Friday, December 21, 2012

A Nest of Vipers

In my last blog, I discussed the fact—unknown to me previously—that individuals working in federal Offices of the Inspector General, including the IG himself/herself are permitted to carry badges and firearms, if so approved by the US Attorney General.

The most recent report I saw, from four years ago, said that there are more than 3000 gun packing IG staffers throughout Uncle Sam’s world. I suspect that number is higher today.

Damn! That a ton of highly questionable firearms for jobs that seldom, if ever, require force backed by weaponry or are danegrous. But this piece is not about clerks with guns.

What that blog also produced was a variety of incoming communications about Fannie’s and Freddie’s regulator, the Federal Housing Finance Agency, and specifically its Office of Inspector General, which Steve Linick heads.

The most jarring message I read had to do with the size of Linick’s operation. The FHFA IG has some 150 employees (“some with badges and guns,” as Linick reminded GSE employees about a year ago) in an agency which has a non-OIG staff of barely over 500 people.

Sharp minds understand that IGs are supposed to look primarily inward at the workings of his own agency. Yet this guy needs 150 people—or one IG staffer for every 3.5 FHFA colleagues—to make sure they are doing their job?

Well, the answer is “yes” and “no.”

IG Linick Is......

It seems Sheriff Steve sees his mission as far broader than just making sure his parent agency does all of the right things. He thinks he needs to make sure that Fannie and Freddie also do the right things, whatever those are, and ergo has built an IG team to oversee that, meaning built a team to do duplicate what FHFA itself is supposed to do.

So, you have 500 FHFA overseers watching Fannie and Freddie and then you have 150 IG staff watching the “watchers,” plus now aggrandizing authority to watch Fannie and Freddie? And some of the latter “watchers” have badges and guns.

Buehler, Buehler???

What’s wrong with this picture?

FHFA insiders—and I am not one—speak ill of Linick, as do many in Fannie and Freddie. They question his priorities and believe Linick’s all about trying to embarrass his boss, current acting FHFA director Ed DeMarco, with a bunch of “chicken*** reports.”

Is DeMarco the Target??

Now all of this needs to be played against the background of a DeMarco who has earned praise from F&F types as well as certain GOP Senators, but seems to be held in minimum high regard by some in the Treasury and the Obama WH, who reportedly want to jettison DeMarco, but can’t rid themselves of him.

Is Linick marching to his own drummer or is he doing some dirty work for the Administration?

One conjecture is that Linick’s formal reports, produced by his large and “well armed” staff, are all about putting a vocational hit on acting Director DeMarco.

I wonder if all of those Capitol Hill denizens--who worry if Fannie and Freddie will repay their federal debts--will wake up to the fact that since F&F pay for all of their regulatory overhead, the two entities could save much more money, faster, if they weren’t paying for a unusually large FHFA OIG staff?

But carefully constructed fiefdoms don’t get shrunk in DC, they just grow like Topsy, no matter how lame the justification.

WSJ On The Case

As I got into this issue, I found out that a year ago, Nick Timiraos, writing in the WSJ, covered much of this story, including the IG’s staff bloat, internecine conflicts and the FHFA’s schisms.

Many would see little changing in a year.

(See Timiraos link below.)

By law, since 1992, Fannie and Freddie have paid for their regulator’s total budget. Beginning in 2013 (in just a few weeks), every dollar the two earn now will go right into Treasury coffers and help reduce the deficit.

Cut down on Fannie’s and Freddie’s overhead expenses and you increase what goes back to Uncle Sam.

Congress, if you are trying to reduce taxpayer spending and lower the federal deficit, look at FHFA  and shrink the biggest semi-independent unit inside it.

Solid savings might be had there without harming the two financial engines due to produce major Treasury cash.

The Congress should keep in mind the threatening braggadocio,  which the Mexican banditos affirmed in the movie "Blazing Saddles," and apply that worthy skinflintery to the Federal Housing Finance Agency IG’s office.

"We don't need no stinkin' badges."

A Stubborn, Muleheaded, and Dangerous House

Congress is lazy, always waiting until the final minute to do anything, often punting on vexing matters they can’t decide and diluting those on which they due agree (see Dodd-Frank).

In a less mysogenistic era, it was said that Congress often “talked like Tarzan but acted like Jane!”

Lobbyists count on that quality and know its endemic to the congressional species, which tries very hard—rhetoric to the contrary—to not gore anyone’s ox, since Members never know when it could happen to them and their favorite interests.

However, this current Congress has an ugly additional element, which I seldom encountered on Capitol Hill—embodied by the Tea Party contingent in the House and a few of their Senate fellow travelers—it’s reckless.

No matter the inherent logic, if the issue doesn’t fit in their tiny little brain square, many House Republicans will oppose  any effort to make it happen. No “grays,” no concessions, just black and white. (Yes, Democrats have their own but far fewer hardliners.)

It’s happening now on these desperate GOP maneuvers on the “fiscal cliff” and the nation will suffer for it and I suspect that the Republican Party will, too.

The TPers, rather than looking at their setbacks in last month’s elections as a sign that their views are not compelling, appear to be doubling down and threatening Speaker John Boehner, too, as he tries to respond to President Obama’s offer of tax and entitlement cuts.

Maybe going home for Christmas--before returning in less than a week--and getting their butts chewed off by their constituents might sober them up. These citizens appear more personally fearful of going over the fiscal cliff than their congressional representatives.

But, as my predictions of a “cliff settlement” before December 31 have been somewhat optimistic, so might this hope.

As we continue to ask God to look out for the tiny victims in Newtown, Connecticut, their families, friends, and community, we also should seek some guidance for these misguided Members of Congress.

Maloni, 12-21-2012

Monday, December 17, 2012

Would the IG Shoot Bureacratic Miscreants?

I assume that many of the readers who consume this blog are familiar with various federal government rules and regulations, most of you having toiled for Uncle Sam or worked closely with one or more of our government’s many agencies or departments.

Not all readers, maybe, but most.

As such, like me--who worked on and with Capitol Hill, in federal regulatory agencies, and at Fannie Mae--you are casually aware of most of the laws—not all, but most—which apply to your special interest area or expertise.

Tax lawyers know the codes and the politics of the tax writing committees, “housers” know FHA, Fannie and Freddie, mortgage interest deduction, some banking laws, and agriculture types know about wheat, milk, corn issues, Ag subsidies and on and on.

Now that I’ve built you up for this quiz, here’s the question?
How many of you know that Inspectors General—the internal legal internal  in every major agency throughout the federal government—and/or their deputies are permitted to carry firearms, if they get the specific approval to do so from the Attorney General of the United States?

Here’s the citation.

U.S. Code, Title 5 Appendix

(e) (1) In addition to the authority otherwise provided by this Act, each Inspector General, any Assistant Inspector General for Investigations under such an Inspector General, and any special agent supervised by such an Assistant Inspector General may be authorized by the Attorney General to—

(A) carry a firearm while engaged in official duties as authorized under this Act or other statute, or as expressly authorized by the Attorney General;

I didn’t know this and I was stunned to find out about it. A former DOJ official later told me that many IG’s are eager to carry badges and guns.

This exaggerated blog build up—which hopefully has you waiting with baited breath--is the forward to discuss something I was told last week, which I hope it is not true and is just the product of some diseased mind (other than my own) trying to start trouble or, more likely, throw gasoline on a nascent bureaucratic fire.

The story  is that the Inspector General of a certain federal financial regulatory agency, often mentioned in this blog, sought permission to arm himself in order to properly carry out the IG’s official responsibilities.

The rumor did not relate to the Credit Union Administration (CUA) or the Securities Exchange Commission (SEC).

If this is unsubstantiated BS designed to harm the purported principal or just mindless bureaucratic chit chat, let me apologize now to anyone feeling maligned in my retelling.

However, if the reverse is the case and this incident is true, someone might want to ask, “What the hell is this all about? What’s this lawyer’s justification?”

I cannot comprehend anything which goes on in said official’s world that can justify packing heat?

Since an IG is almost always looking “inward’ at matters within his agency, does this mean the individual would carry a gun when meeting with his boss, colleagues or junior staff. If so, would the unarmed be aware that one (more?) of their brethren is lethal?

How about if the IG attended a meeting outside the building at one of the institutions the agency regulates, would officials there be told that he is armed? What if he attends a meeting of other agency colleagues?

Are the requests to carry and the AG’s decisions (to grant or reject them) public information?

“Holy MBS Batman, what the hell is this all about?”

“I don’t know, Boy Wonder, but I’d like to!”

I hope most who read this find it as funny and ludicrous as I do.

If anyone can verify this specific story—meaning if it is true and not urban legend-- respond in the comment section of the blog. And, if it  did not happen, please let me know that, also.

(Ooops, just told that the WSJ hinted at this story last year and may have named names.)

Maloni, 12-17-2012

(Please pray for the children in Connecticut, their familes, friends, and community.)

