Sunday, June 2, 2013

Questions, we have lots of questions..


Goodnight Moon & You Want to do What?

Goodnight Moon, good night stars, good night red balloon. Good night Obama legacy? 

My hopes—if not the nation’s, the world’s, and his own--for President Obama's second term success seem to be teetering and about to slide into an abyss. His poll numbers may not show it, but my sense is that the public has come close to turning cold on this President seven months after his solid defeat of Mitt Romney.


The poor guy cannot escape controversy and appears flummoxed. Can Seal Team 6 kill Bin Laden, again?

Whether it's Benghazi, IRS stupidities, phone and email invasions, Syria, North Korea, Iran, or immigration, every time Barack Obama sees a fruit bowl hoping for a plum, he reaches in and pulls out something rotten.
Are we seeing the creation of a negative Obama legacy?

I keep asking myself how Bill Clinton, Lyndon Johnson or even Harry Truman would play the cards Obama has been dealt this year?

With the first two—shortly after inviting them to the WH for drinks--I suspect that there would be several congressional Republicans with bloody noses and cracked teeth, after Harry and LBJ got done thrashing them. And Bill Clinton would be administering poison punji sticks, while smiling and slapping their backs.

I don’t believe those other Democrats would display Obama’s current “deer in headlights” confused look. 

Obama's well known political shortcomings and inept handling produced these episodes and more, since the government officials involved in these messes either report to him or folks he appointed. 

The President can bob and weave for a bit, but sparring over these mistakes leaves him with very little leverage to achieve any of his foreign or domestic priorities.
The good news for Barack Obama is that his opponents are Republicans who still don’t get it, who still want to embarrass him rather than help formulate constructive policy; as bad as BHO looks, they look and act worse. 

Obama persists in giving the GOP sharks fresh blood in the water and—from the day he was first elected—they pledged never to do anything which makes Obama or his policies look good. That’s one reason why the absence of Obama thunder in one of his fist and lightning in the other is so disappointing. 

Can you say, "Hello Hillary!"


Maloni’s Bucket List 


Multiple media reports have Banking Committee Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) soon introducing dynamic legislation—in that it is grand with many moving and expensive parts—to restructure the nation’s mortgage lending system.

I love the bipartisan effort, Senators, but….. 

The proposed bill, as described, would: do away with Fannie Mae and Freddie Mac;  keep the Home Loan Bank System; create a new federal re-insuring corporation to provide guarantees on private label mortgage securities (PLS), issued by large banks and other lenders; and put everything on the federal budget.  Oh, and all of Fannie Mae’s and Freddie’s Mac existing contingent financial liabilities would be added to Uncle Sam’s tab, too.

Whew, do we have enough national fingers to count all those budget dollars?? 


So the two Senators and any co-sponsors they attract will take everything Fannie and Freddie now do--easily, glitch free, and successfully—and give it all to a new to a new“ federal financial intermediary.


The connection between this segment my personal “Bucket List”—the things I want to do before I die--was produced by comments reportedly attributed to Senator Warner, when recently he met with a Virginia community lender who sought ongoing support for the two secondary mortgage market securitizers.

Warner, never a player in mortgage finance issues, boasted to that lending exec, “Congress is going to end Fannie and Freddie."  


My “Bucket List” has dramatically shrunk over the years. I was fortunate enough to cross out many of the “do before I croak” items, especially when Kate Middleton chose to marry that youthful “other Bill.”

But the Warner comment and dozens of similar ones from House Republicans and others has catapulted to the top of my BL my wish to, "Meet with every member of the Senate and House Banking Committees and discuss their positions on Fannie Mae (and mortgage finance), explore their reasoning, and bring them up to date on issues about which I expect they know and understand very little."

The more I read of public officials making the inane, hyperbolic, thoughtless, and worse fact-less political statements, the more I feel the urgency to get on with my BL task #1.

