Monday, June 23, 2014

Where do they grow these guys?



Oh No, Not Another One!! 


Last week,  blog reader “Anon/JM” sent an opinion/question to the blog’s “comment” section, wondering why/how people can continue to be so dense, obstreperous, and wrong about Fannie and Freddie issues? 

I suggested most of those critics didn’t know any better and believe all of the false rhetoric the GSE enemies built around lots of distortions and a few real F&F mistakes (PLS!). But other haters, either for business  or ideological reasons, want to get their DNA into whatever succeeds F&F—if something does.
Think “huge scalp/coup” complete with big financial rewards. 

David Fiderer, the Hebrew Hammer,” dubbed the years long assault, the mortgage market’s “Big Lie.

Suddenly, we have a new born again GSE critic, a very contemporary example of someone—despite his educational achievements or maybe because of them—who exposes himself as a GSE-hater, by repeating bullshit conjured by the American Enterprise Institute and others on the Right. 

Meet David Brat, the guy who shocked many in the nation by defeating House Majority Leader Eric Cantor in Virginia’s Seventh Congressional District’s GOP primary. Chances are very good in November’s general election Mr. Brat will become “Representative David Brat (R-VA).”

Facts? Hey I’m Running for Office

Who knows why how/why the GSEs came up in this internecine GOP primary election in the Richmond area, but Brat sought points telling his possible future constituents that all of the problems of the 2008 financial meltdown were caused by—you guessed it—Fannie Mae and Freddie Mac. 

How can a supposedly intelligent individual suggest the commercial bank lenders did everything right and F&F did everything wrong, as Brat did?  

Both suggestions are foolish and reflections of a simple mind. 

Um, Dave, go back and check this out. The nation’s large commercial banks issued almost $2 Trillion in near worthless private-label subprime mortgage securities, in 2006 and 2007, selling them all over the world with inflated bond ratings maced from their friendly bond rating agency business partners.

Banks’ garbage PLS generated three to four times more mortgage losses that Fannie Mae and Freddie Mac securities did. The latter quickly righted their houses and repaid taxpayers over $200 Billion with a still increasing surplus. Banks still are skittish about lending for mortgages. 

How did Brat conflate all of that information? Simple, he lied! 

When the AEI first authored those same falsehoods, its arguments—formally and in writing--were shattered then rejected by Federal Reserve staff commentary, the President’s Financial Inquiry Commission report, and dozens of writers, columnists, and think tanks.

But that didn’t stop David Brat from repeating all of the inflammatory talk, serving up the bogus AEI drivel, repeating variations, and perpetuating the F&F lies and myths, ignoring that much of what he claimed was wrong. 

This from a college professor and a purported trained economist, but so far, he got rewarded? 

I doubt the GSE issue, alone, got him over the top against Cantor, but will Brat now let some facts creep into his narrow intellectual band width as he campaigns for the Cantor seat against a Democrat? 

Austin Kilgore’s article in the National Mortgage News this week, discussed Brat’s distorted F&F views of what led up to the nation’s 2008 economic and financial blues. 


Mortgage Sidestep: Dick Cheney 

Is Dick Cheney a “lying sack of sh--?” (See Urban Dictionary if you need a precise meaning.)

Go quietly into a dark corner, Mr. Cheney, and stay there until God or the Reaper takes you.

For reasons selfish and egomaniacal reasons, including feeding more BS to his party’s crazies, Dick Cheney and his daughter--in a Wall Street Journal op-ed last week—sought to project the Bush administration’s egregious foreign policy errors onto the current President and blame Barack Obama for Iraq’s recent setbacks.  

I believe the US never would have invaded Iraq if it wasn’t for you, Mr. Cheney, and your lying/stealing corporate oil-sucking buddies taking advantage of a very naive President George W. Bush. You then doubled down and made sure your military industrial complex Goombahs got monstrously rich on taxpayer dollars.
Shame, shame, shame on you Mr. Cheney. 

Back to Mortgages: Rosner 

Josh Rosner has enjoyed a fascinating odyssey, to which I am sure he will attest, from Wall Street financial analyst to co-authoring a book, with the WSJ’s Gretchen Morgenson, critical of Fannie Mae and its then Chairman, Jim Johnson.
Rosner's and Morgenson's book relied on AEI “research” (see above), which has been debunked by most intelligent observers.  

