Sunday, May 25, 2014

Geithner, CorkerWarner, Stevens, F&F, Castro, Memorial Day, etc.



Lots of Holiday “Cats and Dogs”


Former Obama Treasury Secretary Tim Geithner is out hustling, hitting the book selling circuit and TV interview scene, pitching his new book about the 2008 financial meltdown.

The flinty former banker (is there another kind?) already grasped for a sympathetic straw in his first interviews, reminiscing AND APOLOGIZING, We should have done more for individuals not the institutions." 

Yes, Timmy, but if my aunt had balls, she‘d be my uncle. 

Talk is cheap and 9.5 million mortgage borrowers still are under water on their loans while—surprise, surprise--the banks are flying high with record profits in 2013. (And nobody in your Admin forced FHFA’s Ed Demarco to help F&F mortgagors in those circumstances, letting him mostly ignore them. But the banks got top shelf treatment.)

I called Secretary Geithner “the DC Democrat the big banks like the most.”  

If I was interviewing Mr. Geithner, today, I would ask:


-- “Why didn't you insist that some of the $425 Billion in Treasury’s Troubled Asset Relief Program (TARP) money pay down individual mortgage loans for borrowers, who had good credit history, but whose mortgages were severely/partially underwater?

That money could have gone right to the banks, wiped out the mortgagors loan indebtedness, and not even touch the borrowers hands, reducing any risk the money would not be used as intended.


--“Why didn’t you and the other financial mavens insist on reciprocal bank lending when you lavished all of that taxpayers cash on them, with no real strings? Why did you permit the  banks just to enhance their bottom lines--arbitraging short term Treasury and Fed securities with their/our new money—and allow the depository institutions to go almost two years without generating any significant commercial or mortgage loan originations?” 


--And finally, “Why were F&F charged 10% repayment dividends—and denied any congressional representation capacity--when banks only were charged 5% for funds borrowed from the Treasury and had no limitations on their ability to influence the Hill?”

I wish I could measure the political/media outrage and angry hyperbole over the $187 Billion the Treasury infused in Fannie and Freddie, some of which continues still, against the very few complaints coming from Congress and the press over more than double that amount of Treasury support for the banks.

It’s always good to remind people that F&F have returned to taxpayers their $187.5 Billion with an added $25 Billion cushion. 

Speaking of Gall…..

There is an old Ralph Waldo Emerson dictum, “If you are going to kill the King, you better not miss.” 

I wonder if Virginia Senator Mark Warner (D-Va.) will bury his ego enough to go back to Freddie Mac, where he spoke a few months ago (and maybe even visit his constituents at Fannie, too), and do a mea culpa for trying legislatively to kill those two workplaces and cost the employees their jobs? 

Most F&F employees live in Northern Virginia, which would have felt the financial and economic shock if Warner’s CWJC bill had been approved. 

The at-times pompous Warner may not loudly campaign that he was recruited by Senator Bob Corker (R-Tenn.) to be the lead Democrat in slaying F&F, But now that the Senatorial pair apparently have failed, What’s their next step? 

(“Hey, Mark. Let’s you and me nail your constituents, heh, heh, heh and then have us a fundraiser.”) 

We know Corker doesn’t have thousands of F&F professional employees, their families, and relatives living in his state (can you say voters?), but the opposite is true with Warner and he’s up for November re-election in Virginia. 

Will Warner try and do a little fence mending among F&F folks who could be formidable, numerous, pissed, and raise a lots of money against him, if they were so inclined? 

Having flopped, does he still want to take credit for attempting to destroy all of those local jobs and the negative impact that would have had on the Northern Virginia economy or maybe consider a strategic pivot? 

Or maybe—if Warner gets re-elected—he’s going to keep coming at F&F, which suggests those targeted mortgage people should do something now?? 

BTW, Senator Warner, please tell your money raisers—who send me frequent requests—I still don’t want to support your fundraising efforts. 

Frankly, as a show common sense, I would urge you to dip into your reported $400 Million to $500 Million net worth and self-fund your own campaigns.

The MBA’s Dave Stevens Said What?

