Monday, August 4, 2014

Summer Blahs, Palin Blahs, Congress Slinks Away


August Cats and Dogs



The Banks Did What??

I tripped on this reference to the President’s Financial Inquiry Commission (FCIC) report, published 3 years ago, while looking for something else. However, it’s worth reminding the Hill and policy makers that the big banks and their partners—between 2005 and 2007--issued more than $2.5 Trillion in PLS subprime securities with poor underwriting, ersatz/inflated ratings that soon generated three times more losses than F&F MBS. With that fact rolling around their solon minds, ask them which of the two—the GSEs or the nation’s big banks—have been more vilified and why?

The Financial Crisis Inquiry Commission reported in January 2011 that many mortgage lenders took eager borrowers’ qualifications on faith, often with a "willful disregard" for a borrower’s ability to pay. Nearly 25% of all mortgages made in the first half of 2005 were "interest-only" loans. During the same year, 68% of “option ARM” loans originated by Countrywide Financial and Washington Mutual had low- or no-documentation requirements.[57]

So why did lending standards decline? At least one study has suggested that the decline in standards was driven by a shift of mortgage securitization from a tightly controlled duopoly to a competitive market in which mortgage originators held the most sway.[6] The worst mortgage vintage years coincided with the periods during which Government Sponsored Enterprises (specifically Fannie Mae and Freddie Mac) were at their weakest, and mortgage originators and private label securitizers were at their strongest.[6]


Are Banks Endemically Thuggish?

In several years’ worth of blogs, I’ve hammered away about the untrustworthiness of big banks, their penchant to run over, around, and through their financial regulators and commit violations of varying degrees of severity, paying fines when they are caught and then promise never to do again--what they always go back to doing.

They are banks, after all. They exist to make money and they will get as creative as their state and most federal overseers (who often husband the institutions) will allow.

I am comfortable arguing that the banks—far more than Fannie Mae and Freddie Mac—are the culprits which deserve dismantling (see passage above), a position a lot of people smarter than I advocate because of their risk and management instincts to keep going to the well to steal water. 

The New York Times’ Neil Irwin, once a Washington Post financial reporter/columnist, last week noted the continuing aberrant bank actions and in a column asked (paraphrasing),”Are the nation’s banks are intrinsically bad and flawed?”


Congress Vacates With Much Left to do--So What’s New?

As the Congress raced out of town for five weeks of vacation—with so much left undone on their agenda—the House GOP did find time to form the Tea Party’s obligatory circular firing squad (“fire, ready, aim”) and begin the process of suing President Obama for…..perceived sins and, also, Sssh, for being Black or not wholly White.

Please, nobody get in their way or try and stop them. GOP self-flagellation is so much fun to watch. 

IMO, this preliminary step to House impeachment antics will so quickly backfire and may allow the Democrats to hang onto Senate control in November, which currently appears to be slipping away from them.

 Anyone reading this blog knows that I’ve expressed unhappiness with President Obama’s performance. 

He’s paying for his perceived detachment and intellectually approach to national office, his lack of collegiality, failure to reach out and schmooze to the traditional DC power people in both parties, and not possessing the alley fighter instincts that his job demands domestically and internationally. 

A Big D Win? 

But, Democrats will be the huge beneficiaries of any GOP effort to impeach or even sue the President, as the Republicans expose themselves for the obstructionist, time and money wasting blockheads which many have become. 

Myriad internal and foreign problems face AMERICA. When will this House of Representatives cut out the narrow minded local golf club political machinations and begin legislating for their constituents and the rest of the country? 

Can the R’s nastiness and Marie Antoinette approach to their responsibilities be any more obvious? 

Disagree with Obama all you want—as I have—use your anger and disrespect (which contains a healthy racial component) constructively and offer competing policy alternatives. Don’t just turn it into a campaign to remove his behind from office. That only exposes the GOP’s extremists in a way D’s can’t by just arguing issues and facts.  

The more the “impeach or sue” Obama noise in the next three month the better the situation for the House and Senate D campaign committees and Democrats holding onto the Senate, which should—by any historical sense—run to the GOP in November. 

The nation needs House Republicans to get into the policy game and quit hyperventilating over misperceived slights and Administration actions. 

Even former VP Dick Cheney thinks this is stupid Republican politics. But please GOP, heap it on, follow that Ted Cruz (R-Tex.) train right into political purgatory.
The controversial individual in the following segment and the impeachment talk will produce more money for D candidates and more internecine Republican grief than the GOP already is facing over its position on women’s’ issues, voter registration bullying, minority discrimination, and domestic indifference (where is that GOP immigration bill or health plan alternative?).
Sarah Palin News Website 

Get ready for a lots of Right wing hot air and “Todd’s got the gun and I have the rack”* jokes when Sarah Palin produces her own online website news. (*BTW. That line is one she used.)


