Wednesday, November 20, 2013

Questions, We Have Questions...

No, I Will Not Join the “Committee of 100”



Alfred Pollard, who has been General Counsel—for more than a decade--at OFHEO and now its successor the FHFA, will testify before the Senate on Thursday discussing “Powers and Structure of a Strong Regulator.”

There are a few questions I hope Mr. Pollard gets asked regarding this issue and OFHEO/FHFA’s past. His answers could help the Committee better define what they are seeking in any regulatory agency’s top law shop and GC

I am certain Mr. Pollard will mention his department’s successes, but maybe he—or the Committee—might want to highlight some possible shortcomings to strengthen the review and improvement effort. 

I won’t beat a dead horse (much) but many of these questions related to incidents chronicled in Tim Howard’s book, “The Mortgage Wars.”
HUD IG Report 

Specifically how did Mr. Pollard—as OFHEO’s chief legal officer---respond to a damning 2004 HUD Inspector general’s report which suggested, strongly, that OFHEO officials engaged in active efforts to drive down the price of Fannie (and Freddie) stock, out of pique over their inability to get senior GSE officials to heel?
Did he take any independent action to verify HUD’s discoveries? 
Securities Fraud Claims

Did Mr. Pollard concur with the 2004 OFHEO staff finding that Fannie officials engaged in securities fraud when implementing—for the first time--the infamous Financial Accounting Standard (FAS) 133 derivative regulation, the source of the phony fraud allegations? 

Was the staff report in any way a form of retaliation against Fannie Mae based on mutual hostile feelings?  

(After the SEC Chief Accountant agreed with OFHEO that Fannie Mae had misapplied FAS 133, without providing any detail, nearly 300 financial services companies, including Citicorp, Bank of America and GE restated their financials because they had applied the FAS reg. much the same way Fannie Mae had.)

Auditors Announce Fannie Correct on FAS 133  

Did Mr. Pollard initiate ameliorative action in 2007-- despite the initial and inaccurate OFHEO fraud claims of 2004, which hounded innocent people from responsible corporate positions--the auditing profession ruled that the FASB 133 implementation which Tim Howard had approved for Fannie in fact complied with generally accepted accounting principles (GAAP)? (This was the work OFHEO and the SEC claimed was inept and law/rule breaking.)
When Do You Stop? 

Why did Mr. Pollard/OFHEO continue to pursue actions against Fannie execs Franklin Raines, Timothy Howard and Leanne Spencer into 2008, well after March 15, 2007, when OFHEO's interpretation of FAS 133 had specifically been repudiated by the Chief Accountant of the SEC, who sits on the FASB's Emerging Issues Task Force. On that date, the EITF specifically validated Fannie's original interpretation of FAS 133?
Judge Said You Wasted Taxpayers Money

Why did Mr. Pollard allow OFHEO and FHFA to waste millions in dollars in legal fees in frivolous motions to avoid disclosing documents? As noted by Judge Richard Leon, whose three opinions in 2012 quashed shareholder lawsuits based on the OFHEO report, "The discovery process was unnecessarily prolonged by OFHEO's repeated and stubborn assertion of privileges that had to be litigated up to the Court of Appeals."
About the RBC Oversight 

On a less hot button note, maybe Mr. Pollard has some insight he could share about agency bureaucratic delay, expense, and—in hindsight--imprudence, when Congress gave OFHEO two years to implement a risk based capital oversight model and it  takes that agency almost 10 years to comply littering the regulatory landscape with failed flotsam and jetsam. In retrospect, is that the sign of a solid agency or a woebegone one?

Sorry Senator, At This Time, I Can’t Help


Lately, I’ve been feeling pretty good at my blog’s reach, impact, and influence. 

I’ve been getting 400-500 hits per blog, people have contacted me about the issues I’ve discussed, and solicited me for one type of help or another. 

All in all, I figured that I’m reaching the audiences I want to reach and educate and people know where I stand. 

And, then yesterday's mail came. Crash!
My confident thoughts of impact and good fortune came tumbling down, when I received a “Dear William” fundraising letter from Senator Mark Warner (D-Va.), whose hubris and arrogance I’ve pummeled for about three blogs now, starting with his famous dismissal of Fannie Mae and Freddie Mac, when he vowed he could have generated a 30-1 return on money the federal government invested in the two.

Warner is the Democrat half of the bipartisan Corker (R-Tenn.)-Warner mortgage reform bill sponsorship. Their bill would abolish Fannie Mae and Freddie Mac as a predicate to building their brave new mortgage finance world.  