Wednesday, December 12, 2012

Silly Regulators and Scurrilous Banks

In This Corner, Wearing Black Trunks and….”

The world today—as we celebrate the Christmas and Chanukah season—is rent with barbed conflict, some very sober and grave and some……. Well, you decide.

Vicious ongoing disputes--upfront and sub rosa--are occurring:

--between Israel and Palestinian Muslims;

--the Tea Party and the GOP;

--Iran and the US;

--Boston and New York professional sports fans;

--Paul Krugman and Mary Matalin;

--the Roadrunner and Wily Coyote;

--Syrian President Bashar al-Assad and the Syrian people;

--Democrats versus Republicans;

--Fox News against anyone with a brain or pulse;

--and the Federal Housing Finance Agency (FHFA) Director Ed DeMarco) and its Inspector General (Steve Linick).


Some  disputes are historical, understandable and bloody, but why are two Fannie/Freddie regulators from-- the same agency-- duking it out?

Nobody is sure. It just may be a “guy” thing or some status envy episode, but it still is weird. (See story link at the end of this segment.)

But, how else do you explain this week’s FHFA’s IG “panties in a knot” report damning the fact that some employees at Fannie and Freddie still are making more compensation than he believes is appropriate? Again, this isn’t more than they were making, just more than Linick thinks they should make.

That’s a cruel and hurtful finding, especially when you realize that the boards and officials at the two entities do not approve their final compensation, since is FHFA’s responsibility, the agency DeMarco runs and where Linick works!

Linick, in effect, just spanked his boss.

It’s like a circular firing squad, but this “gotcha game” is silly and unproductive except for its laugh value.

If Linick’s staff found evidence of deviation from previous pay standards, why not just walk down the hall and tell the boss or DeMarco’s top staffer about that? Why issue a report, generate news and pretty much behave like a bureaucratic ass?

Is this what the nation and the still vulnerable real estate world needs, one guy chewing at the other’s butt over nonsense or is this about Linick seeking a shot at DeMarco’s job when Ed leaves?

If IG Linick believes that less compensation produces more productivity, then he should propose that Fannie’s and Freddie’s back office responsibilities go to the hard working folks at HUD or FHA, where salaries are “government” and lower.

If Linick believes that neither skills or talent to manage trillion dollar mortgage portfolios—while still processing 75% of all of the conventional mortgage written in the nation—are not important, let him propose applying the Civil Service system to all of F&F;

If these aren’t his objectives--and he’s just trying to embarrass his boss--then he just should do his work (no press releases or media reports) and ship his findings to his superiors.

Making it a media show risks driving out more decent people at both enterprises, threatening the excellent progress they’ve made financially turning around Fannie and Freddie and their quality systemic efforts.

Anyone who might take heart from Linick’s work needs reminded—after recent Treasury machinations--that Fannie and Freddie, together, are required to tithe all of their profits to the government, beginning next year, and annually pour between $15 billion and $25 billion into Treasury’s coffers.

So the IG should be careful at what he targets, he could hit something vital.

But, I have a far better suggestion. Go old school men.

Linick and DeMarco just should drop the jawing, meet on FHFA’s roof and go “fist City.” Settle your dispute in a way both will understand—and the media, too--after one fails to get up from the asphalt because of the beating the other gives him.

(Here’s a link to the link to Washington Post article on this matter.)

HSBC Did What??

Is anyone else as PO’d as I am about the wanton behavior of HSBC Holdings plc?

Money laundering hundreds of millions (billions?) in Mexican drug cash and, separately, for years hiding thousands of transactions which support Iran and a host of anti-American hostile forces and countries in the Middle East.

For years regulators warned the HSBC that it was weak on compliance and oversight controls and that its was being to used channel Mexican drug proceeds, but the bank did nothing to rectify its problems and instead doubled down on its drug money operations.

Sorry, but just paying a nearly $2 billion fine to US regulatory authorities is a slap on the wrists.

Why is it that?

First, because the bank agreed to it and second, it is an amount that the forces if evil can replace for HSBC quickly, if the latter is inclined to recidivism and can’t wean itself from all of that ill-gotten revenue.

Would an individual, conspiring with America’s enemies and drug lords, be treated so lightly?

Well our SCOTUS claims corporations are people, so why not whack this company big time for its sins.

Go medieval! I would deny them access to the US payments system for a year or two--no matter the corporate consequences--and dent HSBC’s capacity to do business.

That would get the attention of the many other financial institutions, licking their lips, to replace HSBC as a compliant financial drug mule or become the international terrorists’ transactions partner.

(Yes, I know that Standard Chartered plc, another English bank, this week agreed to a $350 million fine for playing financial hidden bookkeeping games with Iran and other Middle Eastern bad guys. They should suffer just like HSBC.)

Maloni, 12-12-2012

Friday, December 7, 2012

Bank's Good News and Bad News

Gee, the banks are now making lots more money; all’s right with the world, and aren’t we happy?

A variety of reports out this week announced growing commercial bank profits, including making big margins on their mortgage originations, which---while not representing huge increases over previous new mortgages—did generate great profits.

The banks are not doing volumes of new business, just making more on the marginal amount of lending they do; along with the hefty profits they make arbitraging their funds in overnight Federal Reserve funds and buying short term Treasury securities.

Along with the earnings reports, a Wall Street Journal a blog article, by Nick Timaros, caught my attention because of both the bank earnings news and their reported “rich”--meaning high profit--mortgage origination business.

Timaros’ story reported on research papers delivered New York Fed conference this week. One of papers noted that despite all of the reasons cited by banks justifying relatively speaking higher mortgage rates, i.e. higher Fannie and Freddie guarantee fees, Fannie and Freddie demands on loan buy backs (damn those GSEs, still a problem even though they don’t control of their own businesses!), hedging costs related to delays in mortgage processing, and finally banks inability to process and approve a loan applications, none of them singly or together justify the banks hefty spread over their cost of funds.

Banks also argue that the large gap between what they pay for money and what they charge borrowers is because they don’t have the staff capacity to handle all the applications they receive.

Bull pucky!

If they want, banks can hire more people, but they chose not to because the business they are writing—which again isn’t huge—is so rich, why should they waste it on overhead?

Plus, they face no other major competition, since the large banks control the origination process via their in house lenders and their subsidiaries.

Timaros’ article notes that for most of the past decade, the banks’ spread between cost of funds and lending rate was 0.5 percentage points. Since the 2008 financial meltdown, the spread first grew to 1 percent and now it has leaped as high as 1.5%.

Even with the Fed insuring low rates across the board, shouldn’t some/all of the federal bank regulators ask why consumers are being charged so much relative tot he banks cost of money?

As Mr. Timaros wrote, “The upshot, the thinking goes, is that mortgage rates would be even lower if the banks were passing along their lower funding costs to borrowers.”

It can’t be news to the regulators when these developments were presented at a Federal Reserve conference with plenty of banking industry, regulatory observers, plus media, present.

The last time the federal financial regulators ignored a trend, financial institutions—including Fannie and Freddie—went on a subprime mortgage buying binge which threatened financial institutions and nations worldwide.

This pattern of high relative costs to consumers may not rise to that level, but somebody should say something about these unnecessarily high financing costs.
Here's a link to the Timaros article.

Oh, Oh, Elizabeth, Sherrod, and Maxine
(They Ain't a New Girl Singing Group)

The banks might want to reconsider their mortgage profit making (who am I kidding?) and maybe make less net cash with all of their government provided deposits, i.e. federal TARP funds and insured deposits, since a few political personnel moves announced this week suggest some dicey times on Capitol Hill for the big financial services companies.

New Sen. Elizabeth Warren (D-Mass)—whose fight for the creation of the Consumer Finance Board, as part of the Dodd-Frank legislation was heavily opposed by the big banks—has been named to the Senate Financial Services Committee, where she joins long time bank critic bank critic Sen. Sherrod Brown (D-Ohio), On the other side of the Hill, Rep. Maxine Waters (D-Cal) was named senior Democrat on the House Financial Services Committee. (She alone, is a major “Oh, merde!”)

If I was a banking industry exec, those could be the last three congressional Democrats I would want to testify before and explain my institution’s profit structure, especially when the industry publicly put so much money into trying to elect Mitt Romney. I wouldn’t be surprised to see similar financial service industry contributions to Warren’s and Brown’s opponents.

Bankers beware.

I am reminded of warnings, “What goes around…” and “Payback is…!”

Dick Armey and Freedom Works

Former House Majority Leader Dick Armey, and his $8 million golden parachute, was thrust into the news this week when his messy departure from Freedom Works, the right wing Tea Party-sympathetic organization which Armey helped create, earned heavy media coverage.

The exact story still isn’t perfectly clear, but it looks like a nest of scoundrels had a falling out and Armey landed comfortably on an $8 million departure cushion.

