Monday, February 9, 2015

Feeling Snarly!!



Ladies, Gentlemen, Boys and Girls,
The AEI-HEN Circus is Back in Town


This is not Ringling Brothers but better, and it’s free.

It’s the AEI and Jeb Hensarling (R-Tex.) one ring extravaganza circus, where Jeb gets to endorse Peter Wallison’s latest thriller (yawn), how Fannie and Freddie ruined the financial world in 2008. (Psst. He's ignoring the past 6 years.) 

And this folks--er, excuse me young man, watch out for the elephant dung heap; ok now go into your seat—once again was  penned after PW’s underlying Ed Pinto research (I don't want to get freaky about this, but do most people remember that “Tonto” rode a spotted horse, also called a.....?)--who was “let go” by Fannie Mae many years ago—was and has been rejected by the Fed, the Treasury, the Federal Financial Inquiry Commission, and a host of financial columnists and writers, including prominent conservatives. 

Someone noted that Ed’s research—and therefore one might assume Peter’s book--has more tire tracks on it than I-95. Oh, wait, that was my observation. 

But Peter will be selling and Jeb will be affirming PW's accuracy, despite the fact that the HBC Chairman—in the last session of Congress--had a panel four ideologically diverse witnesses  before him  declare they were in agreement that F&F may have been a factor they did not cause that meltdown.


The promo for the event (honest and for real) says complementary copies of Peter’s book will be available. (I am assuming for free, but with the AEI you never know), but you might, repeat, might have to bring your own crayons. 

Psst. This is the book Peter claimed was blasted by Left wingers writing reviews on the Amazon book site; Pete maybe this folks just didn’t like or believe rehashed hash? 
(I can't take credit for the above artwork, borrowing it from another site, but I hope friend Peter appreciates its humor.)

Watt, a Disappointment Last Week? 

If I am wrong with this next few paragraphs, I am sure I’ll hear about it from those who read the blog. 

When asked last Wednesday about the possibility of the White House taking some aggressive action--via regulations, using the authority Watt months ago claimed it and he had  to change the “conservatorship” rules and let F&F hold onto more of their income, Mel did his best Mad Magazine “Alfred E. Neuman--“What me worry?” and said it wasn’t his job to raise this matter with the White House. 

It’s not your job, Mr. Watt?
Did you turn in your heart, brains, and political cajones when you took the F&F post?

Why isn’t it your responsibility Mr. Watt, who better?

Deep down, do you really believe that last year’s CWJC legislation, which the President keeps blathering about (and which most of your former CBC colleagues hate) is good for anyone but the big banks? Is it good for low and moderate income families; is it good for small lenders?

Think about what interests rose up last year when the bill came up for a vote in the Senate Banking Committee?

Honestly, I hoped for more from Mel Watt. I hoped this veteran 20-year congressional good guy, who had served on the Banking Committee and a senior member of the Congressional Black Caucus—who reportedly got his job through WH counsellor Valerie Jarrett because of those qualities—would step more and assert his gut instincts.

Others kept insisting that the Obama Administration is playing “possum” and will rise up, rectify past F&F conservatorship wrongs, and unleash the mortgage finance giants letting them return, partially, to the job they did pre-2004--before their quality managers were run out of government by ideological zealots--and since 2008. 

I Expect More From Watt 

Frankly, I hope in passing over Mark Zandi for a former black Congressman--who never came close to Zandi’s mortgage sophistication and knowledge—the GSEs were getting a new overseer who felt the pain in the minority community being cheated or denied homeownership chances by lenders seldom challenged by federal banking regulators. A man who would/will act on those faults. 

When he went before the  Hensarling (R-Tex.) HBC, didn’t Mr. Watt hear those congressional CBC voices espousing the many positives about the two entities he oversees and expressing their hope—on behalf of their constituents—that this Administration (as it has for most of the past six years) would stop “turtling” and eschew the GOP/big bank agenda to do away with F&F??

Let me make it simple, Mr. Director. Did you hear, with all of their deprecations, what those House Republicans were seeking, what type of mortgage finance system, controlled by which interests?

Well, it’s simple. You should be opposed to much of what they support. 