For a guy who just had months of his lobbying efforts jammed back in his face like a cream pie--when the Senate Banking Committee failed to pass the CorkerWarnerJohnsonCrapo bill with sufficient numbers, likely ending its consideration for this year and possibly the immediate the future—the Mortgage Bankers Association’s David Stevens seemed to take a lot of bows at the MBA National Secondary Mortgage Market meeting in NYC last week. 

Stevens speech, linked below, makes it sound like he and the MBA influenced all sorts of positive things, including FHFA Director Mel Watt pronouncements last week, which heartened so many in the mortgage world.

Stevens was engaging in some major spinning when he lamented the F&F system was not approving lots of low income borrowers and mortgagors of color.

Of course, Stevens has spent all year trying to blow up F&F, substituting instead his CWJC “let’s give it all to the banks” plan. 

I’ll let the F&F experts—with whom his members still must work--respond to Stevens on the applications matter, but two things leaped out at me as I read Stevens comments. 

(Link to Stevens’ comments.) 

 In dumping on F&F for mortgage application rejections citing HMDA data, Stevens knows—and it’s important for most others to understand--F&F never see loans not brought to them for securitization

It’s the lenders’ job to review mortgage applicants and apply the F&F guidelines for acceptance, based on which securities they seek. It’s in the primary lender’s domain where decisions get made to approve or not approve a mortgage loan application and then to send it either to F or F.  

Despite its' rejection, Stevens continued to tout the CWJC proposal over the current F&F system, which he claims is flawed.

In waxing over the dear departed CWJC (large and bold text for emphasis), DS never admitted—his low-mod wailing to the contrary--there was nothing in CWJC which compelled a lender to make loans for lower income families!  

For emphasis, I am going to repeat there was nothing in CWJC which compelled a lender to make loans for lower income families! 

Yes, CWJC would create a mortgage subsidy fund but with no requirement for any lender to dip into it.

(How about annual low-mod enforceable lender goals, Dave?)

Stevens took credit for MBA praising F&F employees, but he seems to skip over his heavy personal involvement in seeing the giant mortgage investors disassembled and allowed to die, with nothing functioning in their place, save CWJC’s Rube Goldberg regulatory arrangement and its huge new federal subsidies to the nation’s biggest banks scheme. 

Bloomberg’s Jody Shenn discusses the MBA exec’s racial mortgage rejection comments and some post-speech rebuttals he produced.

Stevens’ allegations produced a “Twitter storm,” according to a Housing Wire report.


Here the New York Times weighs in on reactions Stevens comments produced.

Grease F&F Bandwagon Axles? 

I predicted that congressional and industry observers would start looking at ways of reviving Fannie and Freddie, since that might be a more promising way to produce a revived and efficient national mortgage finance system, with more access for all borrowers and lenders, and much faster and cheaper than anything in the CWJC legislation, given the bill’s controversial bank mortgage security subsidies and virgin insurance regulatory structure. 

John Taylor, President and CEO of the National Community Reinvestment Corporation, publicly called for what is, in fact, occurring behind the scenes with some influential housing and mortgage finance people discussing the revival of F&F. (Probably not David Stevens, right now.)


Foreign Banks Break US Laws; Join the Big US Banks, It’s Easy! 

Only because it tracks so well with what I’ve said and written, in almost every blog I’ve produced this year and most of last, here’s this week’s story about the Swiss headquartered Credit Suisse violating US tax laws (and our banking regulations). 

Here is another “this week” story about France’s BNP Paribas bank, vitiating our bank laws by managing/moving funds for Iran, Sudan and Cuba. 


By all means Senators Corker and Warner, let’s turn over our national primary and secondary mortgage markets to the big banks. They are responsible and would never try and manipulate any regulatory or legal systems, right? ;-) (Sarcasm!)

(Heh, heh, heh, now Mark and I have some fundraisers coming up…..!)

One More DeMarco Fiasco

I have hammered away on the Common Underwriting Platform (CUP), which Ed Demarco forced Fannie and Freddie to create (single purpose Delaware corporation) and fund, as part of Ed’s dream about doing away with F&F. 

