The GSEs, also Wishes and Hopes
Other issues with higher political priorities have bumped Fannie and Freddie to the back burner, making those of us who predicted no legislation on these companies until 2013 look prescient.
Still there were two GSE items this week worth highlighting.
First the American Enterprise Institute’s (AEI) Peter Wallison was back on the Wall Street Journal perch, beating up Fannie and Freddie, using Ed Pinto’s ragged research (EP also is with AEI and once toiled at Fannie) which wrongly suggests that Fannie and Freddie bought subprime loans in the 1990’s bringing about the 2008 international financial meltdown.
Give it a break, Peter. You lost this one…overwhelmingly.
Fannie’s regulator, the Federal Housing Finance Agency, the Federal Reserve Board, the Securities and Exchange Commission, and the President’s Financial Crisis Inquiry Commission, plus any number of columnists and prominent economists have shown how wrong Wallison’s and Pinto’s meanderings are. That view is heavily weighted by the fact that Ed conjured a unique and exclusive definition of “subprime,” which nobody else recognizes or employs.
Wallison and more recently Pinto have run with this bogus claim for years but their numbers still lack integrity, unless you are the WSJ.
Moving on, but not too far…
The recent book by Josh Rosner and the New York Times Gretchen Morgenson employed the AEI fables and added their own negatives about former Fannie Mae Chairman Jim Johnson. But their business attacks were rebutted too, by many of the same folks who threw cold water on the Wallison-Pinto work.
Jeff Madrick and Frank Partnoy, writing in the New York Review of Books, penned the most recent Rosner-Morgenson smack down. (Link below.)
One more article which deserves sharing came from an old line GOP economist of some renown, Martin Feldstein, Chairman of President Reagan’s Council of Economic Advisers, from 1982 to 1984, who last week wrote in the New York Times about making existing mortgages more affordable and holding down future defaults.
Feldstein’s proposed creative use of Fannie Mae and Freddie Mac, to reduce the outstanding principal on their mortgages, could meet bank opposition. This, despite how quickly the banks could make it work, how many consumer/customers could benefit, and how alternatives might be less efficient and more bank costly.
The Treasury and Fed should meet with bank reps and offer Feldstein’s plan for implementation. If the banks reject it, federal financial regulators should propose that banks “mark to market” their mortgage portfolios. That won’t immediately help consumers, but it will bring greater reality to bank accounting. (Link to Feldstein’s article follows.)
My Bucket List
One of the beauties of writing a blog is that you don’t have to check with anybody before spilling your thoughts on the issue of your choosing.
Here are a few things—some serious, some silly, some fanciful, others doable--which I would like to see happen before I kick or succumb to Alzheimer’s.
--A ton of “country club” Republicans run and win congressional seats, displacing some of the Tea Party cranks who won in 2010, and bring some sanity to the GOP.
--“Solyndra” notwithstanding, for the Congress to foster and stimulate green business development because the world payoff is so grand.
--To be alive when the Congress and whoever is in the White House realize that Fannie and Freddie really did work, except for the subprime crap, an aberration unlikely ever to happen again.
--The return of bipartisan friendships/relationships. When I worked on the Hill in the 1970’s, most D’s and R’s did like and respect one another, got along, compromised and displayed comity.
--For colleges and universities to share some of the revenue with “student athletes” and end the amateur status charade.
--For the National Basketball Association (NBA) to stay “struck and locked out” through next year and maybe 2013.” (Fat chance; too much money involved on both sides.)
--For Roger Goodell to resign or be forced out as head of the National Football League.
---I want the Congress to pass and the President to sign legislation capping malpractice health care awards and then track to see if the “docs” pass onto their patients some of their medical insurance savings.
--For the GOP to admit—even to itself--that lower taxes for corporations, the wealthy, and smaller companies have been around since “W’s” first term and haven’t dramatically increased industrial production or new hiring. The R’s want the poor to get by with less federal help. They would earn greater credibility if they apply the same principle to the well off.
--For a future Supreme Court—this one won’t reconsider--to establish spending limits on all federal elections, low enough so incumbents face plenty of competition, meaning the most appealing candidate--not the richest--has a chance to win.
--For some bright young American kid to figure how to run internal combustion vehicles on salt water or something equally far-fetched and improbable.
--For newspapers to make a comeback.
--Never having to pay more than $1 for a two liter bottle of diet soda, no matter the brand.
--John Boehner to tell the House Tea Party contingent (and their back stabbing leader from
--For the American people to wake up to the reality of the giant financial services companies. They exist to make money; they are not charities; they squeeze you for every dollar they can; they covet their competitor’s revenue; and most couldn’t exist without the federal government’s largesse, which –for me—puts the stake in the heart of the bank claim of being “the private sector.”
--For Maryland and Virginia to truly clean up the Chesapeake Bay and also significantly curtail crabbing and fishing—both commercial and private--for a year or two to let the species thrive and multiply. (Too radical?)
--To spend quality time with Angelina Jolie, when she isn’t wearing make up, to see if I love her as much as I think I do.
--To have fresh recordings of all of the 1950’s R&B hits by groups whose first name always started with “The……” (as in, Platters, Arabians, Drifters, Del Vikings, Aladdins, Five Satins, Crows, Dominos, Limelights, Passions, Angels, Imperials, Bel-Aires, Argyles, etc. etc.)
--To have a local store with all the penny candy and five cent candy bars I used to buy when I was a kid (and pay today what I paid for them 60 years ago).
--For the state of
--To be able to play touch football, basketball, and soft ball as well as I did when I was 20.
--To learn how to mechanically repair and refurbish old cars and then to buy two 1970 GM “Muscle Cars” (Pontiac GTO and Olds Cutlass convertibles) and restore them.
--Force the UN move its headquarters to
--The Russian armed forces to mutiny, revolt against Putin, the Russian mob and the oligarchs who control that country and lead the Russian people in demanding a true representative government.
--Sidney Crosby and Evgeny Malkin stay health for the entire 2011-2012 hockey season, almost guaranteeing that the
--Ben Roethlisberger, James Harrison, and Troy Polamalu to stay healthy for the balance of the 2011 National Football League season, allowing the Pittsburgh Steelers to be Super Bowl contenders.
--To have Bob Nutting, the Pittsburgh Pirates’ owner—whose team now has produced 19 consecutive losing seasons--sell the Pirates to a person/corporation willing to spend the money necessary to compete in major league baseball.
--To have The Angel of Death visit every nation and annihilate all their citizens who practice violence and repression of others or who foster those vile acts. (Gawler’s funeral home in the
--For President Obama to approve dropping several nukes on parts of
--Ditto the nukes in about 20 valleys between
--Have the world turn
--The Congress to approve an automatic death penalty for all child molesters, with this current Supreme Court rejecting the inevitable challenge.
--For every country to legalize marijuana and release from prison anyone jailed for trafficking solely in that drug.
—To see every American second grader get instruction in foreign language and computer classes, with the most able taught Asian and Middle Eastern tongues.