Sunday, June 23, 2013

A Lone Ranger!



I Knew It Was Just a Matter of Time
Before a Smart Congressman Got It!


“A fiery horse with the speed of light, a cloud of dust and a hearty Hi-Yo Silver! The Lone Ran-ger…With his faithful Indian companion Tonto, the daring and resourceful masked rider of the plains led the fight for law and order in the early western United States. Nowhere in the pages of history can one find a greater champion of justice. Return with us now to those thrilling days of yesteryear. From out of the past come the thundering hoofbeats of the great horse Silver. The Lone Ranger rides again!”


(No, I am not pimping the Johnny Depp Lone Ranger movie, but I can’t wait to see one of my favorite actors, play Tonto as Jack Sparrow.) 

Excuse me for exploiting one of my all-time favorite “radio” show (yes kids, there was dramatic programming on radio, when Grandpa was your age!), but the emergence of a brief but vital “cut through the happy talk BS” letter from Rep. Mike Capuano (D-Mass), a member of the House Financial Services Committee), to  Treasury Secretary Jack Lew (he of the new signature fit for currency) shows that someone on the Hill is thinking and looking at the implication of the raw treatment of Fannie and Freddie. 

Capuano has drafted a bill to effect the issues he raises in his letter. 

Capuano’s letter—which unfortunately I possess only in a PDF form I can’t put in my blog--questions why Fannie and Freddie can’t repay the Treasury as did every other recipient of 2007-2008 federal financial assistance—(candid answer, which we never will hear from JL: “Um, because my Bush predecessor, Hank Paulson, wanted to kill the suckers, while pretending to save them, so he cast them into forever penury never able to repay the Treasury no matter how much money they send over”) and what are the regulatory and legal stumbling blocks for the two to do so, implying an interest to introduce legislation to allow. He goes onto to ask other pertinent and direct questions. 

I don’t want to over interpret his letter (much welcomed!) or imply intentions which may not be there. But, Capuano is the first of the  “smart MoC’s” I predicted who: would look critically at the current  Fannie and Freddie situation, see their success and more importantly the reasons for it; examine the alternatives being offered by increasing number of people who want to replace the two; coldly analyze the legislative environment and the possibility of anything super complex passing this or the next Congress because of the poisonous political animus between the parties; and suggest, “Maybe we already have something in place which works fine and could be made better with some small changes rather than a 10 year transition to something which nobody can guarantee will work or work as well?” 

“Ding,” we might have a winner! 

Speaking of Rumors? 

--Congressman Capuano better watch out, he may get one of those rumored communications--over which Cato Institute sources are chortling—to wit that retired Committee Chairman Barney Frank is rumored to be reaching out to his former colleagues in both chambers, reportedly, says the Cato source, asking them not to endorse a revitalization of Fannie and Freddie.

I’d love to hear the esteemed former Democratic Chairman of the Committee discuss why he may still be mad at F&F and—more importantly, again if those rumors are true—why he would want to endorse what amounts to a large commercial bank takeover of the nation’s primary and secondary mortgage markets, complete with new federal subsidies? 

Say it ain’t so, Barney! 

Likely, Fannie and Freddie broke Barney’s heart/spirit with their post 2004 Alt-A and PLS subprime extravaganzas, but the big banks made it personal and set out to bust his b*** and embarrass him--continuously—over the Dodd-Frank bill both on the Hill and later in reg formulation. Many observers think they succeeded, their big bank crocodile tears notwithstanding.

If the Cato Institute source  is fabricating, then I apologize to Mr. Frank for amplifying it. But if that’s an accurate account —even though he’s no longer a Member—knowing Barney’s views, and the rationale behind them, would be helpful.

--Mark Zandi, once a prominent name to become the next Director of the Federal Housing Finance Agency (FHFA)—and my friend and former Fannie colleague, Ellen Seidman—are among a group supporting a new “trash F&F” proposal. (The way things are going, there will be nobody left on my Christmas card list, after the congressional session.) 

But I wonder if Zandi’s emergence from near hibernation after his high flying (and well received) name crashed as a FHFA nominee could at all be related to the Senate hearing this week on Mel Watt to be the new FHFA Director. 