The “worst week in Washington”—a sobriquet given every Sunday by editors of the Wash Post “Outlook” section—IMO,  goes to Mel Watt, who during his HBC testimony the previous week, certainly didn’t produce a “Profile in Courage” and carried through this past week with the same “leave no tracks in wet mud” activity.

The good news is that Mel Watt has more time in town to reverse that image and urge the Admin to do the right thing. 

Please remember, Director Watt, and broadcast far and wide the F&F that exist today are far more secure than those 10 years ago, when they started to drift with new managers in charge.

Jon Prior (@JonAPrior)
On rebuilding GSE capital, Watt said he isn't aware of talks in Treasury to do so, says not his "responsibility to start that conversation.”


Ironist in Charge of Moving

Treasury, i.e. the American taxpayers, will benefit when Fannie sells their several buildings in an around DC and eventually move into what was the site of the Washington Post newspaper on DC’s 15th Street,  after that structure gets demolished and a new Fannie home constructed.

Depending whether the buyer of the iconic Williamsburg style “3900 Wisconsin Avenue Fannie HQ” uses it as is or re-sells it after it has been  bulldozed (with some critics hoping Fannie’s charter would go with it), somehow the result will be multiple millions will go into the Treasury coffers.

Think about the incongruity, Mr. Bezos, the home city newspaper, once removed, will provide the new home for Fannie. The paper which trashed the company editorially every chance it got, even creating a few when  opportunities weren’t ponied up to them, now housing the “Houser.”

My one hope, when the Fannie finally move in, is that someone finds the article/column/editorial--which still hasn’t made it into the WashPost--telling their readers that federal Judge Richard Leon, in 2012, dismissed the “securities fraud” charges against former Fannie executives Frank Raines, Tim Howard, and LeAnne Spencer Garmon. 

It must be there somewhere, Mr. Bezos, it must be? I mean Fannie is a famous, if not infamous DC company, all the principals are local and certainly in the cases of Raines and Howard well known.  

So, I am sure you’ll agree it was newsworthy and probably just slipped into somebody’s “burn can,” by accident of course. 

Of course the Leon decisions screwed up the ongoing Post anti-GSE allegory but, hey, that couldn’t be the reason for this glaring now going on 3 year omission, could it Mr. B?

Washington Post Columnist, Charles Lane 

Lane produces op-ed columns for the Post and is regular guest on Fox News. Last week, CL wrote a piece lamenting how much the federal government (Democrats and Republicans) devotes (wastes?) supporting home ownership. As evidence, he pointed out that home ownership rates have stayed pretty stead near 64% for 20 years, despite a fault a vault to 69% in in 2005.  

He implied the nation needed a new perspective on home ownership and Washington was directing too much to support people who wish to buy homes noting the static the relatively static home ownership rates. 

His column produced this Maloni LTE response, which—naturally--the Post didn’t print. 

With his lament, today, about too much federal home ownership support, Charles Lane missed the bigger picture. 

Home building and home ownership are tied to about 17% of the nation's annual GNP, in dropping or lessening the federal support for people wishing to buy homes, that large job generating segment of our economy gets whacked, because the banks will pick up the slack. 

More important, why pick just on home ownership federal efforts? 

If Lane is lamenting the failure of the home ownership rate to return to the 2005 levels or just to grow--he needs reminded the nation has spent trillions on defense spending, but we still have wars and US military personnel coming home in body bags; the nation has spent trillions on public education and we still have non-perfuming school producing kids who can't read; the nation has spent trillions on healthcare and health research and we still have young and old dying from diseases we can’t totally cure. 

Should we all join the Tea Party, stop all of these outlays, plus many other worthwhile federal expenditures? 

One last point, if the issue only is home ownership and the federal government listens to Mr. Lane and gets out of the way, the logical recipient of the entire primary and secondary mortgage markets are the large commercial banks. 

This unworthy group, in 2005-2007--issued in their own names and labels (meaning no federal support of any kind)--and sold around the world, $2.7 trillion in poorly underwritten, falsely rated “private label mortgage backed securities" (PLS), which quickly failed making the US real estate deflation an international debacle.