Naturally, when Warner visited Freddie Mac's  McLean headquarters a few days later, he softened his tone, since the company is home to four or five thousand of his constituents, and he opted not to take credit for a plan to make many of them jobless.

My reports on that gentle repartee suggested, unfortunately, that no Freddie employee or exec asked Warner, "Why would you abolish them? What was and is their crime that deserves such disparate treatment from other vital companies the government helped, starting in 2008?”


I hope he gets asked those questions later this week, when--reportedly—he will meet with representatives of another impacted organization and that officials  strenuously challenge the Warner’s rationale.

The same inquiries should be put to Senator Corker, anyone other Senator, or the next “monkey see monkey do” Congressman who grabs the Corker-Warner proposal throws their name on it and drops it in the bill “hopper.”

A Few Questions I'd Put to The Proposal's Supporters

--What exactly are the problems you proposed to repair with this massive expansion of federal government control? Or is this all just punitive because you believe a great injustice was done and now you are going to mete out bipartisan post facto “vigilante” justice, likely at the expense of the consumers you argue you are helping?


--Do , Fannie and Freddie still represent too much risk, today--now that they all but paid back the Treasury the $186 billion given since 2008? Hasn’t that been a good thing?

--Is there any reason to think that the pre-2008 mischief is starting up again requiring you to act now?

--Do the two work well, systemically, supporting the broader system? It sure seems that way since so many lenders, mostly banks and banked own smaller lenders employ, pay for F&F’s services. That fact also helps explain part of the historic increase in major revenue passing through the two into Treasury coffers recently?  

--Is there a problem with the current F&F executives and boards of directors (most named by the Obama or Bush Administrations)? Are those officials not competent? 
--Will Corker-Warner insure that mortgage credit is efficiently available at reasonable prices to consumers in every community, as now is the case with F&F under girding the secondary mortgage market: will it also be part of an extremely efficient system which matches borrowers to lenders and originators with investors, in a smooth and seamless manner, allowing capital from all over the world to fund America’s homeownership needs?


You see Senators, because that's what F&F do now and could do even better if they didn't have to run through the Treasury and FHFA hoops (For instance, management could make their own decisions about reducing principal amounts on  underwater loans, not turn that into a spat between the WH and an acting FHFA director).


--If, as rumored, your proposal contains major elements championed by Ed DeMarco, who the White House has been trying to remove for more than a year,  someone needs to answer, what in the Hell has DeMarco been conserving these two companies to do, if it just is to let you crush them?  

With both companies generating historic earnings and repaying the taxpayer, it seems they have been financially revived and now you plan to kill them?

-- Senators Corker and Warner, if you compare pluses and minuses of creating from whole cloth--and having the taxpayers support form Day 1-- this giant new mortgage finance system or marginally tweaking two well-known market, familiar to all in the mortgage market and with a history of solid service--PLS subprime and Alt A no-doc episodes to the contrary-- why does you approach make superior practical, financial, and political sense? 

--Does anyone besides the major TBTF banks—with new MBS guarantees--benefit from the claim that your approach is a better way to finance US home mortgages?  

Does Uncle Sam taking all of this broad new authority and debt on his shoulders (and in his budget) really attract new “private capital” to the mortgage market or would it be better to rely on  those institutional investors, who traditionally have bought Fannie/Freddie debt and mortgage securities?

--Sorry to be repetitious, but in the politically riven Capitol, with cooperation measured by the thimble, why is this a simpler, less expensive and more desirable  than tweaking Fannie and Freddie? 

Face it, F&F already are at work doing what you claim you want. They’re known by mortgage market participants, already have the lender networks and business relationships, and soon will have repaid all of the $186 Billion the Treasury used to keep them floating.


--As you answer these questions, Senators, please acknowledge the fact that the Federal Housing Finance Agency (FHFA), F&F’s current federal overseer—with dozens of employees working in the offices of the two mortgage giants--two years ago implemented two major regulations which all but prohibit a replay of the subprime debacle. 1) Fannie and Freddie are prohibited from acquiring or securitizing others flawed mortgage assets, i.e. “subprime loans”; and 2) FHFA all but has eliminated the controversial percentage of business housing goals requirements, which the GOP right wing strongly opposed and F&F. 