Reportedly, leading up to last month’s election, inside Freedom Works Armey for the organization to work more closely with the GOP congressional leaders, a position that Dale Kibbe, the FW president, and other FW officials didn’t support.
Armey then resigned from Freedom Works and took his guaranteed compensation, waiting until this week because his contract called for that payment only if he resigned after the November presidential and congressional elections.
Dick Armey now has cited his “ethical and moral concerns” over the behavior of some FW leaders as a major reason for leaving.
Freedom Works lost several of the high profile races in last month’s elections, when voters rejected their and Tea Party’s incumbents and candidates also were dumped by the electorate.

Dick Armey and Fannie

Armey always was a tough guy for Fannie, but never more than when he traveled the country in the late 90’s (in what some considered his thinly disguised testing of the presidential waters) touting his “flat tax” proposal.

Fannie Mae joined other "housers" to oppose--without mentioning Mr. Armey's name-- the negative homeownership impact that tax proposal would have on those taxpayers who itemized and deducted their mortgage interest costs.

The fact that the ads challenging the “flat tax” appeared in Iowa and New Hampshire really seemed to off the then GOP House Majority Leader Armey.

Armey retaliated by asking the General Accounting Office (GAO) to investigate whether Fannie Mae had First Amendment rights—my phrase not his—and legally could advertise and take positions on issues of the day?

GAO’s answer was “Yes, they do,” which did not mollify the Leader and seemed to put in concrete his opposition to Fannie and Freddie.

Support John Boehner as He Tries to Be Responsible

I’ve predicted a resolution on the “Cliff negotiations” before December 31--press statement wars aside—and I continue to believe Speaker John Boehner (R-Ohio) is attempting to act responsibly, given his constraints.

The GOP's wing nuts are gunning for him because he is talking constructively to the White House. Republicans and Democrats should support Boehner’s efforts.

People who know something about politics realize that any “Cliff deal” is a preliminary to far more significant bipartisan agreements next year or in 2014 regarding additional major spending cuts and substantive tax reforms. The problem isn’t going away.

The Right is wasting a lot of ammunition over a near term fight they will lose, if President Obama lets all of the tax increase become law on Dec. 31, because the right wing zealots in their party won’t let the GOP congressional leadership reach a settlement.

Read about Boehner’s attacks from the Right, link below.

Rick Santorum Does What and the Senate Listened?

I had to throw in this chestnut.

Those Senators who voted “no” on this action are cowards as well as craven. All because the Santorum family has a disabled child and choose to home-school her, while the soon to be ex-Senator believes the UN can deny them that opportunity???

Maloni, 12-7-2012

(“Remember Pearl Harbor,” 71 years ago.)

Sunday, December 2, 2012

President Obama: Big Steps and Go Bold

Cliff Notes

Tim Geithner would not be my choice to negotiate the Administration’s side of the “fiscal cliff” discussions. Despite his title, he doesn’t have the necessary credibility, political savvy, skill or clout; plus the Republicans know he’s a lame duck.

I would trust the President more himself to get the job done, personally. Mix it up Barack, don’t sit back and pontificate.

Grab Speaker John Boehner and the two of you, plus a small group of advisors, get in a room and stay there until you’ve hammered out a deal.

To me, that’s far more preferable and presidential than press release battles.

Since the President, for now, has eschewed this approach and wants an intermediary, my pick would be Obama Chief of Staff Jack Lew, someone whom I consider much more “Washington-smart.” Lew is a man of great integrity and a budget expert whose knowledgeable word on those matters counts. It doesn’t hurt that he is on the President Obama’s short list to succeed Geithner as the next Secretary of the Treasury and smarter than Geithner.

I continue to believe that the sides will agree on a package or the GOP—having failed to awaken and smell the November 6 coffee—will suffer doubly over their insistence of protecting the wealthiest 2% of Americans at the expense of the rest of American and no matter the Republicans seek to spin it that is the reality.

In that context, I believe Republican lobbyist Ed Rogers had an excellent summation of the GOP political status.

And a Politico reporting team has an equally pithy report on a possible “Cliff” outcome.

Reaching Across the Aisle, BO to Mitt and BZ

I hope that the President’s recent lunch with Mitt Romney produces a White House invitation to Romney to take on a serious mission, widely viewed as having substance and merit.

President Obama should advantage of Romney’s managerial and skill business set and turns him loose of a vexing public matter (ala Simpson-Bowles) and hope he succeeds. The mere appointment would send a message to America that one time political opponents can find common ground.

In the same vein—although I think this is a much longer shot—since Susan Rice has wounded herself in the foot and possibly lost her chance to be Secretary of State, President Obama should consider skipping the easy step of sending up Senator John Kerry’s name for the slot, and reach out to the brilliant, but very Republican Bob Zoellick and consider naming the former President of the World Bank to the top US foreign policy position.

(Disclosure: Zoellick is an old friend and former Fannie colleague, where he toiled in two different stints, the second as my boss. He’s a tough SOB to please and his team expectations are high; he’s confident and a solid manager.)

Bringing Zoellick onboard would be a bold, bold move Mr. President and possibly add a meaningful element to your legacy that lesser lights would not. It also would prove “bipartisanship” isn’t just a throwaway line.

Bob Zoellick earned boffo reviews for his World Bank work and—reportedly—had support around the world for a second term, if he wanted to serve again.

Zoellick professional history is excellent. He worked with the renowned Jim Baker at Treasury, holding several senior positions. He was the US Trade Representative for 4 years; is an incisive thinker, who doesn’t suffer fools gladly; seems to work about 26 hours a day; and, as Time Magazine famously quipped, “Zoellick has 30 more IQ points than everybody else.”

He also was the Deputy Secretary of State and later worked with Goldman Sachs when he left government, before being named head of the World Bank in 2007, a term position from which departed last July.

Zoellick is a senior fellow at Harvard, his alma mater and recently was an advisor to the Romney campaign.

Don’t know if he and President Obama could have a meeting of the minds on policy issues, but Zoellick would be a tremendous appointment, who would come onboard only if Zoellick respected the President’s intellect and they shared common views on the Middle East, China, Russia, Korea, and the many hot button issues facing Hillary Clinton’s successor.

Worrying about Fannie? Don’t!

Because of their pivoting and mammoth central financing role, Fannie and Freddie will be in the middle of anything the While House/Congress cooks up to improve housing finance or the status of those paying off underwater loans, many of which are in Fannie’s and Freddie’s mortgage portfolios.

As federal financial regulators seek to define risky and non-risky mortgage qualities—in new regulations soon to see the light of day—Fannie’s and Freddie’s standards and systemic operations will highlight and encourage making those mortgages.

Their current business profits suggest that the Treasury now will reap between $10 Billion to $20 Billion annually from the two, no small amount from which to blithely step away.

Some in the House may call for early Fannie and Freddie hearings but it will be right in the middle of great earnings years, with all of that cash going to Treasury, just as new national policies to insure quality mortgage acquisition will be applied to all lenders, and as the nation looks to housing to help stimulate an economic recovery.

So any partisan hearing designed to kick dead or to pretend that the two caused the 2008 financial meltdown will merely showcase the viciousness of those who promote such deliberations.

However, hearings to educate the relevant committees’ members about how F&F truly operated positively for 30 years--before they deviated and both engaged in undesirable and unnecessary Alt A and subprime mortgage investments--could be a very beneficial educational exercise.

Here’s a link to a recent article suggesting Fannie and Freddie will be with us “forever.”

Learning From History

In my last blog, I suggested that  housing and mortgage finance policy leadersshould analyze three decisions rendered by federal Judge Richard Leon, when he issued summary judgment rulings to three Fannie Mae executive, and removed them from a shareholders’ law suit alleging securities violations.

I wrote then that I felt it was important for people writing legislation to understand the real working of Fannie and Freddie and the why dark clouds still surrounding their pre-2005 operations may be all wrong.

Now, I am going to apply the same suggestion to any GOP officials dissecting the presidential election results to discover ways the party might change itself to insure that it’s not an anachronism as US demographics streak by it.

While I’ve offered my own recommendations in previous post-election blogs, a better idea is for those people who to read and internalize the comments of a Jim Greer, Florida Republican official who candidly discussed how state Republicans sought to suppress Democrat turnout and why? There are the answers to some of the GOP’s challenges.

It boils down to the same reasons why minorities don’t feel comfortable in the Grand Old Party, no matter how much the “regulars” claim that’s not true.

If, as a political party, the GOP tries to keep them away from the ballot box, what does that say to blacks and Hispanics when they consider the Republican Party’s accessibility?

These 2012 GOP election maneuvers scream, “Sure, we’re inviting, but not you!!”

Maloni 12-2-2012

Saturday, November 24, 2012

Summary Judgment

3 Strikes and You’re Out

Summary Judgment, Again

The “Mighty Casey” got three swings and after three strikes he was out, living only as a vague literary memory dragged out occasionally during baseball season.

