Sunday, June 16, 2013



Unscientific Poll* Suggests Many Fools in US Capital,

Survey Says DC’s Fool-to-Wise Man Ratio is 724-1

(*Read more below.)


Let me restate something, which requires constant repeating, if anyone within hailing distance of this blog misunderstands me.

I believe if the Congress spends a little bit of legislative time looking dispassionately at the Fannie Mae’s and Freddie Mac’s successful operational structure and, understands the systemic values they produce, Congress will find it easier, less disruptive, more practical, more efficient,  to produce a worthy and fair national primary and secondary mortgage market—with no explicit federal financial ties-- than spending painful years trying to legislatively twist, turn, restructure, and prevaricate about new structural proposals, whether its Corker-Warner, the Bipartisan Commissions recommendation (which overlaps with C-W), or multiple other ideas.

Congress should take a deep breath, permit Fannie and Freddie to repay the government $200 Billion to cover the $186 Treasury/taxpayers invested in them, allow F&F to keep all of their future earnings for capital purposes, net of taxes and overhead, and free them to insure that the nation’s primary and secondary mortgage markets work smoothly, efficiently, fairly, and at reasonable prices.

I state this fully aware of all of the F&F criticism and biases.

Yes, they have sullied and excoriated--mostly without cause and with tracks and motives leading back to obvious perpetrators--but what the F&F have going for them is success in the past and success today.

The mortgage market is totally familiar with their procedures and indeed every participating lender, MI, Builder, Realtor, appraiser, title insurer, etc., knows them and how they operate, which means no flawed trial runs, no painful trial and error break-in periods, or no elaborate and expensive transitions, which the competing ideas would produce.

Market Never on Vacation and Hates Uncertainty 

Let me remind people that the nation’s gargantuan national mortgage market does not take breaks, even when Congress wants to go in a new direction; it functions every day and at all times and there is a huge multi layered “back office” of national and international players which complement it, a fact that most Americans don’t/can’t comprehend.


People underestimate the dysfunction of the Congress--certainly the present one so rive, but many former ones as well--trying to reshape something most of them don’t understand or about which they hold only negative thoughts. Many Senators and Members can’t resist the temptation to add unrealistic goals and objectives “for the folks back home” and cannot comprehend what I briefly described in my last blog, the bushel load of unintended consequences that arise from any major legislative rewrite.

One last word and then I’ll move on.

What surprises and upsets me is not Republican opposition to my idea. Most R’s were taught to hate F&F because of F&F’s political heritage, support for homeownership and minority homeownership at that, and the oinks of big banks complaining that F&F too much profit from lenders, money the banks squeezed from uninformed consumers.
It’s the silent Democrats who disappoint me the most.
Since all of the Fannie/Freddie destructive external assaults were piloted by GOP officials, Republican MoCs, and conservative think-tanks and media, I would hope that one or two thoughtful Democrats might see through this never ending campaign and make a contrary case.
It’s safe to come out guys and girls, see the F&F achievements (the latest as well as the earlier ones), smell the coffee and speak out.
Fannie’s and Freddie’s perfectly legitimate post-2008 regulation--taking away their “low income housing missions” and transferring that largely to the FHA plus the very strict limitations on what loans the two can securitize--explain their recent success and future promise.

Add to that the increasing number of fingers pointing to Bush political hijinks and skullduggery as the cause of F&F fall into political purgatory and I have to ask the standard bearers of John Kennedy, Lyndon Johnson, and President Bill Clinton, where are you hiding your Democrat cajones?

If you learned the facts, you could not possibly believe you F/F deserve their pariah status.

Fannie and Freddie did produce fabulously for the nation before 2005—before they slipped into their PLS subprime and ALT A follies--and have since 2008. Despite all of the BS explanations/excuses, no industry or set of institutions have stepped up to show they can replicate the systemic values of the F&F without Uncle Sam granting the F&F posers broad new subsidies. 

Funny/Curious Inquiry 

Last week I got a call from an enterprising and successful journalist (who stays nameless because he was serious and driven by some evidence) asking me if I was aware of certain Fannie officials acting (my phrase) “too entrepreneurial?”
When I finally stopped laughing (not at him but the concept), I told him that I hoped his rumors were true since I believed that FHFA (and Treasury) had squeezed all of the  business swashbuckling out of the two companies and—again, as I have written—F&F are being run by employee automatons not entrepreneurs.

I further suggested, more importantly, that anything of significance--which either company or their officials do--is blessed in advance by their regulator, the Federal Housing Finance Agency or the Treasury through FHFA, denying  much room for F/F freelancing. I reiterated that I hoped I was wrong because I would like to think someone is sharpening his/her business skills.

My conclusion: calling Fannie Mae officials “excessive entrepreneurs” is the equivalent of calling Baltimore City female jail guards “harsh jailers. (I was going to say “tough screws,” but I was afraid that would be misinterpreted.)