--Rumor is Watt’s chances seem to be slim and the Obama Admin may have to throw in the towel and make nice to Ed DeMarco—and whatever Ed’s priorities are, which turned off the Obama WH originally—or turn to a wholly new nominee.


I am not close to Admin machinations,  but it sure doesn’t appear from my “30,000 foot” vantage point that the Admin busted its hump to get Watt the votes he needs, a result—if Watt’s name goes down—that can’t make Mr. Watt or the Congressional Black Caucus very happy.


But, in the unique political approach which this Administration takes, the Senate R’s DeMarco means the Obama White House soon will love him, too.

How Many Cheeks Does Barack Obama Have?


…and somehow has he acquired more?


His old friend Vlad Putin, he of the stolen Robert Kraft New England Patriots super bowl ring and the new semi-trophy bride, just smacked another Obama cheek conveniently turned to him by our President, when Putin’s government facilitated the travel from Russian-- a country of “courve and goniff” (Yiddish for thieves and whores)--for NSA-leaker Anthony Snowden to parts unknown. 

I don’t care about Snowden. I supported Bush’s use of NSA and Obama’s too. I don’t feel my civil liberties were/are at risk when terrorists operate with impunity. 

But I do care about some KGB thug-thief continually flashing his ass to the United States, while smiling and claiming he isn’t. 

Mr. President if you lack the means to make it painful for the Russians to keep defying you and your requests, then you are not looking deep enough into your tool chest and monthly changes in national security personnel won’t help!

The very “Obama legacy” which seems to concern you so is withering away as you dither, whether domestically or internationally.

In his fifth year as “leader of the free world,” President Obama still seems to be waiting for Putin do him one “solid” on Iran, North Korea, Syria, nukes, on and on and on, but nada!!

I hope our future presidents have only the traditional Biblical two cheeks, allowing for only one concessional turn!


Maloni, 6-24-2013

(6-25-2013 Addendum)

Here is the entire (and brief)  Capuano bill.

To provide for the repayment of amounts borrowed by Fannie Mae and Freddie Mac
from the Treasury of the United States, together with interest, over a 30-year
period, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,

This Act may be cited as the ‘‘Let the GSEs Pay Us Back Act of 2013’’.

The Secretary of the Treasury and each each enterprise (acting through the
conservator for the enterprise appointed pursuant to section 1367 of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617))
shall enter into an agreement with that modifies the Preferred Stock Purchase
Agreement for such enterprise to provide as follows:

(1) TERMINATION OF DIVIDENDS.—That after such modification, any Senior Preferred
Stock purchased under such Agreement by the Department of the Treasury shall not
accrue further dividends.

(2) TREATMENT OF ENTERPRISE DRAWS ON TREASURY.—That any amounts received, before
or after such modification, during a single year by the enterprise as a draw on
the commitment made by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the enterprise that—

(A) was originated on the date of the last such draw during such year;

(B) has an original principal obligation in an amount equal to the aggregate
amount of such draws;

(C) has a term to maturity of 30 years;

(D) has an annual interest rate of 5 percent for the entire term of the loan;

(E) has terms that provide for full amorti-zation of the loan over such term to
maturity; and

(F) shall be repaid by the enterprise in accordance with the amortization
schedule established for the loan pursuant to subparagraph (E) of this
paragraph, subject to paragraph (3).

(3) TREATMENT OF DIVIDENDS PAID.—That any dividends paid by the enterprise to
the Department of the Treasury under the Senior Preferred Stock Agreement before
such modification of such Agreement shall be treated as payments of principal
and interest due under the loan referred to in paragraph (2), and shall be
credited against payments due under the terms of such loan (in accordance with
the amortization schedule established for such loan pursuant to paragraph
(2)(E)), first to such loan have the earliest origination date that has not yet
been fully repaid until such loan is repaid, and then to the next such loan
having the next earliest origination date until such loan is repaid.

For purposes of this Act, the following definitions shall apply:

(1) ENTERPRISE.—The term ‘‘enterprise’’ has the meaning given such term in
section 1303 of the Federal Housing Enterprises Financial Safety and Soundness
Act of 1992 (12 U.S.C. 4502).

