Tuesday, January 5, 2010

Hello 2010!!

(I'm a little verbose, perhaps, but too much has happened recently.)

I was all set to share my opinion on whom/what President Obama should be listening to in 2010 (you’ll still find much of that in the following blog segment). But then the Washington Post yesterday chose to editorialize on its view of the future of Fannie and Freddie, so I couldn’t help but to take on that matter first. (I won’t even comment on the continued right wing editorial out pouring in the WSJ, this past weekend.)

I don’t respect the Post editorially and, as it has done consistently, yesterday it took shots at the “old” Fannie and Freddie, as well as their current leadership, as if either group actually chose the laws under which they operated 15 years ago or today.

The Post—as it usually does--ignored whatever good things the “old Fannie and Freddie” did for 20 years, like dramatically expanding the home ownership base, especially among minorities. In one revealing “let them eat cake” editorial reference, the Post relegates all low income families to the Federal Housing Administration’s (FHA) programs, something many in both parties sought to avoid, insisting that Fannie and Freddie help finance home loans for that family demographic.

But, on Monday the Post—which in my opinion editorially still reflects the “preening Georgetown cocktail clubby set”--and whose editors I suspect never had to grapple with the FHA rules and inefficiencies, because they can afford better— endorsed some ersatz version of a new Fannie Mae and Freddie Mac, produced by a “liberal think tank, with ties to the (Obama) administration.” Gee, that proposal will sail through the Congress!!

In championing “chartered mortgage backed securities issuers,” the Post backed a scheme that the Mortgage Bankers Association championed months ago. The trade group issued this idea as part of an “independent market review.” The idea merely has the federal government (the guarantors of these Post-blessed securities) doing what F and F did, but not likely as well or efficiently, yet with Uncle Sam’s dollar and imprimatur. Is anybody surprised at the MBA’s desired approach?

Thank you Washington Post. Those mortgage bankers—now mostly owned by large commercial banks—are superb foxes to watch the nation’s mortgage chicken coop and with Uncle’s money. They’ve done such a good job with the FHA, whose “guarantees” on FHA and VA mortgages they control. Or, maybe your wine and cheese eating editors don’t realize that fact?


The Post editorially damns any public purpose for the new entities it touts, which was a crucial part of the rationale for Fannie and Freddie taking on a very specific percentage-of-business housing goals in 1992 legislation. (Goals which rose to cover “55%” of their annual business, which had to serve “low moderate and middle income families and families who lived in underserved areas.” Despite seldom failing to meet those onerous goals, before they were put into “conservatorship,” the Post never opines on those facts.)

And decrying editorially how easily Fannie and Freddie borrowed in the private debt markets for their working capital, the Post fails to explain how these “new” entities--authorized to issue federally guaranteed mortgage backed securities--would not be afforded similar lower borrowing costs by a market, which has just been stung by a world of worthless “private label Wall Street mortgage backed security guarantees?”

And just wait until the Congress—especially the House of Representatives—gets this Post-endorsed legislation. Do you think the interest groups making huge industry and personal contributions to those Members will sit back quietly and let those august committees just rubber stamp such legislation?

Ho, ho, ho!!

GOP conservatives, the Black and Hispanic Caucuses, and the Blue Dogs, all well represented on the House Banking Committee managed to get many concessions for their constituents/interests on the recently passed financial reform bill. That ain’t going to stop.

I continue to maintain my core point and the Post--almost implicitly but unknowingly does, too—when Congress gets around to really examining how the resident mortgage market works and what is needed to re-tool it, Fannie and Freddie in their current form need a lot less “refining” then starting de novo and creating something out of whole cloth, expecting to produce the same results as the two former GSEs did before their managements got greedy in the 2005 and 2006 years.The GSE model didn’t fail, their housing missions didn't destroy them, but those latter day GSE managers sure did, aided and abetted by the lame Republican regulators (sorry GOP friends), and the disingenuous, smarmy, faithless GSE-hating Bush Administration did. (See Ben Bernanke’s weekend rant about insufficient federal financial regulation and what I later say about the D’s and federal regulation.)