As an example, if people are concerned about F&F g-fee (guaranty fee) increases, most of those have been spelled out by FHFA in its annual report to Congress and are aimed at either increasing revenue for the Treasury or making commercial bank PLS MBS (mortgage backed securities) more competitive. 

Time to Hunt up another “Enemy”

What’s Austan Goolsbee doing these days, let me at him?

Austan Goolsbee, a former Obama Admin economist and CEA chair-- (Maloni humor: economists often resort to caviling, “on the one hand, but on the other,” which is why we need three armed economists)—decided to tweet a particular nasty message (see below) about the recent law suit filed by a variety of very respectable interests. The lawsuit argues that Hank Paulson broke the law in pushing Fannie and Freddie into conservatorship and forced shareholders to lose billions.


Austan Goolsbee (@Austan_Goolsbee)
Dear Fannie and/or Freddie shareholders suing U.S. govt for not being more gentle when saving your dying asses. SHOVE IT. Sincerely, America

Maloni’s response: 
Austin, don't you have it backwards? The government gave Fannie and Freddie shareholders nothing, but took a hell of a lot from them. 

In return, Fannie and Freddie provided the federal government with a sound and necessary secondary mortgage market operation—which they continue to operate today for the nation--and in less than five years will return the $186 billion Treasury invested in them. 

C’mon Austan, given the  possibilities, you have to agree that this has been a sweet deal for the government and the nation. 

Austan, how about those improved Treasury credit ratings and the political benefits of the larger than expected Fannie and Freddie payments, not to mention the deadline easing aspect of those payments re debt ceiling negotiations with the GOP? 

There is little doubt in my mind that Paulson manipulated/twisted, if not violated the law, in his little takeover kabuki which was more about getting a "two fer," i.e. shackling and, in his view, blowing up F&F, while maintaining the market PRESENCE and stability that the two represented, an action which failed since the two soon will return all of the money Treasury invested in them.

I don’t “tweet,” but please consider this response just “144 characters.” 

For Mr. Goolsbee and other F&F critics who fail to see the benefits Uncle Sam has enjoyed from the Fannie and Freddie experience..


Does Your Government Lie??
Do bears go potty in the woods?  

Check out this description of Fannie and Freddie from the federal government’s FY2014 official budget document. 

“They are not included in the Federal Budget because they are private companies, and their securities are not backed by the full faith and credit of the Federal Government.” 

Maloni says that was accurate pre-2008 but not now. If this was true, can you imagine what would happen to Treasury auctions??

The Nonscientific Poll Source Mentioned Earlier? 

I made up that poll, but I’ll bet most of you believed it was true based on your personal experience and observations. 

Recognition: Father’s Day congratulations to my late father, Carl Maloni, and my late brother, Louis Maloni, both of whom were excellent Dads.
And thanks to my wife, Heidi, and my sons Jason, Scott, Billy, Jr., and Carl Arthur (”Cam”) for allowing me to celebrate this day. 

Condolences to the family of Carl A.S. Coan, Jr, a longtime acquaintance and Washington lawyer and housing lobbyist who passed away this weekend.
Carl was a knowledgeable and indefatigable fighter for housing and homeownership and one of the more irascible individuals all who knew him encountered. I knew I had arrived as an influential Hill staffer, when Carl—working for the National Association of Homebuilders, before he founded his own law firm—gifted me with the then perfectly legal NAHB Christmas bottles of scotch and bourbon.
I am positive that gnashing of teeth we heard on Saturday was Carl Coan in dispute with St Peter over how much of the 1968 Housing Act Carl actually wrote, with the options in Carl’s mind being “all” or “most!”

RIP friend. 

Maloni 6-16-2013







Robert Mae said...

Beating a dead horse?

Bill Maloni said...

Yes and it feels like one of the originals that the Spaniards brought over in the Fifteenth century.

I think I'll start blogging about flower arrangements, which should be more stimulating.

Is there anyone in that business or industry I can call %$#^*&??

Robert Mae said...

Barney Frank?

Bill Maloni said...

Although I had a decent (relative term) working relationship with him, he was the toughest MoC I ever had to lobby, as well as the nastiest.

Personal comment: I am surprised how vehement he's become in his "destroy" (my word) F&F.

Giving him the benefit of the doubt, whatever goodwill he may have felt was wiped out by the disastrous and dumb Fannie subprime follies which occurred post 2004, which all was about yield, revenue, and market share.

Anonymous said...

The other day, while I was at work, my cousin
stole my iphone and tested to see if it can survive a thirty
foot drop, just so she can be a youtube sensation.

My apple ipad is now broken and she has 83 views.
I know this is entirely off topic but I had to share it with someone!

my webpage; website **

Bill Maloni said...

All that I know--according to Mrs. Maloni--is that cracked screens on I-phones and I-pads are major deals for teenagers and young people.