Hoping he could preside over killing off F&F, the former FHFA Director, first asked them to facilitate their deaths by creating an underwriting platform to be shared with the domestic mortgage market.
Right now the project has a vague annual cost of possibly $300 million, with up to 300 new employees headed offices in to Bethesda, Maryland---which currently are empty).

But last week, the FHFA’s Inspector General found a few major problems with this DeMarco creation.

End it Mr. Watt; putting your fingerprints on DeMarco’s project just attaches you to a total waste of taxpayers’ money for reasons I’ve spelled out in previous blogs. (Every wasted CUP dollar is F&F revenue which doesn’t back to taxpayers or is lost to possible future F&F recapitalization.) 

If you believe it’s absolutely necessary (I don’t), detail 20 techies from each company—or 40 from Fannie or Freddie--and have them build one, giving them a year to complete the task or dump it.


Who Said What Recently?

Josh Rosner offers some tax advice to facilitate mortgage finance and boost the middle class.

How about this tome on risks to bank reputations for violating federal government rules?


Here’s another perspective on underwater homeowners from the Hass Institute.

Bruce Katz, a former Senate Banking Committee Housing Subcommittee staffer, deputy to former HUD Secretary Henry Cisneros, and currently a Brookings Institution’s VP—writing in Politico-- offers some thoughts on what new HUD Secretary Julian Castro might undertake

Remember, hug a veteran; I’m able to write this and you are reading it because of them and their sacrifice.


Maloni, 5-25-2014

Again, comments, questions, (some) epithets welcome; see  below.


Monday, May 19, 2014

CWJC Folds Tent; Watt Pitches His; Castro is Coming!


Last Week, Lots of Major GSE News
Senate Crashes, While Watt Soars 


As I predicted in my previous blog, the Senate Banking Committee last Thursday did report the CorkerWarnerJohnsonCrapo (CWJC) bill on an underwhelming 13-9 vote, with one supportive  “Aye” tendered by retiring conservative Senator Tom Coburn (R-Okla) casting his vote for his friend Mike Crapo (R-Idaho) not so much on content.  ( I misidentified Coburn as Sen. John Cornwyn of Texas in the original blog.)

The narrow bipartisan approval likely was insufficient to show Majority leader Harry Reid (D-Nev)--or Minority Leader Mitch McConnell (R-KY)--the kind of popular appeal which merits Senate legislative floor consideration. 

Compass Point’s Isaac Boltansky wrote an excellent post-action report looking at some of the contentious GSE matters. (Also, note how possible future committee Chairmen voted.) 

See Huff Post’s article on the same matter. 

Watt-age Rising (not his years)!

Ironically, two days before the Senate Banking swung and missed killing F&F in its time at bat, Mel Watt Fannie’s and Freddie’s new oversight Director at the Federal Housing Finance Agency (FHFA), hit a solid double and easily could made third base with his maiden policy speech at DC Brookings Institution. 

Watt reaffirmed his support Fannie’s and Freddie’s traditional role, keeping them working until there was reliable evidence of a viable alternative, and his commitment to increase mortgage affordability  controlling keep F&F fees and charges (contrary to his predecessor’s agenda). 

His speech, whether by design or not, marked Watt as a key player on GSE policy (which I am certain PO’d certain White House and Treasury officials, who saw Watt as the policy-shaky new kid on the block and not their equals). 

Given Watt’s impressive debut performance, in the media’s eye, he might have vaulted over Treasury’s Mike Stegman and HUD’s Sean Donovan (who’s reportedly headed over to run OMB) as the Admin’s point person on GSE policy. (Grunt level, grumble, grumble!)

The well coifed Nick Timiraos (I know his barber!) covered the Watt speech for the WSJ and wrote the story linked below. 

Tie Richard Bove down and douse him with cold water. If Bove was any more jacked up and delighted over Mel Watt’s speech portent, public safety officials might have to breathalyze Bove and cite him for writing under the influence!!! (See below.)


And Along came DeMarco….