Did I mention those same big banks—for a variety of transgressions-- have paid Uncle Sam more than $220 billion in federal financial regulatory fines in the past few years? 

Careful for what you wish, Mr. Lane.


Court Cases 

I confess that I don’t understand legal proceedings, overlapping jurisdictions, and such. 

To date, I’ve dismissed Judge Lamberth’s decision (now being appealed) that there is no judicial review of federal regulatory cases; cheered  Judge Sweeny ruling to muck through obvious Treasury and Department of Justice obfuscation of her “discovery ruling,” and last week saw Iowa Judge Robert Pratt punt—in essence—and buck the case back to Sweeney. 

Pratt said that while he didn’t agree with the plaintiffs, he also didn’t know much about Fannie Mae and Freddie Mac, which to me is a shockingly scary admission for any judge working on the subject. 

In reading about his proceedings, Pratt seemed very intellectually uncomfortable and didn’t want to consider/decide this case, which became the result. 

Looking for more Sweeney, until we hear about the Lamberth appeal. 

More Fiderer!



Maloni, 2-9-2015


Fan O. Fred said...


I agree that Mel Watt was disappointing last week. Director Watt has recently competed one year on the job and has now testified at both the Senate and House finance committees. He has given a few interviews (despite NY Times calling last week's his first) and he has given a few speeches. Now we have something to assess regarding his performance. "Disappointing" may even be a kind assessment.

Due to the longer-than-anticipated c-ship and the current quagmire, we need a Director that is explicitly clear with both his deeds and his words.

Unfortunately, I personally believe Mr. Watt is driven more by the loyalty he has for the President due to the confirmation battle and less by the responsibilities of the job.

Not my job!? Foolish to say once; utterly perplexing that he keeps repeating it. If he actually means that statement, he doesn't grasp the job. If he is playing games with words, he should stop.

If Mr. Watt and Mr. Lew have a difference of opinion, they should have it settled by their mutual boss. It seems like that conversation has taken place and we are witnessing the results. So much for an independent conservator...

We have an administration using executive privilege and a director playing cutesy with his words. Yes...disappointing...

Fan O. Fred

Anonymous said...

OT: It seems I-95 is the subject of many jokes. Today, NPR reported that at some point there was so much marihuana being transported through I-95 (from Miami, of course) that it was called "reefer 95" by local enforcement guys. Then, "lanes longer than I-95" when cocaine replaced mh as the drug of choice being transported.

Re: who reportedly got his job through WH counsellor Valerie Jarrett...

But remember, VJ has a long history siding with the left and communism, including personal relationships that go back in time with people who represented these ideals and who acted upon them. How does that help our "private property" claims? If she still is a voice of influence within an inner circle of power, then, I'd say we may be out of luck with Mr. Watt.

The present situation is like a dream come true for those who may share some aspects of her philosophy.

1. Companies are de-facto nationalized yet, they continue to be technically private. So investors have little to no claims as courts have proved so far. Government gets no hurt and all the money.

2. Rules issued are vague, thus executive power and Mr. Watt can safely disregard all issues and all claims by deferring stuff to Congress. Government gets no hurt and all the money.

Government does not want to take a stand here. The benefits they get from the current statu quo are out of this world. Specially, when you take into consideration that so far, government has not been hurt a bit by their actions.

This is even better than in Venezuela or Cuba. Here, government expropriates everything with no blame on their side and because of the legal limbo, there is no recourse for the victims. Except that for the VJ's of the world "private property advocates" can never be victims of anything. Unless they are victims of their own capitalistic greed.

Bill Maloni said...

Double response (thanks for reading and writing):

To FoF; What I am hoping for--given and understanding his fealty to the President who gave him this job--is that Mel's instincts take over and he at least lobbies internally for things which his gut tells him are correct.

To Anon--That's why we are looking at 20 or more law suits and the outrage that accompanies their submission.

OK, I am not a lawyer but the judicial decisions we've seen to date confound me.

It also makes me wonder--as I have written about 50 times--what those government lawyers are hiding in adding glue and gear sand to Judge Sweeney's "discovery" order?

Fan O. Fred said...

Good lord...I hope he is making different statements internally when speaking with UST and WH.

This external, affable confused grandpa act is getting old, though...