Completing his circuit, Mr. Rosner is managing director of Graham Fisher & Co, and now has become an ardent advocate and supporter of a Fannie/Freddie revival. 

Check out this Bloomberg video of a recent F&F investor conference, where Rosner discussed the virtues of a F&F mortgage market rebirth and the very flawed and hardly lamented CWJC legislation. 


 DeMarco’s FHFA Was Messed Up

Here is a little bon mot from the always excellent Inside Mortgage Finance (IMF) publication that reported the departure from FHFA of a man who had a strange set of responsibilities, which I bet doesn’t exist at any of the other federal financial regulatory agencies (at least I hope not). 

The IMF article:

“Manoj Singh, a top official at the Federal Housing Finance Agency, has left the agency for the private sector. According to associates close to Singh, he has accepted a position with American Express and will serve as a market risk oversight officer. At the FHFA he was involved in strategic planning to help attract private capital to the mortgage industry, a key goal of former Acting Director Edward DeMarco.” 

DeMarco’s goal was to end F&F as most people knew them. So did Fannie and Freddie pay the salary of a guy trying to generate business that never would go to them?

Strange position for a regulatory employee to be in, trying to encourage growth elsewhere and not at the two entities his agency is overseeing.

Dems Talk to Watt? Fast, Jam the Lines!

Jon Prior, writing in Politico, reports that a top Republican on the House Financial Services Committee said he's “worried that pressure from Democrats will lead Federal Housing Finance Agency Director Mel Watt to expand Fannie Mae and Freddie Mac's role in the housing market at a time when it should be contracting.”

"Even if Mel Watt seeks a moderate course, I believe it will be very difficult for him to resist the pressure coming from the left," Rep. Scott Garrett (R-NJ) said in prepared remarks for an event hosted by the Financial Services Roundtable. "If he complies, he will be a hero to the Democratic base. If he resists, he will be called a sellout. It will be in his interest to comply.”

My goodness, Republicans worried that Democrats may listen to other Democrats.

Intraparty communication and cooperation? What is the nation’s capital becoming? Next they’ll claim that there is “gambling at Rick’s!”

Of course, consider the venue.



I couldn’t help but include the following article, just for the headline alone.

As a new investor (reportedly about $50 Million in F&F common stock purchases), I wonder on whom Icahn will use his tried and true technique of threatening those who make decisions over his stock shares??

“Jack Lew, this is Carl Icahn and I better get my %^$#@& way or………Hello, Hello!”


“Discovery”: A Smart Man’s Opinion 

I heard from a very wise financial services friend this past week, who read Judge Margaret Sweeney’s comments during the 6-19 discovery hearing on Fairholme Funds, Inc., et al. v. USA. It doesn’t look like the Judge is purchasing what the government is peddling.

Here is that individual’s opinion. 

It seems pretty clear to me that Sweeney isn't buying the government's argument that FHFA should be exempted from discovery because as conservator it's not a federal agency, and that she also believes she can deal with the government's concern about sensitive information by crafting a sufficiently restrictive protective order that will keep potentially market-moving information from being disclosed.  

So, my conclusion is that the documents plaintiffs are seeking to access will be produced under a protective order.  And I strongly suspect that when this happens it will become clear that (a) FHFA was acting at the direction of Treasury when it agreed to the net worth sweep and (b) that the net worth sweep was put in place precisely because Treasury had concluded that without it Fannie and Freddie would begin building capital, and that calls for releasing them from conservatorship would begin in earnest-- something Treasury wanted at all costs to avoid.  Then the fun will begin!

I don’t have a transcript link, but for those interested, a transcript is floating around and something will be publicly available this week. Just read Judge Sweeney’s comments to the government’s lawyers in the first three pagesShe doesn’t sound happy!

(Post publication addition. Thanks to Compass Point's Isaac Boltansky, here's a link to the Sweeney hearing transcript.)


Maloni, 6-23-2014




Qualified Observer said...

Just a quick one to say thanks again. Keep singing and beating the drum, please :)

Bill Maloni said...

Thanks QM. I appreciate the feedback.

"Do, re, mi, fa, so la, ti, do...."

Bill Maloni said...

Hey--my friend Compass Point's Isaac Boltansky just helped immeasurably by sending me a link tot he Sweeney hearing transcript.

It's now in the blog as a post facto addition.

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