(2) PREFERRED STOCK PURCHASE AGREEMENT.—The term ‘‘Preferred Stock Purchase
Agree-ment’’ means, with respect to an enterprise, the Amended and Restated
Senior Preferred Stock Purchase Agreements, dated September 26, 2008, amended
May 6, 2009, further amended December24, 2009, and further amended December 24,
2009 (as such agreements may be further amended), between the United States
Department of the Treasury and such enterprise.
























Robert Mae said...



Anonymous said...

Also, how far do you think this Capuano "thing" can go? Any reason to be optimistic? In all actuality, a 4th amendment by the Jack Lew to the Stock Agreement will suffice.

Bill Maloni said...

Before anything "positive" can happen, this town and the process needs an idea and a principal.

The Capuano letter/bill represents that.

Let's see who else in Congress thinks there is sense in it?

Other advocates are important.

I suspect soon you'll see the same hoary old anti-F&F arguments and, frankly, lies raised again.

But, what is it about F&F that demands they be singled out an not allowed to repay the government and maybe even through in a bonus, just as other financial services companies did?

Initially, F&F were forced to pay Treasury dividends at twice the bank repayment rate (10% versus 5%); why keep screwing them because Paulson sought that objective five years ago, betting they never could rebound??

Anonymous said...

Keep up the good work Bill....just recently heard about your blog and been reading them ever since.

What are the chances that we'll see a 4th amendment soon to buy back the senior preferreds?

What is your opinion on the Takings Clause that everyone seems to be talking about? Do you think it applies in this case with GSEs?

Bill Maloni said...

Again, I am not a lawyer, but if anyone in the Administration or the Hill wanted to go against the law or anything good for F&F--leaning on it if not breaking it--I doubt here would be much opposition.

It sucks, I know, but--right now--little sympathy for the two. Hoping that will change.

Anonymous said...

Thanks for responding.

Does FnF have any friends (lobbyists:) left in Congress?

What about the proposal from Jack Reed about a possible restructure of FnF? Have you heard anything about it? It was mentioned in the Wall Street Journal that he is working on a possible proposal.

Bryndon Fisher said...

Dear Mr. Maloni:

Thank you for your insights into the Fannie Mae and Freddie Mac conservatorships. Would it be possible for you to post a copy of Congressman Capuano's letter to Secretary Lew on a financial message board such as the following:!forum/freddienfannie

Also, I have written two articles on Seeking Alpha that address some of the legal aspects of the conservatorships that you may find interesting. Here's a link to the articles:

Thank you, again, for your comments and commentary.

Bryndon Fisher

Bill Maloni said...

Bryndon--Thank you, but I only (still) have a pdf copy, which is what stopped me from putting it in originally.

Be patient, I am sure it will be available online or, try contacting Capuano's office and asking for a copy. It's a pretty standard request and likely will get you a copy faster.

No prominent allies of whom I am aware. If they exist, they still are chary of "coming out."

Have heard nothing about the Reed proposal. He is an excellent Senator and would be a worthy advocate if he got engaged.

Bryndon Fisher said...

Thank you for the prompt response, Bill. Just so you know, I did contact his office earlier, and they said it could be "found" somewhere on the net. They didn't say where, and I didn't ask.

Also, the Google group I suggested above allows for the uploading of PDF documents, if you feel comfortable doing that. Thank you, again.

Best regards,

Bill Maloni said...

Bryndon--Email me @ and I'll send you the pdf I have.

A friend who tried it claimed "nada," but you are welcome to see if you can succeed and, if you do, send me a copy!

Bill Maloni said...

Capuano Letter Available!

Bryndon Fisher just posted the Capuano docs (letter and bill) on the following site.!topic/freddienfannie/4QNkfRfItls

Anonymous said...

Thank you!

Matt Hill said...

If Republicans won't give up on austerity, I see no reason for Democrats to give up on Fannie Mae. Which one has really caused more damage during this crisis? I think I know which answer most independents would choose.

Bill Maloni said...

The F&F recent success and productivity--not to mention rate of federal "repayment"--is lost on most people.

Instead, when the subject comes up, people are fed old "negative stories."

Most "news" will be on today's introduction of the Corker-Warner bill and developments with it.

A positive F&F editorial or op-ed, plus some additional co-sponsors of the Capuano bill could bring some positive attention, but don't look for sudden deluge of constructive F&F talk.

But--and this is good news--strap on your "big boy pads," because this will be a long fight.