Monday, March 28, 2011
Republicans and Libya, Bank Regulation, and the GSEs
Suddenly the GOP--who allowed George W. Bush to violate all sane budget dogma with his war his phony war in Iraq and combat later Afghanistan--are concerned over what Persistent Obama is spending on Libya and what congressional blessing he is getting for military action.
It’s Mickey Mouse partisan hassling, since the R’s read the papers listen and often appear on television and know exactly what is happening in Libya and the fact that President Obama, unlike his predecessor Bush, quickly put together a real participatory alliance, which early on committed their sovereign wills, planes, pilots, and other military resources to stop Gadaffi from killing his own people and further mucking up the economically important oil rich northern African.
The alliance quickly has opted to give NATO control of the military operations and our President will tell the American people Monday night, what he believes are the US’s goals and opportunities in shutting down Gadaffi
I learned professionally—and have said often in this blog—that when you toil in DC and have a profile, you are going to be rebuked either for being a sheep or a wolf. I hope Barack Obama agrees with me that it’s better to be a predator then a lamb chop.
That doesn’t mean that President Obama’s messaging on Libya has been sound, but his actions are to be applauded. I’ve been wrong plenty of times in my political prognostications, but continued GOP opposition to what Obama and NATO are trying to do will hurt the Republicans, especially given their “gung ho, kill the Commies and all enemies of the US” Christian Conservative/Tea Party elements.
It Isn’t 2006
I don’t know if Gretchen Morgenson is aping me or the reverse is true, but—once again, in her Sunday NYT column—she takes the large commercial banks to task for trying to dilute regulations being fashioned by the federal regulatory community or favorably shape them.
The scary and not so surprising thing is that Treasury Secretary Tim “I Haven’t Seen a Big Bank I Don’t Like” Geithner isn’t vexed by what the banks want and may end up supporting them, with appropriate veils hiding his work. (Link to GM's column.)
Colonial and Equine Heroes and F&F
There are both House and Senate hearings this week on mortgage finance issues, which means Fannie and Freddie, will come up and likely trashed, in part because the of the heavy campaign of mistruths which have been dumped so hard and heavy on them.
It will be very tough to polish the companies’ wheels from what will be another crap shower.
Plus the Congress has in front of it, the fresh grist of GSE borrowings from the Treasury, based on the Bush GSE takeover, which should be heavily discounted literally and figuratively.
Oh and don’t forget all of the congressional “outrage” over paying legal fees for former GSE officials facing legal challenges. Those purse string watchers on the Hill—in both parties--better hope those outside counsels do their best Perry Mason imitations and do it well, because their fees are scant compared to what the Treasury--which owns Fannie and Freddie—would have to pay litigants if the former GSE officials lose. (Hmm. Think that one over Reps. Issa (R-Cal) and Hensearling (R-Tex).)
Treasury insists that the companies maintain loan loss reserves against assets already owned by the government and liabilities which—if actualized—immediately become the responsibility of the taxpayers. That’s the government’s choice, not the companies. And F&F are being charged an exorbitant interest rate, which too has to be borrowed from Treasury and then promptly paid back to the Treasury. Duh?!!
Of course this both makes the companies look—on paper—in worse financial shape then they are and also allows Treasury to boast that it is earning money on what it “lent” the former GSEs.
Isn’t that something like offing your parents and then crying because you are an orphan?
Once you get over those minor hurdles, you likely don’t have the political will among many D’s to subject the GOP’s “facts” to a grueling review. Plus, we know the GOP won’t cross the Wall Street Journal, AEI, and their Tea Party screamers no matter what a factual review shows.
The Grand Old Party and Tim Geithner just want to get rid of Fannie and Freddie or “abolish them,” in Barney Frank’s famous phrase.
But, if they don’t want—as they naively claim-- the federal government dominating the nation’s conventional mortgage market, both sides will have to come to grips with the fact that their proposed mortgage market saviors--the nation’s large commercial banks--are barely one step below Fannie and Freddie on the “who is getting all of its working capital because of federal supports and subsidies?”
All of Those Federal Benefits
One just has to think and understand federal deposit insurance, access to Fed and Home Loan bank windows, exclusive markets where they face no competition because the Treasury has walled off others, And their continued efforts to both dilute Dodd-Frank regs or twist same to their decided advantage, i.e. return to Morgenson’s column.
Since the GOP doesn’t care for stringent federal regulation or much regulation at all and the banks are trying to get full ROI on their 2010 GOP campaign contributions—and Tim Geithner keeps doing his best Treasury secretary Andrew Mellon impersonation--what’s to prevent a replay of the last real estate financial disaster, since we know those big banks, top heavy with their investment banking subs, are the ultimate TBTF?
Of course in five years to seven or even 10 years (pick your “fix the national mortgage marketplace” time frame), most of the current Members of Congress and Admin officials will be gone, but they mess they create by caving to the big banks-- or more accurately re-create--will require someone’s cleanup.
A Hero and a Derby Winning Horse!
If the big financial behemoths are the 18th century British Redcoats then I am happy to be Paul Revere, riding through every “Middlesex, village and farm” warning, “They’re coming, they’re coming.”
Mixing our metaphors, what we really need to is for F&F to be the famous smallish racehorse “Carryback,” but in the second decade of the 21st century iteration.
Carryback was the little horse—often laughed at or even pilloried by peers and critics, as F&F are now—which in big races started out neat the end of the pack but then his core strengths would kick in and he would roar past the competition to win.
Maybe the former GSEs can just stay alive and win the big one for consumers, small lenders, and the nation.