"Honey, do you know where I left the keys to the conservatorship...I just can't perceive that I recall not to forget to remember where I left them. It really was not my job to remember - it's everyone else's job."

Bill Maloni said...

I certainly hope there's more "there, there."

But, nothing would surprise me.

I plan to give him additional time before I call him not up to the task.

Zandi had the experience and the instincts, if he was FHFA Director now, we might be singing a different unhappy song.

So, as I suggested to Charles Lane, in today's blog, we need to be careful for what we wish.

Fan O. Fred said...

bill- like your honest, straight-forward opinions...definitely not cryptic, ego-driven bs...thank you!

Bill Maloni said...

Thank you.

It's the least I owe people willing to read my stuff.

Anonymous said...

First Anon...

Bill. All this talk of the evil of fandf. If they are serious of doing away with them, why not just do away with them.

You know, old mel baby, say... no more buying loans.

That way it will force the market to adjust and we'll get a full private market. You know whatever happens happens.

So loans get originated and held on the banks books. Or they sell them to private investors. You know the kind that require 10% real rates of return or more, you know just like that "pspa interest rate"

So what happens to the availability of mortgage cash... it dries up and gets expensive. So the price of homes fall because no longer can you afford a $400K home, but say a $200K home at 15%. But hey, isnt that what they want, government out of mortgage lending. You know over time, others may join the party and lower rates for the best qualified buyers with 25% down.

So, give it to them. Let them suck eggs.

Bill Maloni said...

Anon--You may have just described the next five year mortgage market scenario, especially if a true conservative wins next year's presidential election.

Certainly Tea Party types, who could grow in numbers after the 2016 contests--would sign up for that, if you believe their "get the federal government out of mortgage finance and everything else" rhetoric.

However, just as the GOP is moving slowly--because it doesn't want to piss off the builders, Realtors, small banks, and lower income interests before next year's elections--there are some politically potent interests that could block those actions.

Again, the negatives in your scenario would take some time to show up and impact all of the parties affected.

But nothing would totally surprise me.

Bryndon Fisher said...

I know I've said this before, but it bears repeating. If the 5,000-plus employees of Fannie Mae and Freddie Mac simply walked off the job until their companies were released from this federal hell (the conservatorships), this whole thing would be resolved. As you know, individuals have enormous power when they stand together as one. Just look at the Montgomery Bus Boycott. Setting aside the shareholders for a moment, the employees don't deserve this kind of treatment.

Bill Maloni said...

Bryndon--I won't bore you with my recent personal experiences--as a retiree--trying to contact someone at Fannie, first through the general call center/switchboard and later, after a "skillion" telephonic transfers, finally I connected with the department I was seeking and engaged with a not very bright employee who fed me a line which I knew wasn't accurate.

I called her on that specific point, she did a 180 degree turn, but still gave me Nada.

While I always have been a fan of dramatic guerrilla warfare, I believe that most of these employees have become the equivalent of "federal drones," where little is expected and not much offered.

It's like getting HUD or HHS to go on strike.

It's a place (Freddie, too) where they come each day and earn a paycheck and for many, that remuneration, likely is higher than they would get anywhere else.

They have little invested in the institution, its former successful operations, and its previous reputation as a fabulously diverse place to work, as award after outside award noted 10 years ago or more. It had dozens of women senior officers, who were paid very well.

For the most part, all of that élan is gone.

That description may hurt the people inside, but these are not the entrepreneurial machines who worked there in the past.

Ergo, I doubt many have stock in the company or care about those who do and they "don't bleed Fannie Mae gray and green," which refers to an old ad campaign the company ran years ago.

They seldom complain, seldom speak out, and--mostly--are not permitted to disagree with their FHFA overseers, at least publicly.

There is no union activity so who will lead the outrage and outage?

If you did have a group stop working, picket, and complain, the first Hill response would be to "fire those selfish SOB's for walking out on those good job. My constituents back in East Hogshead would love to earn $--,000 a year and do nothing all day in a cushy office......"

Sorry, my friend, I like the idea I saw on 717's blog about a group of F&F investors coming to DC, picketing, getting themselves arrested and then going on a jail hunger strike.