Part of me wishes that becomes the fate of those remaining people who dislike or hate Fannie Mae, since much of their anger is based on trumped up allegations just now being exposed by the bright light of judicial action.
Last week, Judge Richard Leon (United States District Court for the District of Columbia) figuratively threw a third strike past a different “Mighty Casey” (my metaphorical Fannie haters) when he issued a summary judgment ruling for Leanne Spencer--Fannie Mae’s former Comptroller--removing her from an eight year old shareholders’ lawsuit, alleging Ms. Spencer, CEO Frank Raines, and CFO Tim Howard engaged in accounting and securities fraud.

Weeks before, Judge Leon had dismissed Raines and then Howard, sequentially, from the same suit for the same reasons. (Links to all three decisions are at the blog’s end.)

“Summary Judgment” is the Judge’s conclusion that a reasonable jury could not find sufficient facts or merit in the lawsuit’s thousands of documents, totaling 66 million pages of hearing records, to find the defendants guilty of any of the charges.

While I am most happy for my three former Fannie Mae colleagues, I remain troubled by the amount of systemic chaos the long hanging charges produced--clearly intended by those who manipulated the lawsuit’s existence-- and the fact that so little has been made of the efforts to sully the people charged as well as the place where they worked.

OFHEO Engaged in Politics Not Regulation

This 2004 law suit was based on a tortured finding by Fannie Mae’s safety and soundness regulator, the Office of Financial Enterprise Oversight (OFHEO) as it was known then, but now renamed the Federal Housing Finance Agency (FHFA), that senior company officials had engaged in securities fraud.

The history is, there was respect or love lost between Fannie and its regulator. Fannie believed the agency long was incompetent implementing the new risk based capital (RBC) mandate, called for in the 1992 law that created both the agency and a new capital design.

The statute called on the new regulatory entity to complete that RBC job in two years. OFHEO ultimately took 10 years, making a colossal mess of the project, often asking the two companies it was created to regulate to clean up and correct OFHEO’s technical failings and computer runs.

The “fraud” claim was a frustrated OFHEO’s suggestion that Fannie Mae, intentionally, had violated a new accounting regulation designed to “mark-to-market” asset backed securities, the price of which could fluctuating with interest rates many times during a business day.

But, in reality, the charge represented another clumsy institutional retaliation against Fannie, as well as some agency guerilla tactics, designed to bring Fannie’s management to heel. (In the same era and vein, there was a damming HUD Inspector General’s review critical of OFHEO maneuvering to bring down GSE share prices.)

Helped by SEC

Also in 2004--before the Fannie shareholders brought their suit--OFHEO’s finding was seconded by an even more bogus Securities Exchange Commission (SEC) “corroboration,” when the SEC acted as a vengeful White House political weapon.

Organized Fannie opponents made GSE disdain easier when they “helpfully” (to their cause) suggested to Congress and the media that what OFHEO and the SEC discovered was “Fannie Mae cooking their books and paying themselves millions in bonuses.”

After those incendiary charges hit and with no challenges to them--except from Fannie Mae--public officials ran from 20 years of Fannie and Freddie mission support or joined the lynch mob. Two decades of solid consumer and industry relationships, not to mention bipartisan political backing, quickly drained away from both companies.

Fannie business and ideological opponents used the reports to batter the corporation and—in a bizarre way--set up the crushing event sequence which bankrupted Fannie in 2008. Raines, Howard, and Ms Spencer had been forced out of Fannie Mae by the end of 2004, but--as now is well known--their successors engaged in very risky and questionable investments, buying billions in poorly underwritten Alt A and private label mortgage securities which failed miserably.

Until the recent Leon decisions exposed the hollowness of the OFHEO and SEC regulatory reports, only Fannie Mae--when the reports first were filed--and later Raines, Howard, Spencer and their lawyers battled the charges.

The Congress and even this White House may still have or share flawed GSE memories which fresh facts might disturb. Yet, at some point soon, these same policy makers claim they will make decisions about the future of the nation’s secondary mortgage market, Fannie Mae and Freddie Mac, and that means the continued availability of the 30 year fixed rate loan.

Ironically, with all of the talk of replacing F&F, it’s safe to say that Fannie Mae and Freddie Mac are going to be around awhile because they are needed, witness their heavy usage now even as government facilities.

When the government finally gets around to trying to help deserving cash strapped families, steadily paying on their underwater loans, it will be Fannie and Freddie assisting the Congress and the Administration--assuming the companies FHFA regulator doesn’t continue to oppose those actions--because so many of those mortgage are on Fannie’s and Freddie’s books.

With both companies generating solid revenue, now would be the time to help those underwater mortgagors since the companies could cover any marginal losses.

Read the Leon Decisions and Learn the History

Policy makers should understand the true history of the shareholder lawsuits, why there was little truth in the charges and why they were rejected by Judge Leon.

Knowing those answers should provide insight to those who will struggle mightily with the matter, if they remain clueless and don’t understand modern mortgage finance and/or still see Fannie Mae and Freddie Mac as evil doers.

As most in Washington know, “clueless” is not an uncommon or infrequent circumstance in the Congress (even among Democrats!), since many Members and Senators often are in the dark about issues on which they opine and then vote.

Let me throw a lifeline to those struggling in the waters of doubt and darkness, at least with regard to Judge Leon’s findings and why there exists so little familiarity with them.

One main reason is that DC’s leading newspaper, the Washington Post, has not reported on any of Judge Leon’s three pronouncements.

I’ve asked some of the Post reporters and even their Ombudsmen the reason for the “radio silence” on this positive development—especially since the Post has always been quick to editorialize against most things Fannie Mae—and I have received zero responses from any of them.

The Real Answer for the Minimal Media Coverage is…?

I did get a thoughtful opinion from a good friend who observed:
“From forty thousand feet, the interesting thing about this case is that OFHEO simply made up its fraud accusations for political reasons. All they had to do was to convince the media that their accusations were credible, which wasn't hard. Plaintiffs' lawyers filed their lawsuit thinking what OFHEO had alleged was factual. They had no idea it wasn't until very deep into the case, and by then it was too late for them to do anything other than to come up with the lame sorts of "proofs" that Leon eviscerated in his summary judgment opinions.

“In retrospect, it's no mystery why no one in the media wants to highlight Leon's rulings. The media was the group who got duped the worst by OFHEO's charade.”

Come on you in the national/political media, do you care to take a swing at any of these pitches?

In doing so, you could repair some damage done to people who were personally and professionally maligned and who suffered reputation and human losses.

You also might see the institution in a different light and unmask how much of the ugly tales spun successfully about Fannie Mae and its business operations, before the frantic 2005-2006 subprime purchases, were manufactured.

It’s not too late to fix this flawed understanding.

A falsehood may travel around the world while the truth just is getting its shoes on in the morning, but that doesn’t mean good people still can’t reveal it as a lie.

Maloni 11-25-2012




(Thanks DF for the links.)

Thursday, November 15, 2012

F&F Generate Solid Earnings

Fannie and Freddie and Some Election Leftovers

“Anonymous,” writing in the comments section of my last blog, requested more discussion about Fannie and Freddie.

I also wanted to note a few things which came via the Obama victory and the behavior of voters across the country, involving religion and marijuana.

Fannie's and Freddie's Positive Earnings Mean…..?

If you ask people who follow Fannie Mae and Freddie Mac what the future holds for the two, since both--as wards of the federal government--still dominate the national secondary mortgage market for conventional loans, the answers are many but similar.

“Leave them alone, they are working fine, not bothering anyone and they are paying back the government faster than anyone believed,” is the gist of most.

The federal government, beginning in 2013, will sweep every penny the two earn to repay their  borrowed Treasury funds, estimated at approximately $135 Billion outstanding for both. (Rough numbers: Fannie still owes @$85B and Freddie owes @$45B.)

Fannie’s regulator the Federal Housing Finance Agency (FHFA) estimated that the two entities could probably repay that amount in about 10 years, based on their current very positive earnings and the fact that each has told the government they no longer will require Treasury’s quarterly cash assistance.

Freddie’s 2012 third quarter earnings, after paying the Treasury $1.8 Billion, were a net $2.9 Billion. Fannie, the larger of the two and the greater debtor, netted $1.8 Billion after paying the government $2.9 billion in dividends.

One more quarter remains in 2012, which also should be a money maker, and then all of their profits go to the Treasury. Their 2012 net earnings stay with the companies and act as an additional capital cushion.

Again, discussion with some smart people about F&F’s future, range from nothing will happen because the two are making too much money for Uncle Sam (most), to a redesign F&F in a hybrid model (fewer), to full privatization and reactivation (fewest).

Pitching Out Bath Water and the Babies

The two do represent “golden geese” in a town where there ain’t many of those, and except for ideologues, recently, there have been no great calls for them to stop providing the huge financial support to the mortgage market they currently offer.

That might change when returning House and Senate Republicans (fewer in 2013) decide they want to pick a fight with the Obama Administration, but, again, most observers don’t expect that to occur or succeed.