But, keep on editorializing against Fannie Mae and Freddie Mac WP; you still have a few more readers in Georgetown you haven’t totally alienated, yet.

How Soon We Will Forget


Today we are living the through the unfortunate fallout from the George W. Bush financial failures.

From 2000 through 2006, GOP congressional budget hawks morphed into the worst of the big spenders, creating monstrous deficits from tax cuts for the wealthy and mountains of red ink from fighting at least one seriously questionable war. Those former savers, who quickly became spenders, also presided over an almost non-existent federal financial regulatory environment, which encouraged mindless and disastrous financial industry risk taking.

Yet, next year, when every seat in the House is up for re-election and a third of the Senate runs, few people will tag Bush and the GOP congressional survivors for those excesses because Obama and his economic policies are too convenient a target.

Voters will need to be reminded that it was the Bush Administration which spent billions we didn’t have; blessed the tax cuts for the rich, let Wall Street and the big banks run amok, and started shoveling money to large failed and failing commercial banks and other financial institutions which repaid that support by ignoring countless calls—mainly by the recently elected Obama Administration--to increase lending to small businesses and to clean up its part of the mortgage mess.

No, it will be the “Obama bank bailouts”—since they continued under Tim Geithner and crowd—and the Obama aid packages to GM and Chrysler, and on and on.

This is why the Democrats need to get the hell out of trying to run businesses and dramatically improve and strengthen their federal regulatory regime, across the board, and allow our economic system to work.

Let business be business, which means Republican-leaning, profit seeking, risk taking, and greedy, and let government regulation be strong, consistent, and applied regularly and evenly. It’s a much better relationship for the Democrats to be in—and for the country, too--than letting na├»ve and ineffective government employees try to match wits with the market piranha as peers rather than federal overseers.

Get the hell out of the way—except in a strong regulatory sense—and let those businesses do what they were born to do, pursue profits, create real jobs, and produce more revenue which will cut our stream of red ink.

(In my dreams, I see President Obama, arming Rahm Emanuel with the authority to visit each and every prominent federal regulator and read them the political riot act, which reminds them their job, is not to coddle their regulated entities but to make sure the companies under their control play fairly and by the rules. Emanuel should keep it simple and say, “Fail to do this and not only are you the ‘next one off the boat,’ but I’ll have your senior deputy crush the offenders because you couldn’t.”)

George Bush created much of this mess, at least his “team” did. The Democrats inherited it, but the party’s responses, IMO, have been only partially successful.

The Obama major effort on health care will take a few years to prove that it was the right step and more efficient than the health care model that we have now. Only a few voters will give the Democrats any benefit of the doubt for taking on what heretofore has been undoable for Republican and Democratic presidents, alike.

The Democrats need to change their modus operandi in 2010.

Your Administration, Mr. Obama, has been soft, soft, soft on the large banks and financial service entities in this nation, giving them too much money and demanding too little from them.

Force the big money guys—who still are despised by the electorate--to do the people’s will, as you define it, and you will be a far better leader and far more successful politically, than if you just plead with the banks to help out.

Tune Out Your GOP Detractors Mr. President

Dick Cheney, Karl Rove, Rush Limbaugh, Sarah Palin Glen Beck and that ilk have no good advice for you, President Obama, despite how they have couched their diatribes over the past few weeks.

The disgruntled R’s seek only political advantage, while virtually every congressional Republican, looks to score points for the coming elections. It’s a shame that it has become such, but while there once may have been more inter-chamber and inter-party comity between D’s and R’s, the divisive politics that is being practiced now goes back to ancient Greece and hardly is without precedent in the US Capitol.

Just tell them to “stuff it” and then go kick some ass, in your party as well as among Republicans.

The GOP in Congress has shown you it doesn’t want to work with you and your congressional colleagues in a bi-partisan way. So, drop the exercise
Get business done any way you can. Do you think the American public cares if the Senate resorts to “Reconciliation” to produce desirable legislation? The citizens want action on troubling policy fronts. It’s time to drop the “nice guy” approach and give the public what it demands. That’s why they elected you President.

Do this and the 2010 and 2012 elections will take care of themselves.

Maloni, 1-5-2010

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