It seems to me that nobody either fully appreciates or wants to admit, that these last two regulatory improvements virtually have solved the problems which produced Fannie's and Freddie's subprime woes of a few years ago.


I am not a fan of your approach, Senators, but I welcome it because I think you will provide a forum and opportunities for the Congress, once again, to begin to understand the system you hope to eviscerate and reconstruct, which then will give me more opportunities to work through Item #1 on my Bucket List.


I have one more hope from legislative hearings or even hearings on the Mel Watt nomination for the top FHFA job. I want them to create an “Aha Moment” for some smart US Senator—when the light bulb above his/her head finally goes on—to declare, “This committee should be revitalizing Fannie and Freddie with better monitoring, not destroying them.”[i]


Maloni, 6-3-2013





Robert Mae said...

I'd like to think that I speak for everyone when I say: ain't buying it.

Whatever Corky is fixing to introduce, if anything - as the possibility of his just seeking attention is strong - will not be anything like today's rumor mill has it. No one would be that stupid.

Robert Mae said...

BTW, ouch!


Bill Maloni said...

Think again.

See Bloomberg wire story filed earlier this evening.

Don't know what Corker is trying to achieve, politically, but there aren't 60 votes in the Senate for anything which looks like this.

6/3/13 7:46 PM EDT

A bill being drafted by a bipartisan group of senators led by Bob Corker and Mark Warner would abolish Fannie Mae and Freddie Mac in five years and force private companies to cover losses in the housing market equal to those seen in past downturns, according to a draft copy of the bill obtained by Bloomberg.

The Treasury Department would take the first proceeds from the wind down as the senior-preferred shareholder in the two taxpayer-owned companies. Proceeds would then go to banks, insurance companies and hedge funds that own junior preferred shares in Fannie and Freddie, followed by common shareholders. Treasury would be responsible for the loans the two companies have guaranteed.

A new entity named the Federal Mortgage Insurance Corp. would be set up to help smaller lenders to finance their mortgages and would guarantee some loans for multifamily properties, according to Bloomberg.

Corker declined to comment on the contents of the bill but said in brief interview with POLITICO that “the talks have been very, very productive.”

— Jon Prior

Robert Mae said...

I think Bloomberg and other sources appearing today went on your post. You're famous, man!

Robert Mae said...

Sorry, just read the remaining of your response:

"Proceeds would then go to banks, insurance companies and hedge funds that own junior preferred shares in Fannie and Freddie, followed by common shareholders"

Trust me, I have read every prospectus of the juniors and not a single one points out that favored junior preferred owners are senior to others juniors.

Seriously, the more I read about this "Corky bill" the more I laugh at its ridiculousness. It's as if hedge funds own him and have ordered him to weaken the junior preferred market.

Bill Maloni said...

I believe there are about 25 Fannie and Freddie "preferreds" currently trading out there, some issued in 1997 and 1998.

I think Treasury has near total discretion to reinstate the dividends, if it chooses, possibly as part of a long term revitalization--should that be the policy.

(It makes sense if F&F ever need to raise money in the future.)

But who knows what is contemplated in the Corker-Warner bill, which shouldn't matter because I don't think it ever could pass.

But, for me, anything which shows some attention to preferred investors is more desirable than silence on the subject.

Bill Maloni said...

Not sure if I was clear, but--as part of a long term revitalization plan--it make no sense for Treasury not reinstate preferred dividend payments.

Robert Mae said...

I agree, it makes zero sense to restore dividends. If FnF are set free the first item on their agenda will be rebuilding their capital base, not depleting it further by paying dividends.

There are 38 FnF preferred issues.

Bill Maloni said...

As I definitively stated, there are 38 F&F preferred issuances.