On the same day that Watt spoke at Brookings, the man who held the job until the Senate approved Watt, Ed DeMarco, came out to argue that F&F should be throttled, shut down, and otherwise ignored because they made market mistakes and “failed,” in DeMarco view.

Wow, what a contrast, the new guy (Watt) holding out housing and mortgage finance hope and the former guy (DeMarco) spewing unhappiness and possibly venom. I look for Mr. D to wind up working for one of the DC conservative think tanks or a Southwestern financial firm hustling mortgage assets and businesses.

Here’s Timiraos’ story on DeMarco.

This article can also be accessed if you copy and paste the entire address below
into your web browser.


Mel, Have a DeMarco Opinion?

Because of the sharp contrast in the Watt and DeMarco messages, I called Director Watt (“Hey, Mel. it’s me. Bill)  to ask if he had any response to what DeMarco said, since it clashed so much with Watt’s references. 

Mr. Watt, statesman that he is, told me that he appreciated the situation in which Demarco found himself and knew that DeMarco was sensitive after President Obama replaced him with Watt. So, with great understanding and some obvious compassion for a “fallen government veteran,” Watt told me that I could attribute the following statement to him:


“Ed, tough noogies; natty, natty boo, boo and nah, nah, nah, nah, nah!” 

(No, I didn’t call Watt and he didn’t say that, just a little Maloni effort at Washington DC humor.)

In This Corner, Weighing……

Also last week, in a somewhat related matter, the Washington Post’s Dina Elboghdady, penned this article about Wayne Hornsby, the ex-FHFA Chief Operation Officer facing charges over threats to Ed DeMarco’s safety/life. 



Director Watt also delivered certainty on and outstanding question about F&F’s federal “conservatorship.” 

In answering questions, Watt declared FHFA has the authority to make “conservatorship” changes. He didn’t offer any he would make or promise to do so, but established that principle. 

Now, Watt wouldn’t be heading the FHFA unless the Obama White House politically blessed and appointed him and the new Director likely isn’t taking any dramatic steps which the White House and Treasury pols and quants don’t prior approve. 

But, it was refreshing to have clarity on a matter which concerns many, not just those plaintiffs suing the Treasury over the “Third amendment” or other F&F issues. 

It also provides a location to send their  “conservatorship” remedial suggestions. 

Here’s an Inside Mortgage Finance story highlighting that part of Watt’s pronouncements.

By Paul Muolo, Brandon Ivey, Charles Wisniowski
During the Q&A session at the Brookings Institution on Tuesday, Federal Housing Finance Agency Director Mel Watt confirmed that the agency has the power to end the conservatorships of Fannie Mae and Freddie Mac. But he noted that he has not contemplated what an end to the conservatorships might look like. It’s safe to say that all those hedge funds that have been speculating in GSE shares – both common and preferred – were listening closely to Watt’s every word...

What Some May Be Missing 

It’s a simple position for me to take but hard to understand, if you never worked in a financial
institution or for a financial regulator 

When it comes to mortgage finance, one of the reasons I support a Fannie Mae revitalization or reprivatization, where Fannie or some other significant financial investor acts as overseer, is because I don’t trust the nation’s large banks to behave.
U.S. financial institutions have shown themselves capable and willing of rampaging through all sorts of federal regulatory constraints and, frankly, are faster, more nimble than the bureaucrats, and always will take risks to make money, which is their primary reason to exist. 

It matters not how august the federal regulatory officials are (see Board of Governors of the Federal Reserve System or the United States Treasury), banks will undermine them, sometimes knowingly or unknowingly with the assistance of the very agency personnel they are subverting. 

But, here is my metaphorical explanation of why mortgage lenders (most controlled by the large banks) won’t easily prevail if they tried to scam when selling loans to Fannie or seeking Fannie’s MBS securities. 

If your watchdog is bigger and meaner than the bank dogs--and motivated because one of his body parts is at risk his, i.e. “his skin is in the game” (think Fannie’s money)--that nasty dog will do a far more ruthlessly efficient job, than any pretend federal watchdog who barks only after the bank dogs violate the “no peeing in the house and drinking from the toilet bowl” rules. 

