Friday, June 27, 2014

Munchkin Invasion!



Cats and Dogs 


(It’s slow in GSE land; summer always is. So I am examining some recent issues and personalities and adding one or two additional perspectives. But the major reason for this approach is that “Camp Maloni” began four days ago. That’s the annual, three week event when 6 Maloni grandchildren—three from the west coast and three from the east coast--arrive to delight and bedevil Gram and Grampa. We go swimming, horseback riding, tent camping, eat a thousand popsicles, go berry picking, go to the toy store about 40 times, make “Somemores,” suffer minor injuries, fight with one another and drive up Grampa’s blood pressure, but also produce some loveable and unforgettable moments making it all worthwhile. Unless something earth shattering happens, the blog will go on a brief vacation at least until Camp Maloni ends.)


Scott Garrett Performs for the FSR 

I don’t know Rep. Scott Garrett (R-NJ), Chairman of the House   Financial Services Committee Subcommittee on Capital Markets and Government Sponsored Enterprise. He arrived on the scene, after I left. But people I respect said—despite being very conservative--he was a pretty smart guy and “good on housing issues.” 

I looked forward to reading his speech delivered last week to the Financial Services Roundtable, hoping to see some enlightenment or even some progressive thinking.

Nope, didn’t happen, wasn’t to be; my friends are/were wrong. I was disappointed when I went through his prepared remarks.

He Ignores Similar Chamber Actions

In addition to bad form dumping all over a recent committee colleague, former Rep. Mel Watt, Garrett’s words displayed very little analytical content, quite the contrary.

Garrett just threw red meat to the bank lions. 

The Congressman hurled the obligatory partisan brickbat at the Senate D majority and its leadership for the Senate Banking Committee’s failure to report the CWJC legislation with enough votes to drive it to the Senate floor.  

He blamed liberal Senators for not backing the legislation to do away with Fannie and Freddie, but seemed to miss a gaggle of very conservative committee R’s, as well, who opposed the CWJC bill. 

Less than adroitly, he then tripped over another uncomfortable fact. 

After eviscerating the Senate and Leader Harry Reid for not passing the CWJC bill, Garrett bragged about the bill his full House Committee produced, the so-called PATH ACT, sponsored and shaped by Committee Chairman Jeb Hensarling (R-Tex.), which would end F&F and turn the mortgage world over to the banks.


Rep Garrett, despite all of the abuse he heaped on Reid and D Senators, glazed over or forgot that his Banking Committee barely approved PATH and with insufficient votes to propel it to the House floor, virtually matching the Senate committee’s shortcoming.  

Both Banking Committees approved a mortgage reform bill but neither had their bill go to the floor. Goose and Gander? And the Senate’s margin of victory was far greater than the House’s votes for PATH. 

So what does that say about Boehner, Garrett, Hensarling and his House R colleagues, who exist in far greater numbers and majority percentages than the Senate Democrats? 

Say Less and You Won’t Look As Foolish 

Garrett just should have sucked up that bicameral common lack of success and headed in a different direction couching his criticism in less haughty terms. 

But instead, the Capital Market and GSE Subcommittee Chairman waded in, repeating every hoary F&F tale for the bankers and their cohorts, using every phony GOP allegation and buzz word (“ACORN” and  “Obamacare”…huh?) including one dear to my heart, when he said:

“Their (F&F) whole corporate model, which was based on shifting risk to the public, maximizing bonuses, and corrupting the political system, was shown to be bankrupt.” 

Gotcha, Mr. Garrett! 

As I done before, I challenge Rep. Garrett (and/or his staff) to prove that Fannie’s corporate model was based on “shifting risk to the public.”  

(Before they were taken over in 2008, can he/they cite one instance where F or F asked the “public”—I assume he meant taxpayers—to pony up for any corporate loss?) 

What’s his evidence of “risk shifting?”

And “corrupting the political system?” How, exactly? 

If he was addressing the situation years ago when Fannie and Freddie were renown for lobbying prowess (excuse me, while I bow to myself in gilded memory), where and how was that illegal and what did we/they do—involving Congress—that corrupted it (any more than it already was)?

Garrett’s observation, I think, may have been a greater indictment of the Congress than F&F. 

If he was discussing recent history, where has he been for the past 6 years when neither F&F--because of the conservatorship implementation—were permitted to have corporate lobbyists?  (Isn’t that a violation of someone’s First Amendment rights?) 