The woman who many/most Americans just want to shut up and go away was so infected by her 15 minutes of fame—when she lost as John McCain’s VP candidate--that she can’t get out of her own way and just stay in the 49th state and hunt moose, gaze at Russia from her door step, or do whatever Alaskans do. 

Even Megan McCain, the Senator’s daughter, suggested…..she’s had enough of Palin.


Megan should just nose punch her old man and A.B. Culvahouse for that mistake. A.B. is the well regarded DC GOP operative who vetted SP for McCain’s VP position and, in full disclosure, A.B. once consulted for Fannie Mae, when I was there.

I wonder who EsPee—whose current net worth is estimated at $12 million--has lined up to pay for her new Internet wardrobe?

I am going to go out on a limb here and predict that if her news outlet becomes reality, Palin’s pain-in-the-GOP-butt persona will help revitalize the Democrat base with her ranting and soap opera family existence. 

Just what are Hopper, Fluffy, Grab, and Tilt (I always forget their names) and the rest of the Palin kids up to these days, any new reality shows, books, drug offenses, out of wedlock kids, or plastic surgery?

Oh, here’s what Stephen Colbert likes about the new Palin channel. 


IU & I Get Some Housingwire Love 

Seth Garrison, writing in Housingwire, discussed one disgruntled non-attendee at the Guggenheim Partners meet in NYC, at which I spoke and about which I blogged last week. Apparently the guy shut out at the door owns F&F stock and is a GP investor, as well as a member of Investors Unite (which supports F&F shareholders’ rights). He was upset at GP’s attendance policies. (BTW, GP’s Washington guy, the very capable Jaret Seiberg, offered to speak to anyone who has questions about the GP conference guidelines.) 

Here’s a link to Garrison’s article, which contains a slug of what was in my last week’s blog. Make sure you read through to the end and the reader comments, where I added some thoughts to what originally I blogged about the “takings” law suits. 


GSE Earnings

Nobody knows for sure—except some FHFA officials—but the Washington Post reports both F&F will announce earnings at the end of this week (Freddie on Thursday and Fannie on Friday). 

Fannie Story Competing for a Prize 

One of the consequences of “conservatorship” is F&F are not permitted to have advocacy congressional relations offices, just some staff who respond to Hill questions and requests for information.

Similar constraints exist in their respective communications office, which the public can see in the number of times reporters include “no comment” from the two their communications when approached to discuss anything which makes it into the news. 

But, something slipped between the cup and the lip, since one major PR industry magazine has nominated Fannie Mae’s financial success story in the “financial turnaround” category.

Scroll down the awards to find the Fannie reference.

I hope Fannie’s wins its bracket. 

US Russian Sanctions  

Keep them up President Obama and find new Kremlin targets to squeeze. Use as many tools as you possess to support your rhetoric. All is fair in financial and economic punishments, especially if you are going to slow walk giving military support to the Ukrainian President and people. 

What Others Are Saying 

Charles Krauthammer, in a Washington Post column, criticizes US Israel-Palestine policies.

In Politico, Charlie K, again, on silly GOP floor actions (see above).

Paul Muolo—in Inside Mortgage Finance--discusses a 2011 Blackrock report—(leaked from the from “takings” discovery?)--that suggests Treasury may have known about F&F’s growing financial strength before it decided to sweep all of F&F’s revenues.


In her Sunday NYT column, Gretchen Morgenson looks at a story I planned to cover but didn’t this week, which was a Government Accountability Office (GAO) report on bank subsidies to the TBTF institutions.

But that report missed the biggest bank subsidy, which is federal deposit insurance. A @47.5 Billion FDIC fund covering more than $6 Trillion in insured savings and checking accounts, allows banks to raise working capital far beneath the true cost of funds, if they had to borrow that money in the national/international debt markets.(Thanks O for those numbers.) 

That’s a rich subsidy thanks exclusively to Uncle Sam. (Remember that unique subsidy the next time the banks cry they are “private sector” and F&F are/always were government.)

Maloni, 8-4-2014


Duncan MacLeod said...

Earnings release- headlines were that Net income dropped. The real story is that this quarter represents normal operating profit without extra ordinary reversals of paper losses and bank settlements.

Bill Maloni said...

You are absolutely correct Duncan
and no credit expenses, suggesting likely positive numbers for the rest of the year.

Not bad earnings for Uncle Sam!

Anonymous said...

I wish that the congress were as well run as Freddie and Fannie!

Bill Maloni said...

Anon---I understand your sentiment, but the reality of it--and no reality affects or infects this Congress--is that the heavy FHFA regulation doesn't allow F&F to make any creative or entrepreneurial moves that contain some risk.

Yet both still are heavily used and doing well.

Now, if you can figure out a way to regulate the Congress then you might realize your wish.