Bill Maloni's GSE Blog

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).

Huh?

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.)

http://www.washingtonpost.com/newssearch/search.html?st=Fannie%2FFreddie+compensation&submit=Submit+Query


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