Sunday, April 13, 2014

A Vulture Murmuration?



The Birds are Coming, the Birds are…..;
CWJC Hostility, Borscht and Chop Suey;



Are vultures beginning to circle the Senate Banking Committee waiting for the April 29 markup of the CorkerWarnerJohnsonCrapo GSE reform bill?
The possibility is in the air! 

Recent Scavenger Sightings  

Righty Vultures

The legendary Rightwing think tanks, Cato Institute, Heritage Foundation, and the American Enterprise Institute (AEI) have issued formal papers and commentary damning the legislation for a multitude of sins: keeping a huge federal mortgage presence on budget and at  taxpayers  risk; trying to impose a vast series of commercial relationship changes on a market which doesn’t like uncertainly, delay, interruptions, or certainly higher costs—all of which seem to hover over CWJC like a murder of crows. 

Oldies Vultures 

A lobbying group of “seniors citizens,” called “60 Plus” --reportedly funded by the Dem-targeted Koch Brothers (you know the guys who seem to own all of the shale oil acreage)--has begun a target media campaign against a variety of CWJC Senate cosponsors. 

Newbie (Hired Gun) Vultures

A new organization opposed to CWJC emerged last week. 

The Coalition for Mortgage Security, led by former Ohio Secretary of State Ken Blackwell, who was once the HUD Under Secretary for President George W. Bush, wants to lobotomize F&F but not hurt the interests of current common and preferred shareholders. Gee, I wonder who is funding Ken Blackwell these days? 

Ironically, Blackwell was linked to one of the Ohio pension fund lawsuits, which unsuccessfully sued Fannie Mae’s Frank Raines, Tim Howard, and Leanne Garmon Spencer, in 2004, claiming they committed “securities fraud.”  The suit was based on a long rejected but damaging-at-the-time regulatory allegation of the same charge. 

While the ex-Fannie execs all were exonerated by a federal judge two years ago, conservative GOP gun Blackwell is the front person for current CWJC opponents which claims it is “bipartisan.” 

 (Reading Blackwell’s career highlights reminds me the Tennessee William’s character, Blanche Dubois in Streetcar Named Desire, and her survival explanation.)  

Lefty Vultures 

And then we had Ralph Nader, darling of some on the Left and bane to some in corporate America, who sent a lengthy letter to all Senate Banking Committee Senators laying out a series of indictments against the legislation, which are quite detailed. (A link to that letter appears below.) 

Nader also utilized the Center for the Study of Responsive Law website to pen this document. (Link below.)

Nader and Tim Pagliara ( see more about TP, below) last week led investors to Capitol Hill to pitch their case to Senators.

Thoughtful Vulture, Sherrod Brown

If I was among the bill’s cheerleaders, however, I’d be more worried by Sen. Sherrod Brown’s (D-Ohio), opinion, who said CWJC might get out of Senate Banking but won’t get to the Senate floor setting up possible conference with the House, because the House mortgage reform proposal is so extreme.  

Sen. Brown also suggested with insight that the mortgage finance system may not need CWJC’s dramatic restructuring and that Fannie Mae and Freddie easily could be revived with some changes to serve the nation. 

(If the Dems hold onto the Senate in November, Brown likely steps up as the Senate Banking Chairman.)


And, the Pagliara Vulture 

One other angle cropped up last week and bears noting. It was a shot at the senior Corker staffer—who was the major draftsman of the Senator’s bill that morphed into the Johnson Crapo bill--and someone had worked before in the mortgage back offices for Countrywide Financial (nee Bank of America) and Wachovia Bank (nee Wells Fargo Bank), companies that were involved in various aspects of the pre-2008 private label subprime debacle but since have been acquired by larger bank holding companies. 

Those facts alone don’t make the guy—and his boss—bad actors, but it is additional dead weight that neither wants to lug. 

Yes, things have gotten fowl around the Senate Banking Committee, but the last item could be some chickens, uncomfortably, for a certain Senator, coming home to roost. 

Leading the latter charge and other opposition to the bill is Tim Pagliara, founder of CapWealth Advisors, a Tennessee wealth management firm, has created Investors Unite, a group to push his case against Treasury’s expropriation of Fannie and Freddie resources.
Pagliara, an investor who now is a CWJC critic, also is/was one of Senator Corker’s primary fundraisers or possibly his largest money guy. 

Foreign Vultures: Vodka and Won Ton Soup?

The Russians and Chinese were dragged into this kabuki, too, when a Yahoo business interview, with author James Rickards and possible US and Russia financial guerilla warfare over the Ukraine  (link below), said that Russian and Chinese officials once collaborated over dumping their holdings of Fannie Mae and Freddie debt and mortgage securities to their mutual benefit and selfish advantage.

All of above—plus lots more written and spoken CWJC opposition--may not represent certain defeat, but it can’t produce sweet dreams for Senate sponsors who hope for 17 or 18 Banking Committee “yes” votes for final passage.

Who is Saying What? 

Darrel Delamaide, writing in USA Today, says mortgage reform issues are causing congressional consternation.


Richard Bove thinks the government will lose the case brought by F&F investors.

As reported in the American Banker, federal financial regulators will force some of the TBTF banks to pony up more capital—which is good given the risk constellations they face—but an additional  $68 Billion, as 2008 showed, hardly will suffice if major systemic problems hit; but the Feds need to start somewhere.

Tough New Big Bank Requirement: The eight biggest banks in the U.S. may have to add up to a total of $68 billion in capital to meet a new leverage ratio finalized by regulators. Under the rule, banks with more than $700 billion of assets will have to must meet a 5% leverage ratio, and 6% at their federally insured banking units. The ratio, approved by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp., is meant to help institutions survive in times of stress. The rule, which takes effect Jan. 1, 2018, mostly follows a plan released in July but also includes a proposed change that could force banks to classify more of their assets as possibly exposed. Though these requirements are likely to be tougher than what is adopted in other countries, this could turn out to be an advantage for U.S. banks, the Wall Street Journal's Heard on the Street states. "Higher levels of capital allow banks to better withstand shocks. So while leverage constraints may damp returns on equity, they reduce the risk borne by shareholders and creditors. That can actually be positive for both share and debt prices," John Carney writes. 

Hedrick Smith—excellent piece in the Washington Post--reviews Matt Tabbi’s new book, “The Divide: American Injustice in the Age of the Wealth Gap.”


Maloni, 4-13-2014


Bill Maloni said...

Monday--Community banks and the credit unions send letter to Johnson-Crapo opposing CWJC, saying current system works well for them.

Anonymous said...

Bill, since it has taken nearly a year to bring the same bill to a Senate Committee markup and vote , who would think that this is nothing more than dressing up the pig in hope of finding a date for the dance? I liked Tim Pagliara's comment that this now brings opportunity for a real debate instead of hearing what's best for us by some Senate staffers led by a former Countrywide scam artist. How stupid do they think we all are? This bill is dead.

BTW: is that your picture on the horse as "moderator" for the Timhoward717 blog? Hi ho Silver!
(PS Made you look)

Bill Maloni said...

As of today, it looks like the dance date is slipping.

They think we are very stupid and also they are very arrogant and, possibly indifferent, given the silliness of their approach.

It starts and ends with " 'Kill F&F' and we'll fill in with something."

If it is a good picture and I am surrounded by beautiful, swooning women, then, yes, it's me. If not, it's someone else!