Getting Fannie and Freddie Positively Involved
When I first heard that the federal government was going to pay Fannie Mae and Freddie Mac to reduce principal on mortgages they own and use the two entities (it’s tough call them “companies” anymore) in a far more constructive way to help the nation rebound from some of its real estate problems, I was overjoyed.
With the continued criticism of the two from the political Right, I felt that the Obama Administration barely tapped the systemic good the two are capable of performing, if only incented and let loose. Maybe that’s changing?
This new step: asks the companies to reduces monthly payments on their loans which receive a “mortgage principal haircut”; recognizes that F&F have to operate on some sense of market principles; will inject billions into the economy as the fortunate F&F mortgagors start spending those monthly mortgage savings; and is an efficient way to deal with the market reality that Fannie and Freddie have so many US mortgage loans on their books.
If this works, the next step--which likely would require an executive regulation--since the GOP controlled Congress likely would balk at any legislation, would permit the two mortgage giants to do the same thing for other mortgage investors (read large commercial banks), holding both Fannie/Freddie and non Fannie/Freddie mortgage securities on their books.
Turning weaker loans into stronger ones, by cutting the principal, clearly helps consumers. I believe it also would strengthen bank balance sheets and might encourage the financial institutions to return to active home mortgage lending.
Good news, one way or another Tim Geithner is leaving government service no matter who wins the presidency in November.
The “best Democratic Treasury Secretary the banks could want”--which is my personal description-- has indicated he won’t stay if President Obama wins and it’s doubtful that “Newt-ney” or “Rom-ich” (you tell me who’s going to prevail) will invite him back.
So goodbye Tim, I wish I could say that “we hardly knew yee,” but unfortunately we got to know you quite well and you never dumped that “big bank first” set of priorities, which always puts the needs of large financial institutions over other considerations.
Job Swap, If the R’s Win?
Some think Geithner would be a natural at the World Bank. (Doubt it!)
There also is a strong rumor that Hillary Clinton—who also said this is her final year in the Administration—covets that job.
If those suggestions are true, Tim should just get a Metroliner ticket to New York and hunt for his next banking position, because, I believe The World Bank’s board of directors would find Mrs. Clinton a far more attractive candidate.
(Of course, if Joe Biden “retires” and Hillary replaces him on the Democratic ticket? Hmmmm!)
One World Bank problem is that current bank President Bob Zoellick, with whom I worked at Fannie on his two separate stints there, has done an excellent job and, despite his five year term ending this year, he likely could get an extension if he wants one.
If there is a Republican president after November’s election, that person easily could offer Bob Zoellick a cabinet post (Treasury or State, not necessarily in that order).
The indefatigable and brainy “Z”--who was former US Trade Representative and worked in the Jim Baker Treasury--has the substantive background to do either of those jobs and do them well. Some might suggest he could do both, simultaneously. (Paraphrased quote from a Time Magazine article about BZ, a few years ago, “The thing about Zoellick is that he has about 50 more IQ points than everyone else.”)
Newt seems to appeal to a lot of prominent GOP dullards, getting endorsements from Jim DeMint, Rush Limbaugh, Sarah Palin, Rick Perry, and Herman Cain, while smarter R’s, like Rob Portman, Bob Dole, Tim Pawlenty, John Huntsman, and a few astronauts and NASA types come out for Romney.
The Florida Primary
The blog will go out before Tuesday’s Florida results will be known and the Republican internecine beatdowns continue, since none of the candidates is likely to pull out of the race until we go through a few more state primaries.
After watching Romney and Gingrich use a similar technique to respond to each other ‘s “false statements,” I now understand the secret to telling lies is quietly to say “yes,” nodding in a condescending way when challenged with the information you fibbed, and then go right on to your next attack point.
Not to suggest that Gingrich has more opportunities to do so, but Newt does it best, just looking at Mitt, slightly nodding and saying “yes” and then he loads up and whacks Mitt with another slobberknocker!
Conventional wisdom is that—at some point—Newt’s peccadilloes (and frankly Callista Gingrich’s jaded role being “the other woman” in Newt’s married life, no matter how many musical instruments or children’s art works she produces) will cause his world to come crashing down and all of the hubris, bravado, an institution challenging silver tongue oration --which has earned him votes and support—will crumble when people start asking, “Do we really want this man to be our President, really?”
Undeniably, Newt has an edgy surface appeal, but if he can run a successful campaign and win the GOP nomination with the baggage he (and she, too) is carrying, then we have lost more national character than I’m comfortable acknowledging.
I still may want to volunteer and be one of the 13,000 people (Newt's estimate) who travel to that new lunar base which “President Newt” swears he will construct before he “leaves office after his second term!”
As Jon Stewart asked, “Why stop at two terms?”
The former Speaker in the 1990’s stood in the way of the, then, 500,000 Washington DC residents seeking statehood for the District. But, as President, Newt says he will support statehood status for those 13,000 Americans colonizing the moon.
Newton Leroy Gingrich must feel pretty confident that a majority of those moonie pioneers won’t be Democrats.
Deficit Cutting, Go Big Sooner Rather Than Later
I know that the National Commission on Fiscal responsibility (Simpson/Bowles) gave the President and the Congress major budget/deficit cutting recommendations, which easily could do the job.
Here are some major meat axe savings I would recommend.
In 1964, we created the “Energy Department” to lead our efforts to free ourselves form foreign oil. It has failed; do away with it.
The Department of Housing and Urban Development probably is the only entity in the nation, beyond some (not all) local and state housing authorities, which cares about maintaining necessary public housing. Limit HUD’s role to just that and the FHA operations and cut the rest of it. It won't me missed.
Disassemble Homeland Security, make all of the components agencies independent and then do away with the duplication.
Limit the Transportation Department’s job to building and maintaining the interstate state highway network and get rid of everything else in the agency.
Do away with virtually all of the agriculture subsidies.
The states are responsible—or should be—for educating their children. Let the federal government, through a greatly downsized Department of Education, support those efforts with minimum federal guidelines which must be achieved to get Uncle Sam’s financial support.
I could do another dozen of these—likely sounding the current four GOP presidential candidates (they’re not always wrong!)--but incremental cuts won’t do the job, given our huge budget deficit and the thousands of interest groups which will moan anytime serious savings are proposed.
Some don’t like using large tools, but a big budget axe produces lots of results.