I hope none of them seek employment at Fannie Mae, when I finally take over!!

Robert Mae said...

LOL, Moses.

Frank is a metaphor. He, more than anyone else, supported the health of FnF while shoving more and more shit loans down their throats until they broke. Then, instead of admitting his mistakes and damning the govt for its behavior during one of the most obvious bubbles ever, he quits and turns face. And why? Because to claim otherwise would be to admit his incompetence.

Anonymous said...

Bill, Do you think GSE will survive in it's current form? Sahreholders? Common? Pfds? Would dividend be restored? When do you think this may be released from C-Ship and when may be relisted? Are you lobbying in DC? Thank you in advance.

Matt Hill said...

My experience with a DC area strip club:
- I've been one of their best customers for decades
- However the relationship soured, seemingly overnight
- Whenever going to the club, they constantly whined about and actually blamed me for other patrons ripping them off. They said shet changes now.
- They even showed me a bunch of white papers from the American Entertainment Institute, claiming that my actions with non-prime whores caused the whoring crisis. I didn't even spend much time with the non-prime whores and they were fraudulently offered to me under false pretenses.
- They started charging me 10% dividends on any ATM withdrawals
- To pay for the all the stripper's drug addictions, they implemented a 10bps Weed-fee on any visits to VIP room
- Whenever I went to the bar and bought myself a drink, they said I was being selfish with my unfair advantages and crowding out the strippers. They told me I needed to abide by the drink sharing initiative and buy any stripper a drink that felt like I was crowding them out from the bar.
- Once I ran out of money I was delisted from the VIP board and could no longer partake in any exchange
- Even though I had paid for all the services already, they surpised me with a final bill labeled as a senior preferred companionship fee for any time they had spent talking to me and keeping me company. They said I can't pay it off now, instead they will just continue to sweep all my daily revenue for the rest of my life until they decide to release me.
- when I complained about the unjust treatment, they said the only way to fix it was through an act of congress
- I told them all the other frequent customers, like Al G, Cici and GiM have never received this BS treatment, they said too effing bad. In most all other countries, whoring is not even subsidized and anywhere else I'd go, I would be effed even more with no vaseline even.
- When I talked to my congress rep about allowing me to get out from under this, he just laughed and said you got a better chance on the lottery
- When I eventually filed a lawsuit, they told me to SHOVE IT, they don't need me anymore, as there's a new Bill in town to replace me.
- They still say they need me as a customer for now. But they want me to help them replace myself by referring new customers. WTF is up with that?
- Someone at the club confided in me that most of this could be swept under the rug if I just agreed to change my name to something else. Really, WTF would I go and do that?

It's amazing how they can get away with this and the malicious smear campaign against me. I never imagined even the worst of clubs being able to get away with something like this. This is happening here in DC. I think I'd have better luck at a club in Somalia or something...
Don't know why I can't just go back to getting my club on. I've been reformed, my personal auditor is always by my side, and I don't even touch that non-prime shet no more.

I don't suppose anyone can guess which club it is that I'm talking about?

Robert Mae said...

heh, heh, MoC's as whores. How appropriate.

Bill Maloni said...

I've been in San Diego for five days, just getting back today so let me combine two answers to the "will the GSEs survive?" and Mr. Mae's "Barney Frank commentary."

Matt Hill's clever work stands on its own heft!!

Yes, I thin some part of F&F stick around for two reasons. One Congress is just loathe to do-In anything and there's enough support for Fannie--when there should be tons--to keep it operative in some capacity.

But, policy makers are missing out on an opportunity do something quite bold and quite but simple, a GSE financial revival.

The evidence and material are there, but not the will.

(Note: I just am learning about the Capuano bill--which may be the first federal legislation suggesting a future existence for F&F-- and trying to put it in the practicality continuum. I plan to discuss it in greater detail in subsequent blogs.)

I worked at Fannie Mae for 21 year, before there were housing goals and after, including spending major time and effort on the legislation which created the goals.

The company's leadership most successful CEO's, David Maxwell, Jim Johnson through Frank Raines, were made for the goals obligations and indeed Fannie intellectually and institutionally took on that challenge and performed against them quite well--even when they were being driven higher from by the Clinton Admin and later the Bushies.

We have divisions of employees working on goals business and producing quality loans which seldom failed right up through the 2004.

New leadership, who followed the Raines politically driven ouster in that year, didn't not have the same commitment to goals business and--as I written more times than I want--made horrible decisions to buy Alt a--no doc mortgages--and PLS subprime loans, which drained the company of most of its capital when the poorly underwritten mortgage bonds quickly failed.

Barney was a Fannie fan and an advocate. I believe the PLS/Alt A follies--which was a naked chase after yield, revenue and market share-- cost Fannie his support and then earned it his animosity.

I could be wrong, but I don't think so.