25 basis points, or in Treasury securities which are as safe as the US government.

Yes, some banks somewhere have made loans but not enough to make an economic difference.

The big guys have hoarded their money and pleaded there is a lot of market risk, still. But, that hording stifled any hope of a US economic resurgence.

Now, the Federal Reserve is going to start generating even more bank working capital when it begins a major securities buy from those banks. The only question according to the Fed Chairman is “how much should the Fed buy?”

The Fed purchases will increase the money supply (just as the reverse does the opposite), lowering already low rates and offering banks the chance to help stimulate the economy by lending that money to commercial and personal borrowers.

But this time, the Fed and the nation needs those banks to cooperate, especially since they didn’t last time.

Where are the Fed’s and Obama’s in-house ass kickers to urgently bring home this point to the bankers? Can we get Rahm back for a few weeks after he runs for Mayor?

Can We Bank on the Big Bankers?

If the Fed gives “Big Bank America” even more money, after they did “bupkis” (nothing) with TARP’s first $500 or $600 Billion, who is going to insure that the second round is any more effective than the first.

Current robust bank earnings are not coming from active bank lending, which is a bank’s traditional role.

Yes, the Fed is “independent” and charts its own course but I hope people aren’t naïve enough to think that Geithner and Barr don’t speak daily with Bernanke and Yellen. But, the White House doesn’t have to keep hands off.

Even though “punked” may be a new term for standard behavior, “Fool me once, shame on you. Fool me twice, shame on Me,” still applies. President Obama and the Federal Reserve should not let themselves be duped a second time.

If Bernanke and Geithner are not up to the job, maybe being “ bad cop” will fall to Congress, Barney Frank (D-Mass), Tim Johnson (D-SD), Chuck Schumer (D-NY), Alabama Republican Senator Dick Shelby (Ha!) and others,

Washington used to be a place where you find some “cajones.”

Will our elected and appointed officials find theirs in this situation?

Hooray for the Chileans!!!

With no connection to Chile other than humanity, I got teary eyed seeing those miners brought out safely from their underground trap. I was so happy for them and proud of how that country’s officials responded to that horrible accident and the Chilean rescue efforts of their brave miners.

I am sure that we will hear a dozen stories that might tarnish some of the individuals and events, but for now, we should applaud the efforts of everyone involved and join the Chileans in their national pride and joy at their returning family members and countrymen.

(Was I the only one who noticed that someone in that crowd surrounding the safety capsule carried a sign urging the House not to destroy the GSEs? Kid must have a relative working at Freddie Mac.)

Who’s in Charge or Who Wants to be in Charge??

Let me return to an earlier theme, this time with the subject being straightening out the nation’s defaulted mortgage mess.

The latest debacle has been horribly mismanaged both by the federal government and the lenders that made, bought, or wound up owning all of those bad loans.

Let me make clear that this next thought is based on nothing but “gut.”

But, I believe that most lenders slow walked the remediation process because they were hoping that the federal government will come in and offer them far more for their dead mortgages than the banks could generate through normal market procedures. Yes, now there are important “new issues” about who owns what and what documents are legal or not, further clouding future as well as past mortgage settlements.

But that—in my opinion—is not the major bottleneck. Once again, it’s avarice on the part of those slow to fix their own problems and slow to fix the systemic problem, with equal blame for the federal government—largely the Obama Administration—for putting forward some soggy “fix it” plans with few teeth to bite mortgage restructuring procrastinators.

Voters, upset over this development, should remember which Senators and Members opposed “cram down legislation,” which would have required some banks to reduce the debt they were owed and allow borrowers to pay back less. The bill passed the House but wilted in the Senate with opposition from the American Bankers Association and it functional subsidiary The Mortgage Bankers Association.

Banks balked and the associations claimed it would drive up mortgage rates with no real evidence of that. Their true position was the legislation might cost them some revenue. But that’s what is happening today, they are losing money on failed assets which they are paying to “carry” and now face more losses as the bank regulators (just like the stock market) see possible greater industry red ink.

But, we can fix this mess, if we get the cooperation of all those with “skin in the game” plus have a singularly leader.

Having said that the question I have for whatever becomes the latest federal amelioration plan is, “Who will lead it; who is in charge? Who will make it work?”

Really, who is in charge? Unlike earlier unsuccessful efforts, on whose desk does the buck stop and does he or she have broad muscle to succeed?

Ideally, it would be a tough Treasury Secretary telling the banks what they must do—under penalty of huge Treasury anger—to get their financial butts in gear.

Or, it would be a fearsome Fed Chairman telling the banks about how he will implement their “worst nightmare,” if they fail to carry out exactly his orders on fixing foreclosure problems.

Maybe it would be President Obama, with those two officials at his side—indicating their total support--saying that the Treasury and Fed will bring down hellfire on any business or industry that doesn’t follow exactly his Administration’s or the Fed’s regulatory instructions to fix the greatest part of the mortgage foreclosure mess.

Nobody else matters in Washington or else they easily can be ignored, so forget like the Secretary of HUD or head of the VA mortgage operations, Fannie or Freddie’s regulatory head, or the Consumer Protection Agency’s Elizabeth Warren (although her work here, loudly backed by the WH, Fed and Treasury, might be very refreshing). And even Attorney General Eric Holder has too many other things on his plate and using the courts is too slow.

A fire breathing, “take no prisoners” top official from the Treasury or the Fed might do, if there was no mistake that he/she was backed up by the agency heads and the President.

Tim Geithner could make himself a folk hero if he took on this important mission and worked it daily, but—if done properly—he would have to anger the big financial institutions! (Oh, darn, haff kaff, harrumph, I shouldn’t want to do that!)

Maloni, 10-18-2010