Fannie Mae and Freddie Mac today, or for the past half dozen years, can do nothing but respond passively to congressional inquiries, since both are denied any permissible ability to advocate or “lobby.” 

“Bonuses?” Buzz word, Congressman. 

Read the papers Rep. Garrett, the Veterans Administration—which today everyone seems to revile--among other government agencies pay bonuses to their top people. 

F&F were created by Congress as “private companies,” no matter how much you disdain that reality. So, they certainly were within their corporate rights to offer bonuses as part of compensation. 

Simple question: “Since when did federal agencies trade on the New York Stock Exchange as both F&F did?” (Even today, post  conservatorship,  F&F currently “de-listed” common stock still gets reported in the Washington Post’s business section if/when either’s daily or weekly growth (or loss) merits inclusions in the “top performers” list. 

Explain that away, please.

Some Uncomfortable History for Garrett

Your very Subcommittee owns that legacy. Then known as the Housing Subcommittee of the House Banking Committee, it wrote that  Fannie Mae enabling legislation in 1970, by design, shaping Fannie Mae in a far different guise than the existing Department of Housing and Urban Development (HUD).  

Congress wanted the new Fannie to operate like a private company and its successes for the next 30 years (Freddie Mac joined it almost 10 years later) reflected that bipartisan wisdom. 

I’d have a more respect for you if you straightened out your own understanding and history of two major players over which the subcommittee--which you lay claim to proudly chairing--has primary jurisdiction.

To bring this all up to date for you, because of the sensitivities of your Financial Services Roundtable audience, maybe you didn’t want to discuss—or just don’t know—the sorry mortgage lending history of the big banks just 7 years ago? 

I’ll keep it brief. 

The $2 Trillion plus garbage private label subprime securities (PLS) those banks sold in 2006 and 2007 infected world markets and produced more than three times the losses of the combined Fannie/Freddie red ink, which itself was $186.5 Billion.


GOP: Banks Can Do No Wrong 

When will the GOP ever get over its love affair with the nation’s major commercial banks and its unwillingness to recognize depository culpability for major parts of the 2008 financial debacle? You can't pretend--although most do--that the banks messed up, big time. 

Check out the table later in this blog which shows that F&F have repaid--with an expanding $15 Billion overage--the 2008 federal funds infused in them. There are, however, a lot of banks and mortgage companies, which have yet to repay the TARP (Troubled Asset Relief Program) dollars Treasury gave them. 

But those specifics don’t fit with your narrative, just like the House’s failure to pass the Hensarling PATH Act didn’t. 

Your PATH action floundered because the extreme Right in your House GOP Caucus wouldn’t bless it, since the big banks don’t want the solitary job of offering conventional mortgage loans without the federal government providing them with loss guarantees. 

As a gentle reminder, the principle provision in the Senate bill, on which you waxed semi-eloquently, was a new federal subsidy, i.e. federal insurance on bank mortgage security losses. 

Maybe you can save discussion of those truths for your next honorarium opportunity!

(If the Congressman's office would have responded to my request to supply one, below would be a link to the Rep. Garrett’s remarks to the Financial Services Roundtable meeting. But they didn’t. I also couldn’t find one at the FSR site, the full Committee site, or online.)


TARP Money Given and Repaid

Here is a current list of all of the financial institutions which the Treasury began helping following the 2008 financial implosion and the amounts those entities have sent back to the Treasury (the taxpayers)!


Petrou’s Post-Facto CWJC Analysis

I long have admired Karen’s Shaw Petrou’s work and (and I am jealous of) her successful career as a financial services expert. We disagree sometimes, but she’s very good at her job.

Karen has worked for the big banks, but—beyond that grievance—she brings a sharp analytical insight to issues when most people just tickle the surface or rant. (See Maloni!).

Hoping she is spot on, I especially wanted blog readers to see her article produced, at the end of last month, which contains her stark congressional worries for the behemoth banks. 

KSP's article was shared with me by friend and former Fannie/Freddie colleague Rob Zimmer, who now represents a group of community lenders and closely watches big bank machinations.

(Coincidentally, Rob also was the source of the TARP repayments link employed above. Thanks, twice.)




Maloni, 6-27-2014
















Anonymous said...

I hope you have a great family get together.
The law suit was extended to July 11, 2014.
Maybe Tim Geithner will finally get his. what a complete crook, along with the long line of Crooks not yet caught with their hand in the cookies jar.

Best regards,
Craig Buchman, CPA

Anonymous said...

You are beacon of light to the securities and secondary mortgage industry. Enjoy your vacations and come back fully charged.