At the other extreme are folks like me  who see the two—with a few legislative alterations—being able to take advantage of their serious and solid regulation and resurrected as purely private entities, raising their own capital with limited or no federal support and bringing fresh “private money” into the mortgage markets.

Given a now profitable Fannie and Freddie no longer borrowing but repaying the government, some see Congress looking at them as a possible “utility,” a candidate for some hybrid role, where the two (and others?) function as government blessed secondary marker principals but with limitations on how much they can buy, securitize, portfolio or earn.

Then there are the diehards who still insist that Fannie and Freddie should be figuratively burned at the stake for perceived transgressions.

Arguments used by the “obliterate them” crowd have been rejected by pretty important mortgage people, including the Federal Reserve Board, the President’s Financial Crisis Inquiry Commission, and a variety of noted economists and publications.

To be fair, with the political world focused on the recent congressional and presidential elections, this subject has not gotten a lot of timely attention, as Fannie and Freddie are further embedded in the day-in-and-day-out process of approving, via automated underwriting, and funding mortgage applications for million of American families.

The question of their fate and resurrection ultimately becomes a political one.

Can the new Congress and Barack Obama, who no longer has to fear reelection, quickly understand and disperse the many myths about Fannie and Freddie and begin to see them as part of a solution not part of the problem?

Ditch the Anger, Choose What Works, and Everyone Can Win

Can their more vociferous ideological enemies swallow some of that bile they hurled for years at Fannie  and Freddie  and grudgingly consider them in a positive light?

Can those same policy makers see the operational pluses that Fannie and Freddie offer and appreciate the systemic virtue of a smooth arrangement that Realtors, homebuilders, large and small community lenders, mortgage insurers, and consumers know and understand—a system which benefits them all currently?

I continue to believe the large commercial banks--which historically have been among Fannie/Freddie opponents--benefit from the model, because it allows lenders to quickly transfer mortgage risk to F&F, investors better able and more willing to manage those.

The F&F system is a familiar one that most mortgage professionals grew up with and work in today. But, for now, that system is financed exclusively by Uncle Sam’s dime and that needs changing.

I’ve read the American Bankers Association policy on this (important because all trade associations are “bound” by their policy statements, until formally changed) and I see no reason why  mortgage system professional  cannot come together-- before the new Congress cranks up in January –and shape a  draft bill which keeps Fannie and Freddie in place, but not as part of the government possibly transitionign from their current role.

The two companies first would have to repay the government or have in place an enforceable repayment agreement (think 15 year mortgage!). Like minded mortgage industry groups then could offer their idea to the Congress as a viable restructuring of the nation’s residential mortgage market.

I believe this can happen with the former GSEs not having any emergency ties or credit lines to the federal government.

General Petraeus

Few of us know much about this man’s personal life except what recently has appeared in the media, but one part of me thinks—after he and Mrs. Petraeus make a decision about their future together or apart—the United States government should find a very useful and valuable role for the General Petraeus’s military skills and expertise.

I still am confused (and likely dazed) over “Ambassador Kelley” and her request for diplomatic protection!!

Mormons and Our Religious Tolerance

Good for us.

After the Romney defeat, I remarked to a solid Romney supporter how impressed and pleased I was that during the Romney/Obama contest, I heard nothing about Romney’s religion or any aspersions cast by Obama allies on Mormons or the Church of the Latter Day Saints (LDS).

He agreed with me and noted there was some of that during the GOP primary, where Evangelicals and other conservative Christians had reservations and, in some cases, active opposition to anyone Mormon. Shame on them.

Maybe this past election did represent a forward step.

Pot's Future?

As both parties fight over fiscal cliff issues, I hope somebody is watching the forest and not missing it for those trees.

We have a rare opportunity to save a gazillion dollars and do the right thing.

For common sense, fiscal, and social policy reasons, I believe now would be a perfect time for the Congress—and the President—to kick the shackles from some backward thinking, follow the leads of Washington state and Colorado and endorse the decriminalization of marijuana, emptying our jail cells of anyone found guilty of a marijuana possession crime and offering a national recreational use plan to regulate and tax the weed.

Cleaning marijuana offenders from our penal instituions would save billions in local and federal dollars. Stopping the criminal pursuit of pot users and suppliers (with some caveats regarding the latter) will allow our police to concentrate on serious crimes and also save money. It could moot a huge portion of the Mexican and South American drug production problem, by substituting approved legal US domestic cultivation and sales, which be  supervised.

Regulating and taxing "grass" will boost Treasury revenues by untold billions and finish the farcical and delusional efforts to replicate alcohol prohibition of the 1930’s—which also failed.

This federal windfall will be welcome deficit reduction and allow for thoughtful health care for those—not unlike some alcoholics—who over indulge in smoking pot.

One Final Thought

Don’t sweat the “fiscal cliff.” The President sand Congress will reach an acceptable accommodation that won’t all be about CYA.

Maloni, 11-15-2012

Friday, November 9, 2012

Obama Wins

Nobody Messes With Big Bird,
Donald Trump Tweeted What,
And Karl Rove Argued What?

Barack Obama Gets Re-Elected

Barack Obama won the big job, again, to the chagrin of about half of America, who really aren’t losers. They’ll grit their teeth, move forward and benefit with the rest of the nation when leaders in both parties decide to act as adults and start addressing serious national matters, a process which begins soon.

For the good of the nation, there were lots of losers in this campaign, not just Mitt Romney. It will be interesting to see if their wasted efforts produce any tune changes.


Donald Trump may have succeeded in doing something anatomically impossible when his election night tweets about starting a revolution and marching on Washington, made himself an even bigger ass than he’s been in the past.

Karl Rove looking like a simpering toddler--who just wasted $300 to $400 Million of someone else’s money--whined on Fox News that it was too early to call Ohio for Obama (when there still were at least 14 or so votes yet to be counted).

Poor Karl. Can you please just go away and hope that folks won’t remember your near emotional breakdown or your empty prediction that Romney would get 300 Electoral College votes?

The Koch brothers wasted a lot of money, but they have a lot to waste and they never will be poor or voiceless in DC, as long as there are mercenaries for hire. My only wish here is that President Obama has a good memory and is prepared to go medieval on the people like the K sibs who tried to buy this election for Mitt.

Sheldon Adelson, I care less about, because he is a 150 years old, has orange hair; soon six Elvis impersonators or 4 really strong showgirls will be carrying him by the handles out of a Las Vegas funeral parlor. (Don’t forget it was Adelson who paid for the 30 minute attack video on Bain Capital, with which Newt pummeled Romney in the Primary and the D’s milked for use in the general election. With friends like him….?)

Recalculating their political approaches applies to several major industries and their trade associations. They know very well who they are, as does the Obama Administration.

If you are going to poison the King, you better kill him because payback is a bitch!


Besides President Obama and the American people, let me note an unsung hero who many Obama voters should thank for his early contribution which helped produce the Romney defeat, and that’s James Carter IV.

President Jimmy Carter’s grandson was the oppo researcher instrumental in getting Mother Jones reporter Jim Corn together with the individual who had taped Mitt Romney patronizingly dumping on the “47% percent of Americans.”  The people Governor Romney disdainfully said relied on the federal government for their existences and wouldn’t change that status if they could.

Corn’s story--when the video went viral--allowed America to hear Mitt Romney’s actual candid assessment of individuals and families not born wealthy but who earned or needed some of Uncle Sam’s help.

That gibe spoke broadly of the candidate and his party and they reinforced that bias throughout the campaign.

When the GOP Candidate realized that he dissed millions of senior citizens, injured veterans, college students and other voting constituencies, whose support he needed to knock off a sitting president, Romney tried and failed to walk back his remarks.

Thank you Jimmy 4 for helping bell Mitt Romney with the “47%” insult!

You’ve Read and Heard This, But…

In the wake of Romney’s defeat, you still have some prominent R’s claiming no changes are needed in their party, just a better get out the vote effort. They say the party of “no” still has winning ideas and principals, if not principles.

But, I don’t buy it.

Republican and Democrats alike will offer dozens of reasons for the GOP loss, including Romney’s shortcomings, Hurricane Sandy, whackos making idiotic comments about rape and abortion, and much more. And to some extent they all will be right.

But today’s GOP—unless dramatically reconstituted and ”darkened”—will lose lots of future races until it recognizes where the demographics of this country are headed.

It’s no secret, our nation is fast becoming black, brown, and less white and any political party which largely stays white is not going to prevail, except in smaller bits of geography where Caucasian voters might be a majority.

And while Marco Rubio, the GOP’s, great Hispanic hope is a shade darker than most R’s, he is Cuban by heritage, and may not connect with millions of non-Cuban Hispanic families they need to woo. (Sshh, don’t that to Reince Priebus--once named “Klaatu”--who thinks all Hispanics are alike.)

