Sunday, September 30, 2012

Shame on the Washington Post
That Newspaper Can Do Better

Letters, We Get Letters, We Get Stacks and Stacks……..

I remain upset—and angry—that the Washington Post refuses to report on its news pages the fact that federal Judge Richard Leon issued a summary judgment ruling to Frank Raines in a plaintiffs suit claiming violations of federal securities rules.

Judge Leon said that he found no evidence linking Raines, Fannie Mae’s former CEO from 1999 until 2004, to those complaints.

The shareholders action—started eight years ago--was based on two federal financial regulatory agency reports from 2004, which suggested the violations, one came from Fannie’s immediately regulator in 2004, the Office of Financial Enterprise Oversight (OFHEO) and a was done by the Securities and Exchange Commission (SEC).

As noted at the time, both agencies may have been part of a GOP cabal to destabilize and shutter Fannie Mae and Freddie Mac. (This was—called “Project Noriega”—and initially discussed in Bethany McLean’s and Joe Nocera’s book about the 2008 financial debacle, "All the Devils are Here.")

The Wall Street Journal, the New York Times, and Bloomberg News all have carried some reference to the Leon finding, but not the Washington Post, despite the fact that it involves a prominent local people who worked at a major local company, a company employing thousands and which continues to be the reliable foundation of the nation’s secondary mortgage market.

Maybe the Washington Post editors see--as I do—the Leon decision elements in the hearing record possibly forcing people to re-examine and change their opinions of Fannie Mae which has been demonized for most of the past 10 years.

Below are two epistles which I sent to the Post--late last week--urging some news coverage of the court ruling. The first was sent to the “Letters to the Editor” site, with a copy to the Post Ombudsman and the second, exclusively to the Ombudsman.

My communications may yet cause a 1000 flowers to bloom, but to date I haven’t seen one blossom.

Maloni Letter to Washington Post (copy to Ombudsman):

A week ago, Judge Richard Leon granted summary judgment to Frank Raines, former Fannie Mae CEO, dismissing him from a shareholder law suit, filed almost eight years ago, alleging securities violations at the company.

To date, the Post--which seemed regularly to enjoy berating Raines and Fannie Mae in its news stories and editorially--has ignored reporting on the Leon decision.

Could it be that this court finding calls into serious question many of the erroneous arguments thrown at Fannie Mae (and Freddie Mac) by business and conservative enemies and--more importantly--with some of those same themes picked up in Post editorials?

The Court concluded that no facts in the voluminous hearing record could sustain charges against Raines.

Even before the Judge Leon's finding, there was evidence that certain Bush financial regulators, including Fannie Mae's own regulator in 2004, the Office of Financial Enterprise Oversight (OFHEO), since renamed the Federal Housing Finance Agency (FHFA), employed a variety of questionable tactics and worked in concert with Fannie's political opponents to hobble the company.

Post editors should be ashamed that they cannot find space to report something positive about a former Fannie Mae executive the paper regularly pummeled.

Maloni Email to W Post Ombudsman:

I copied you on the letter to the editor I sent the Post decrying the fact that it has nothing printed nothing about the referenced court decision, a week after it was announced.

Stories on the decision have appeared in the WSJ and the NYT, but "nada" in the Post.

I know there is an anti-Fannie element at the Post but, news still is news, especially when it involves a local company and a local resident, who has been pilloried in Post editorials.

I retired from Fannie eight years ago and have stayed retired, not working for anyone in the mortgage finance or PR field. I am most familiar with all of the details of the pre-2005 Fannie. I was no longer there when Dan Mudd became Chairman and went on his subprime follies.

In a financial services blog that I write occasionally, I have heavily criticized those decisions and the company's actions.

Those recent sins, incorrectly, often have been visited on Raines and others who were long gone.

Choosing not to parse, opponents, using the bogus OFHEO report-- which a slavish SEC endorsed (shortly after Raines sent a strongly worded letter to Andrew Card, which the White House CoS viewed as impudent--the letter has been discussed in books on Fannie)--launched a political and media blitz (35 or so WSJ editorials) from which the company never recovered. (Once again, in my view, that also paved the way for Raines inexperienced successor to make calls dooming the company.)

For me, the OFHEO/SEC actions, much of which were rebuffed in Leon's decision, was the keystone to the later attacks on Fannie, albeit it a campaign which had been going on for years. Those reviews allowed the "bad guys" to say "and they cooked their books to pay themselves huge bonuses."

Rejection of those securities violations claims is embedded in the Leon decision, if one goes through the thousands and thousands of reports and notes which are part of the case file.
Another thing worth bearing in mind is that the issue of "what will be the US secondary mortgage market structure?" is not going away.

Right now, because of the subprime history and takeover, nobody--D or R--wilt look at the early Fannie Mae model (pre--subprime purchases) and consider it a possible solution, with better regulation and caps on earnings.

Those of us who have studied the mortgage market know that, absent some federal involvement, there will be no affordable 30 year mortgages, since most banks can't hedge them and prefer not to make them, unless they are first sent to Fannie and Freddie and securitized with their guarantee.
If you have an opportunity to weigh in on these matters, I hope you will consider these related issues.



Watch the Presidential debate, October 3!

Maloni, 10-1-2012


KJO said...

You go, Bill.
Kirsten Johnson-Obey

Bill Maloni said...

Thanks, Kirsten.