And, yes boys and girls, it is all about the money. Maybe if the federal government shared those stiff, after-the-fact, bank fines with their employees who snoop about sniffing bankers’ activities, the Feds would be more effective at insuring the nation’s citizenry won’t have their carpets soiled so much by regulated financial institutions.
To earn/generate more revenue is why banks manipulate and cheat.

The Ongoing Story of Maloni
and the W Post Editorial Board 

Once upon a time……

Again, last week on the even of the Senate Banking vote, the Washington Post editorialized against those opposing the CWJC legislation, continuing the paper’s crusade against Fannie and Freddie.

Predictably, I sent a letter to the editor, which naturally was ignored, but appears below. 

Today's Post editorial--dumping on the continuation of Fannie and Freddie--misses the sunshine and spreads just the doom and gloom your editor’s see.

First, in less than three years, F&F have repaid all of the $187.5 billion the government infused in them and added what is now a $23 Billion and growing surplus. 

Next, opposition to the Senate bill to undo Fannie and Freddie was opposed pretty broadly not just from the from the "left"-- to which the Post gives credit--but also from the right, i.e. see opposition from Cato, AEI, Heritage, Club for Growth and many conservative others. In addition, the Urban League, Ralph Nader, the Independent Bankers Association (ICBA), the National Association of Federal Credit Unions (NAFCU), the Credit Union National Association (CUNA) and others objected to this plan which basically shifted control of the nation's mortgage markets to the large commercial banks. (Please read some of the opponents’ detailed objections.) 

The big National Association of Realtors (NAR) also expressed concerns about the bill's costs and negative impact on mortgage affordability. 

It's important to note, which the Post also seems to avoid, that Fannie and Freddie--unlike any other entity which received federal financial kelp--were banned from lobbying as part of the 2008 takeover and the myth of F&F lobbying opposition should be buried, too. 

The Corker-Warner-Johnson-Crapo Senate bill is bad legislation and would extend huge federal rewards to the large bank lenders which helped drive the US 2008 financial disaster (far more than F&F did, just compare the relative losses of the principals), has no certainty for mortgage financing for low and moderate income families, and proposes a Rube Goldberg regulatory regime, none of which yet exists. No wonder people opposed it. 

The Senate bill would take years to implement putting a new regulator in charge while F&F got unwound and the banks got to use their new federal mortgage securities federal guarantee. A recipe for disaster if one looks closely at bank behavior in the past few years.

The housing finance sector of our economy, which is about 20% of GNP, deserves far better.

Yes, retooling F&F--with significant structural changes--would occur more swiftly and more surely, with less cost, more certainty, and less political bloviating.


Cabinet Shuffle, New HUD Secy?


Weekend news reports have President Obama nominating San Antonio Mayor Julian Castro as HUD Secretary, as current Secretary Sean Donovan’s moves over to the Office of Management and Budget (OMB). 

Castro’s twin brother, Joaquin represents San Antonio in the US House. Both brothers are considered rising Democratic political stars. 

Now it’s Julian Castro’s turn to try his hand at F&F politics.


What Others Said and Wrote

I have never regretted labeling Tim Geithner, big banking’s best Democrat friend in Washington, when President Obama named the head of the New York Fed to be his Treasury Secretary. His actions bore that out.

Gretchen Morgenson’s New York Times column reviewing Geithner’s new book underscores that point. 


Reuter’s did a story on Watt, speaking later in the week, and expanding his Brookings views.


An article from the Center for Economic and Policy Research pops the balloon of the CWJC advocates who claim—unlike the current situation with Fannie and Freddie—their bill will removes the federal government from any mortgage market loss obligations, by substituting private capital. 


I just had to add this Huff Post review of the coming Koch brothers’ biography. A brotherly croquet mallet to the head and ceremonial sword in the back…and that was when they were kids??!! 

“Bad boys, bad boys, whatcha gonna do…..!”


Benghazi and medical fantasies, someone is afraid of Hillary Clinton and guess who it is (Rove and Priebus are stalking horses)?
And, if you need reminded, Republicans play very dirty even against one another.


Maloni, 5-19-2014

(Remember, post any comments or questions below.)