It’s not just “color,” it’s the GOP's institutional appeal. The GOP for generations has stood by the “wealthy” and the “haves.” For it to matter nationally, it has be more ethnically inviting and willing literally and figuratively to spread that wealth in more than just a public relations sense or the Republicans risk achieving "electoral runt" status.

That was true on Tuesday and it will be truer in two years when the Congress and Senate run again. And, it will be truer still in 2016, when Hillary Clinton might decide to grab for the brass ring.

A more moderate GOP doesn’t need to be a Democrat-lite facsimile. It could hold onto historic smaller government and greater entrepreneurial discretion doctrines, which might make each side work harder for the votes they get because the choice wouldn’t be so stark and ideas and principles would matter.

Going into this election the public was hurting with the economic dislocation which President Obama’s polices did not solve for enough people.

Democrat and Republican families were angry, confused and ripe to support whatever was necessary to improve their situations including voting for the Republican presidential candidate.

GOP's $$$$$$=Nothing

The GOP had more money than Midas and a SCOTUS ruling which allowed all of those corporate giants and industry groups to feed major anonymous money to their candidates and their causes, but it produced nada.

After a Primary featuring a variety of Lilliputians, they settled on a multimillionaire, who was willing to take both sides of any issue pretending he never flipped, and a man --despite his best efforts--who could not connect with those most suffering.

His party’s platform didn’t make that task much easier.

The Republicans uttered God’s name—blaspheming, aimed at Democrats--more often than a thousand southern cheer leading squads praying for a big game win.

God answered with “Hurricane Sandy.”

The voter dogs--including millions of GOP voters who had gone to the polls in 2010, but stayed away this week-- just weren’t eating the Republican’s electoral dog food and won’t until the GOP leaders change the flavor, the portions, and the content.

The “Cliff”

I had to laugh—ruefully since my retirement funds took a hit—at the stock market’s Nov. 7 reaction to the Obama win.

The market drops 300 plus points and 100 more the day after, as apologists cited fears of the “fiscal cliff.”

Bull dung!

The fiscal cliff has been around for most of this year—with everyone knowing that a premeditated “after the election” fix was planned--yet the market did pretty well before the election with that resolution just pending.

The loss just was the moneyed interests wetting their collective pants over the President’s win.

Maybe Wall Street just realized the implication of throwing all of that money into GOP coffers and betting big against an Obama second term?

Oh, maybe the specter of Sen. Sherrod Brown D-Ohio) and Sen. Elizabeth Warren (D-Mass.) as twin voices for financial reform and consumer protection just represents heartache for the big guys, when inevitably those two get to work on the Senate Financial Services Committee.

My Hope for Speaker John Boehner

Don’t worry boys, the fiscal cliff will be avoided, with program/spending cuts and new revenues leavened with the realization that you can’t cut federal spending too much before private investment really kicks in.

Maybe—just maybe—the White House, Senate, and the House crazies (as they have to be labeled for now) will build on that agreement to grapple with some other serious issues facing the nation, including job creation through the private sector and tax reform.

I believe that John Boehner will step up and lead the GOP in doing its necessary share to make sure there are no major cliff casualties.

My advice to both parties is let the Bush tax cuts die at the end of the year and go back to the Simpson-Bowles recommendations for domestic and military cuts.

Who knows what good, minds unburdened from trying to defeat Obama, can do once they cooperate to solve issues which vex Americans in both parties. They may even come up with some good ideas about Fannie Mae.

Maloni, 11-9-2012

Wednesday, November 7, 2012


New post-Obama victory blog in the works!!

Monday, November 5, 2012

Romney’s Taxes (redux)

(addendum to 11-4-2012 Blog)

Sunday, November 4, 2012

Some Recent Stories & Columns
As You Choose Your Candidate

I’ve previously noted my intention to vote for President Obama, but I have selected  a potpourri of recent media items, if others want to read/see them before they go to the polls on Tuesday.

No Matters Who Wins; Party Splintering in the Offing

Mitt Insults Voters

Katy Perry Campaigns for Obama

A White Man for President

Women Should Be Concerned Over Romney Win

Chrysler Exec Nails “the Donald” (and Mitt)

Mayor Bloomberg Endorse Obama

Hill Republicans Try and Shut Down Critical CRS Tax Report

Paul Krugman on GOP Blackmailing the Nation

Chris Christie Lauds Obama for “Sandy” Response

Maloni, 11-4-2012

Tuesday, October 30, 2012

Can't Vote for Mitt

My GOP Apprehension:
It’s Not All About Mitt

Some D and R Differences; Sorry Mitt, But I Can’t Vote For You

In the past few days, as the Romney and Obama campaigns charge after the White House, Senate, House seats and local offices, I heard smarmy Ann (“I’ll say anything for TV time”) Coulter call President Barack Obama a “retard.” Donald Trump again offered his “Obama is foreign born” bull pucky. Former New Hampshire Republican John Sununu dropped his thinly disguised “racial bomb” when explaining why General Colin Powell endorsed Obama (they’re both black). This prompted Powell’s former chief of staff, bravely to blast the GOP and Sununu calling them “racists,” with his longer more accurate statement, “My party is filled with racists.”

Indiana Republican Richard Mourduck--running for Senate--announced that his God welcomes babies born via rape of the mother. I won’t even bother to talk about the biologically challenged Missouri Republican Rep. Todd Akin, another Senate candidate, who assured the world that women have a hidden body switch to shut down baby making during a “legitimate rape.”

I can’t leave out, (according to his campaign) “right to life” advocate Rep, Scott Dejarlais (R-Tenn), a married medical doctor, who cajoled his mistress--one of at least four mistresses according to local news reports--into having an abortion.
Dejarlais now is running for re-election with an endorsement from a different mistress. (Can’t make this stuff up.)

Mitt Romney did not utter any of those comments, nor did he criticize the people who did, including the hypocrite Rep. Dr. Dejarlais, which is a major reason for the title of this blog?

Many, but not all, Republicans share common tenets. (My R friends will tell me if I am mistaken.)

Partial GOP List

Here’s is my not exhaustive GOP preferences list:

 prevailing disdain for the federal government;

 strong belief in right to life for fetus, but less support for babies once they are born;

 dislike and distrust of minorities;

 inherently not comfortable with minority group priorities

 dislike or distrust of feminists or other aggressive women demanding parity with men;

 oppose legislative efforts to deal with racism, sexism, sexism or other forms of inequality, since they question whether many of those conditions even exist;

 oppose most forms of gun control, including sale of combat weapons;

 oppose all but the most minimal regulation of commercial activity—at any level of government--no matter how risky or dangerous the practices;

 an overwhelming belief that the “market” is the best arbiter of any product, service, price or commercial activity;

 affinity for a large military and “muscular” foreign policy;

 fear of China’s business and military might;

 silent endorsement of “boys will be boys” behavior;

 engage in insensitive and occasionally inaccurate public dialogue about sex matters; (suggesting fixations or personal problems);

 admire the “law of the jungle” or “survival of the fittest,” but disdain for Darwinism/Evolution and much of the science surrounding it;

 not wildly supportive of environmental or “global warming” issues;

 support state voter suppression campaigns in the absence of any evidence of voter fraud;

 support tax cuts, especially for the wealthy, as a universal elixir for all ills;

 believe that the most effective government level is the government physically closest to the population;

 generally believe that the Bible and the US Constitution are sacrosanct and require little if any interpretation;

 generally opposed to activist judges and courts;

 strong advocacy for states rights over federal authority, except Florida in the year 2000;

 and few concerns about Church-State relations, believing that the US is a “Christian nation”;

 unfailing support for the society’s “haves”;

 not wild about the United Nations or its smaller members wielding influence;

 Want to believe that large commercial banks represent “private capital,” despite the fact that most of their $7 trillion in deposits/working capital spring from a $5.3 billion inadequately funded federal insurance fund, which can’t possibly cover all of the personal/family/business savings in banks, if there was a massive failure.

Not Universal and D’s Have Their Blind Spots

Now every Republican isn’t into all of those and I suspect I missed a few other shared beliefs, possibly some salient ones. But those I have noted provide a pretty fair profile of the “GOP gestalt.”

If I listed average Democrat descriptors--in the same categories--most items on the list would contrast with GOP traits, from a little bit to a whole lot.

D’s would believe in the federal government’s ability to manage or solve fiscal, social, and commercial problems; think the wealthiest among us should pay more taxes, because they have benefited more; D’s seem less fearful of diversity and change; are more skeptical of total faith in “the market,” since the latter has been responsible for some truly and costly diabolic behaviors, designed not to favor the least among us but concentrate wealth in the hands of the “haves”; most D’s believe in the efficacy of strong federal regulation and consumer protection; also they far less agitated over their fellow American diverse religious beliefs and choices.

What Mitt Does for the GOP and Why That Concerns Me

I have no personal animus toward Mitt Romney. I never lived in Massachusetts, never attended Harvard, am not anti-Ivy, and don’t care if he fantasized that if he was Hispanic he would be the next President. I don’t have the significant wealth the Romney family enjoys and don’t run in the social circles in which they move.