I’ve been on the sponsor’s case for weeks, mainly about their legislative proposal’s lack of details and their unyielding disdain for F&F. 

I guess Warner, his personal and campaign staff, and friends don’t read my blog, or I am incapable of embarrassing this United States Senator. 

Warner must have a water buffalo’s hide and is impervious to chagrin or I am lame at broadside. 

I tried to hoist Warner on his own petard but only succeeded in having him ask me to be part of his “Committee of 1000” and pony up a $100 and start off his re-election campaign. 

If Senator Warner shows a little humility, sensitivity, and Fannie understanding, it might cause my chilly Warner-opinions to heat up, possibly a $100 worth. 

But, until I see or hear some serious Warner recanting, my “C-note” is traveling with me to the Charles Town casino.


Maloni, 11-20-2013









Anonymous said...

Here's the latest attack from the Financial Times:

"A group of activist investors are agitating Washington to privatise their (GSE's) key mortgage insurance functions. Last week they raised their equity stakes in the two enterprises....But a sell-off would make little sense from the taxpayer’s point of view". Why is the FT saying this? Fannie and Freddie have improved their loan quality assessment and business controls, beyond the requirements of banks, mortgage industry and investors. The GSes continue to stabilize the housing market and have almost returned all the money borrowed from taxpayers. As the old saying goes "Dogs bark when they are afraid"

Anonymous said...

The D.C. politicians including the Obama administration are dangerous. They are not making laws for the benefits of the country, but only to grease the pockets of their friends (TBTF banks!)

Just look at how absurd their logic is. Let's confiscate the properties of the F&F shareholders (private capital providers/investors) and then ask the private capital investors to invest in a new far-fetched, unproven plan that could derail the whole economy.

The TBTF banks destroyed the housing market and the economy by creating fraudulent loans and sold them to F&F, claiming these loans meet the F&F underwriting standards. But the recent payments by the big banks to F&F for these fraudulent loans showed the true reasons of the crash of the housing market. F&F were the contributing factors when they bought the sub-prime securities and loans for their portfolios under the encouragement of the politicians. But F&F are making huge profits now. They have repaid their loans except for $2 billion and continue to stabilize the economy by helping the housing market while being under stricter supervision. Why do the politicians still want to kill F&F and ask taxpayers for more money to fund their new insurance agency which basically is going to need the support form the government if there is a crisis. Is there a secret agenda? Did the government walk away from rescuing GM, AIG and other TBTF institutions? Do the taxpayers gain anything by doing away a potential profit of $200 billion. This so-called housing market reform is full of hypocrisy and thievery!

Bill Maloni said...

Anon1, I am inclined to ask, "What do the British know?"

FT always seems so snarky. That publication is not going to decide US housing policy or even mortgage reform issues.


Anon2, I agree with you and was dumbfounded listening to Gene Sperling today describe his concern that F&F going forward (even as Maloni's "Thing 1" and "Thing 2" or in any other guise) would cause the public to believe that they were TBTF and likely to be saved from future travail by the federal government. Ergo, they need to been done in

Really, Gene? And the TBTF banks to whom this Administration would give the primary and secondary mortgage markets--and which your current financial regulatory regime cannot keep up with, except after the banks are exposed at one dubious act or another--will be able to oversee all of that new mortgage activity that will fall to the big guys when F&F are abolished?

Sperling's thinking seems very circular to me and more designed to justify destroying the GSEs rather than making surefooted mortgage market policy.

Loading the banks up with more income generation through mortgage market domination just is not the correct planning.

Duncan MacLeod said...

It might be most appropriate to send our Senator a lottery ticket for his campaign contribution.
I might send one to Warner and one to Corkner!!!

I-have-no-bosses said...

@ anon 2.22pm

Politics is about power. Not morals, not principles. So...

Not all private capital has been created equal: there's the hedge fund money and there's the bank money. I'll leave the rest to you.

Bill Maloni said...

Agreed, but both require some control, regulation or "greater authority" no matter which is employed running a new national mortgage system.

Fannie's "skin in the game" kept a lot of systemic players honest (unfortunately, not some Fannie in post-2005)!!

Bill Maloni said...

Alert, Alert, Alert!!!

If initial the Senate vote today holds, could be some big FHFA changes coming if Rep. Mel Watt gets Ed Marco's job.

I'll wrote more on this in my next blog!!

Bill Maloni said...

You all know what I meant, but it should have been Ed "DeMarco's" job.