Through my entire Washington career, working in and with Congress, at two financial regulatory agencies, and at Fannie Mae, I have engaged successfully with a number of Mormon public officials and I have been exposed to the Latter Day Saints faith. I believe their religion (including mission and tithing) makes them just another positive variation of Christianity.

Romney also might be a decent President and I have written that Mitt Romney may have more success sooner than Barack Obama bringing back our national economy because he will have a supportive Congress to work with him. Obama won’t.

But……with the decided rightward tilt of the GOP and the purging of moderates, if Romney wins election next month, he would be forced with little alternative, to flood the Executive Branch with men and women who are very comfortable espousing and embodying that list of GOP positions I developed.

The Romney-Ryan team has not been straight or transparent with the American people, offering meager campaign platforms and pliable position papers, displaying a lot of venom but little substance.

On most major issues, Governor Romney has espoused both sides of the question.
Just what does he really believe about tax reform, deficit reduction, and immigration, let alone Medicare and Medicaid?

The sweetest plum that could fall into Mitt Romney’s hands is the power to appoint two and possibly three Supreme Court justices who will serve for life and buttress a Robertson, Scalia, Thomas SCOTUS majority possibly for the next generation.

Rove, Koch, Adelson Channeling Right Wing $$ Millions

I will vote for Barack Obama because I don’t want the Nation’s Capital or courts filled with acolytes of Karl Rove, the Koch brothers, and Sheldon Adelson, if not frequent WH consultative visits from those individuals.

I don’t believe “corporations are people.”
This “new Conservative cabal” is just the “old Conservative cabal,” who served George W. Bush 10 years ago.

It will try and push us—and the world—backward to an era which can’t exist anymore and can’t be recreated, the United States of 60 years ago, still pumped and bristling from leading and reshaping the world after our World War II victory.

In presidential Debate #3, Romney said that “we can’t kill ourselves out of our nation’s foreign policy problems.”

We already are the world’s greatest military power, spending more on our armed forces than the next 10 sovereign spenders. But who believes the “new” Republican Party jingoism--which wants to boost defense spending two trillion additional dollars in the federal budget--agrees with that logic? (“Nothing like a good war to get the economy…..!”)

The GOP calls for building more barriers to keep out “illegals” plus shipping many back to their countries of origin; standing up militarily to China in the Pacific; giving Iran, Russia, and other bothersome countries a little of our nuclear middle finger.

Sounds great on a campaign stump but it’s a very risky and destabilizing foreign policy.

An Obama victory won’t sanitize the Congress of all of its extremists, right and left, but it will keep most out of the Executive branch.

Barack Obama, warts and all, offers more to America and the world. He’s the better choice to be our next President.

Maloni, 10-30-2012

Happy Halloween to all of you "kids" and VOTE next week for which ever candidate rings your chimes!!

Friday, October 26, 2012

Mortgage Liquidity, Liquidity, Liquidity

(Warning, this is a lengthy blog. I felt it was necessary to remind people of the value of the pre-subprime Fannie and Freddie, mostly before 2005, and the new reasons justifying consideration of the former GSEs ongoing national value as private entities. I could have broken it into two parts, but feared the loss of continuity. Thanks to my friend and former Bank Board and Fannie colleague, Gwenn Hibbs, for her legal and cynical eyes.)

President Obama and Mitt Romney are neck and neck, with less than two weeks to go before the Nov. 6 election.

The hard core votes for each man should balance and, if news reports are accurate, the race will be decided by women and those currently “undecided.”

The women and “Undies” driven by major social issues probably lean to Obama; those who care about the economy will lean to Romney, especially when they realize the former Massachusetts Governor will have a friendly Congress to work with, which Obama likely won’t.

I’ve blogged enough about the presidential election, so I want to turn to a more familiar matter, since it is an issue confronting the next Administration and Congress no matter who comes out on top.

What should America’s secondary mortgage market look like?

Right now, nobody cares because everything seems OK, with the federal government backing all the main players. But because of those taxpayer risks and costs, both political parties argue a change is needed.

A couple of developments have occurred which I believe lean heavily in a direction which won’t surprise many blog readers, but might open an eye or two among those hoping to make national mortgage policies.

Bye-Bye Uncle??

Can we ever get the federal government out of the conventional mortgage market? How might Fannie Mae and Freddie Mac make that happen?

A major part of the answer, first, is forcing the world to look at Fannie Mae anew, after decade of horribly bad press--much of it sensationalized and inaccurate--which started with a major lie. The negative momentum picked up as subsequent Fannie officials lost billions on very low quality mortgage investments and drove the enterprise into the ground.

Since then, matters have changed producing facts which checkers will find irrefutable.

As creatures of the federal government, since the Bush takeover in 2008 and now managed by the Obama Administration, Fannie Mae and Freddie Mac have managed 75% of all new conventional mortgage loans, which lenders sell into the secondary mortgage market. In fact, they’ve had the same market share—or slightly larger--for over three years.

It’s safe to say, Fannie and Freddie are the nation’s secondary market, because nobody else wants to manage it, given the responsibilities.

The only other industry large enough to take this mission from the former GSEs and their federal overlords is the commercial banking industry and bank actions scream they don’t want the job.

The Big Banks

Right now banks are happy; banks do not want to hold any conforming mortgages on their books, which the federal government doesn’t guarantee, nor do they appear to want to challenge F&F for the systemic obligation to keep money flowing on a steady basis throughout the nation—“in good times and in bad”-- by acquiring mortgage loans other institutions originate, i.e. the role of a secondary market maker.

The Federal Reserve’s two month old “Quantitative Easing 3” (QE3)—which the Fed hopes will stimulate the economy with its monthly $40 billion purchases of bank-owned mortgage bonds so banks have lower cost mortgage money—has freed billions of bank capital for mortgage lending and at low pass through rates for mortgage borrowers.

But many banks have chosen not to belly up to that free bar, saying they don’t have the staff to handle all of the potential new business those low rates can produce.

Maybe true--yet easily fixed--but the banks ain't bragging about the ton of cash they earn through arbitrage, putting the bond proceeds in overnight Fed accounts (about $1.5 trillion earning 25 bp) or buying Treasury securities.

With their actions, the banks display risk aversion and cite the pre-2008 real estate fiasco to justify not making bold new mortgage moves until the dust settles on what bank regulators as well as their own boards of directors expect.

F&F Still Chugging

At the opposite extreme in their current “quasi-government” lending role in the past three years, Fannie Mae and Freddie Mac—with Fannie carrying a larger burden of the two—have securitized nearly 8 in 10 of conventional mortgages originated in the United States.

In a harbinger of future black ink, both recently have posted solid earnings and publicly announced that no further Treasury financial help was needed in the near term.

Pouncing like a Soviet era apparatchik, the US Treasury then announced it was going to sweep every dollar the two earned, not just charge them the usurious 10% dividend on borrowings for its assistance. (Banks needing help only were charged 5 %.)

But the market operation's die is cast.

If  Banks continue to sit on the sideline (and why should get change, if they are being given such easy Fed money?), Fannie and Freddie in their ersatz form still will dominate the mortgage market, as policy makers wring their hands over that reality.

Please note, too, the F&F success is based on supportive—and at times strait jacket regulation—imposed by their safety and soundness regulator, the Federal Housing Finance Agency (FHFA). That agency requires that F&F only process low risk well. Underwritten mortgage loans. The mortgages have lender warranties affirming that borrowers have the means to repay those loans.

That kind of control was absent when Fannie got into deep trouble.

Why Fannie II?

Supporting my suggestion for a brand new look at something old is:

--Fannie and Freddie are a tested secondary market system well known to consumers and lenders;

--Fannie and Freddie have much improved oversight;

--There are no obvious or willing successors;

--Because of other governmental changes, most lower quality mortgages no longer go to F&F as conventional loans, but directly to HUD's  FHA guarantee insurance program;

--and most important to some, the “evil Democrats,” who used to freak the GOP, are long gone from Fannie Mae.

Now before all of the smirks and grins appear on wizened faces, contemplate this “wild card,” which few people in the nation’s capital seem to know and understand.

For the second time in five weeks--issuing a “summary judgment” decision in an eight year old shareholder lawsuit accusing former Fannie officials of violating security laws--Federal Judge Richard Leon found there was no evidence in the thousands of pages of testimony and filings which showed that Tim Howard, Fannie Mae Chief Financial Officer (CFO), did anything to break any securities laws or had any information that Fannie Mae broke those laws.

Previously, Judge Leon issued the same “summary judgment” decision” (dismissing him from the suit, as he did Howard) to Frank Raines, who was Fannie Mae’s Chairman and CEO from 1999-2004.
As my late mother used to cynically ask, "What’s that have to do with the price of tea in China?”

Lies and Damn Lies

Well Mom, and the rest of you chuckling, pointing fingers or rolling your eyes, those legal decisions mean that the single most devastating attack on Fannie Mae now has begun to unravel, because its only was a fabrication shaped less by reality and more by Fannie's business and political enemies, succored by the Bush Administration.

Worse, it fostered a situation, where good managers were forced out and Raines’ and Howard’s overmatched successors broke from the successful Fannie Mae norm--purchased unsound Alt A mortgages, ‘No Doc loans” (documentation), and worthless Wall Street originated subprime mortgage securities--and doomed the company and its shareholders, adding grist for the haters.

In 2004, as reporters and authors have documented, the Bush Administration utilized a variety iof actors and tactics and facilitated a Fannie Mae jihad (overused term, but quite accurate here).

A brewing conflict between Fannie and its sophomoric regulator then called the Office of Financial Enterprise Oversight (OFHEO)--renamed FHFA in 2008 legislation--pivoted around the company’s belief that OFHEO lacked technical competence and industry understanding.

In a thinly veiled retaliation, OFHEO issued a damning 2004 report alleging Fannie officials violated federal accounting rules, fooled investors, and used the manipulated numbers to support large yearend bonuses or as company opponents were quick to politically reduce it to (paraphrasing) “Fannie cooked their books and paid themselves big bucks.”

Fair Weather Friends

Company denials and solid rebuttals failed to assuage official Washington. When federal regulators imply fraud and deceit, the Capitol’s meek run to the sidelines while the feint of heart figuratively leave town.

That happened to Fannie Mae which immediately began to lose congressional, industry, interest group, community and consumer support, especially when the Bush SEC affirmed OFHEO’s finding.

By the end of 2004, Frank Raines resigned and Tim Howard did too.
Their successors, chosen by the Fannie board and the Bush White House, were not quite ready for prime time and made disastrous business errors leading to colossal failure and a Bush Administration 2008 takeover.

But the OFHEO report was false and the SEC confirmation equally so.

Professional careers, personal lives, and reputations were savaged and a well run institution, which was a major underpinning of the country’s mortgage system, stopped being so well run.
Given all these considerations, I believe that a review of what Fannie and Freddie did for the nation, leading up to 2005, argues for a “re-privatized” Fannie Mae and Freddie Mac, especially when the reviewer keeps one eye on Judge Leon’s findings doing the objective examination.

In all of the Fannie hate spewed it’s too easily forgotten--before the 2004 regulatory attacks and disruption began—that Fannie Mae worked successfully with a variety  of lenders and efficiently provided hundreds of billions in systemically safe and affordable mortgage financing, crowned by the ready availablity of the much desired 30 year fixed rate mortgage and its 15 year sibling.

I contend that only some ideologues will fail to see that times have changed and nobody wants the federal government up to its eyeballs in the conventional residential real estate market.

A Fannie in Your Future

Fannie and Freddie can be resurrected to serve what everyone hopes will be a housing surge that can produce economic activity and jobs across the country.

Done thoughtfully, after a statutory transition period to get from here to there, a President and Congress might agree that safe secondary mortgage market efficiency can emerge again without Uncle Sam financially standing behind it.

The new Fannie Mae and Freddie Mac must agree to a Treasury repayment scheme and going forward without federal financial support or lifelines.

I think even the nation’s major banks truly would love to have “new” institutions to which they can transfer the mortgage risk inherent in every loan eligible for Fannie/Freddie purchase.
They certainly do that now but with the federal government taking all of the risks. (Why is it that Conservatives never accuse the banks of “privatizing the profits but putting the risk to the federal government?”)

Congress Needs to Work Smart, Not Mean

Remaking Fannie Mae along these lines will bring private capital back into the mortgage market, faster than anything else Congress can create with that objective.

No matter what the Congress says in statute, I know that “Mr. Market” in the future could look back to 2008, when Fannie and Freddie and big and small financial institutions were helped by Uncle Sam. Those institutional investors still could assume that the mortgage sector is too big to fail and the feedral government will just write checks the moment there is trouble.

None of us can erase that history, so the market will just have to learn the hard way if the Congress declares in law that Fannie and Freddie or other major mortgage investors are not backed by the federal government and then acts accordingly.
With continued expert oversight, the federal government can get out of financial responsibilities for every conventional mortgage which Fannie and Freddie could finance.

The lender and systemic familiarity with Fannie and Freddie still exists. The solid regulation—keeping bad loans out of the process--is in place. The demand is growing. The efficiency is there and Judge Leon has provided a new perspective on well know actors.
All that is missing is an Administration and Congress trying to reinvent the wheel and opt for an easy transition from the old government model to one minus Uncle Sam’s copious support.
Official Washington talks the “private mortgage real estate capital is needed” talk, so now it should walk the walk.

President Obama or Governor Romney, think about what I’ve proposed and get back to me!!

Maloni, 10-26-2012

Monday, October 15, 2012

Hear Me Roar; Just Don’t Tally My Deficit “Savings”

I am surprised how many of my Democrat friends continue to think President Obama is a shoo-in because he holds slim leads in crucial Electoral College states.

I don’t see it that way, even if Obama is leading in some states.

I think that Mitt Romney--warts and all (referring to his public policies which don’t quite add up whether it’s tax reform or deficit reduction)--has Obama and the Democrats on the run going into tomorrow night’s debate.

But there still is hope, if enough light can shone on Mitt's policies and positions.

Truth is a big issue for the Romney campaign, claiming it not telling it.

Hear Mitt Speak Out of Both Sides of His Mouth

Mitt Romney and Paul Ryan consistently have accused President Obama of not telling the truth and Romney’s proxies, including former GE CEO Jack Welch, are accusing the Administration of putting out phony employment numbers, despite several prominent GOP policy and political wonks saying Welch is all wet.

Romney already has said that he doesn’t hold with everything that his supporters believe (Trump on “Obama is foreign born”) (Todd Akins’s belief that women can flip a secret body switch and hold off the unwanted rape results) to name two.

He has not commented yet on Rep, Paul Broun (R-Ga.), a senior Republican on the House Space, Science, and Technology committee, who last week called all modern science, regarding evolution, a “lie from Hell.”

Its tough getting Mitt Romney to stick to what he supports or doesn’t; maybe that will change, since his views seem diverse and manifold, which is a nice way of saying they don’t add up.

Tomorrow night and in coming weeks, I hope Mitt Romney will give some details on his own platform, instead of just why he thinks Obama’s policies are bad.

Although now on Obamacare, Romney has backtracked from total rejection (“I am going to repeal it on Day 1”) to identifying major provisions he likes, specifically protecting people with pre-existing conditions and coverage for their children up to young adulthood. (So, what’s he against?)

His retreat was just before he backtracked and flipped on his disdain for the 47% of all Americans who are wedded to their federal benefits and wouldn’t support him for President. He ate that one, too.

Republican Romney this year has backed several GOP state efforts to suppress voter where there has been little or no history of same, but I doubt if he’ll shout that from the roof tops. (State courts have put on hold until after the November elections two of those efforts.)

Romney has been up front about opposing the Obama relief for the automobile industry, which seems to have worked for the auto industry, its workers, suppliers and the US

Treasury’s coffers, as well as allowing “The Big Three” to make attractive and competitive vehicles (which I guess still should play well in Ohio, Michigan, and Illinois and places where they like American cars).

I have a suggestion for President Obama  and that is to promote these videos  showing Mitt, who claims he will end federal deficit spending, making expensive promises to various audiences around the United States, saying:

--He will not cut Medicare for seniors and near seniors;

--He will not cut social security benefits for the same group;

--He will build 15 new ships every year, including three nuclear submarines and return America’s military to some previous level of strength he claims has disappeared;

--He will reduce tax rates by about 20%

--He will provide more money for job training

--He will close various tax loopholes and deductions (unstated), but not the mortgage interest deduction, the deduction for charitable contributions, nor any of the other top 13 US tax expenditures.

They appeared conveniently on the October 9 Jon Stewart’s “The Daily Show.”

Bloomberg News, hardly a tool of the Democrats, also carried an article claiming that Romney’s tax plan--despite claiming that he won’t give tax relief to the “rich”--appears to provide $86 billion in tax cuts to folks making more than $200,000 per year. (See following link to Bloomberg article.) Experts believe the Romney tax plan would require major new taxes on the middle class, if Romney hopes for any serious deficit reduction goals.

When asked how all of this spending will still produce significant deficit reductions, VP Candidate Paul Ryan tell Fox News (also on this Stewart video), “It will take too much time to explain it.”


Maybe President Obama or even Candy Crowley will ask Governor Romney to clear up some of this confusion during tomorrow’s debate and tell the nation, once and for all what he proposes to do, specifically, if elected President and who gets to benefit and who gets the pain? Then let the fact checkers have at it.

It does sound like the Romney-Ryan ticker is resorting to a lot of malarkey, but you decide.

Maloni, 10-15-2012