Monday, June 29, 2015

GSE Summer-Lite



The Cynic..Who Me??


Some blog readers have noted some cynicism in my comments about HERA and “Third Amendment” court cases and possible outcomes for the GSEs. That’s a fair review. 

In contrast, many solid and smart posters at the “TimHoward717” blog—allies, if you will-- are very optimistic that “the truth and law will prevail” and both their opinion and their personal net worth will be enhanced, when GSE share values skyrocket.

I hope they are right and I am wrong, but…..Washington (courts, Congress, media, opinion leaders, etc.) doesn’t too often anoint “winners,” with the losers skulking off into a corner licking their wounds with nothing to show for it. 

There are endless variations of this exact political principle—almost a staple of democratic process--which occur inside the Beltway daily, with various “half loaves” being handed out. But some of the halves are tastier and fresher than the other half. 

Certainly the Congress, any Administration, and others hope nobody (voters and contributors) goes away too upset with a final resolution —except, of course, if you are a Fannie or Freddie fan and, maybe, a hedge fund principal (aka “those bottom fishing bastards”). 

I point to Judge Thomas Wheeler’s recent AIG decision—which we know is being appealed—when he found that the Fed engaged in takings but the Judge didn’t think it necessary to award damages.

People jumped all over any reported comment Wheeler made during the hearing, suggesting he was sure to side with plaintiffs and against the government. 

So now—when that didn’t happen, because Wheeler middle it--Boies and Greenberg get to say they were right, but the Fed (the government) doesn’t have to pay anyone for its violations. 

Again, just look at some of the post-Wheeler reactions. Tons of people say it was a Greenburg rebuff, while others crow it was a principle win for the GSEs and “takings” case. 

Not that he needs more money, but I doubt if Hank G can monetize Wheeler’s decision, absent a successful appeal. But, we know his legal team will keep at it.

So, are the GSEs forever to be Wily Coyote, close but never quite catching the Roadrunner?


How to boost GSE stock prices….

If someone just could convert the @$240 Billion the GSEs have paid Treasury--under conservatorship--into raisins, it might pave the way for  the SCOTUS—hearing an appeal of a lower court’s “Third amendment”  decision--to graphically visualize the volume of “takings” to which the two have been subject. 

It worked for the raisin producers, ergo….. 

That would be a lot of grapes/raisins dumped on the Court steps, to show the magnitude of the F&F takings, but—one way or another—it might convince our nine black- garbed SCOTUS solons that Boies, Olsen, et al are correct in charging Uncle Sam--now that the raisin folks have been recognized as federal takings victims--with lawlessness in seizing all Fannie and Freddie earnings.


FHFA Report 

I love the irony of these reports which FHFA publishes re F&F’s riskiness. 

IMO, the entities largest risks are their government operators can’t run a business employing any type of entrepreneurial capacity, save giving warnings about possible future problems (which often create). 

As “Pogo”--cartoonist Walt Kelly’s famous comic political and social commentator-- once reported, “We have met the enemy and he is us! 

Just who is FHFA criticizing when it blames F&F for not doing enough or moving fast enough? 

The answer is starring back at FHFA when it looks in its bureaucratic mirror. 

Recapitalize the GSEs and get out of their way, then report how well—or poorly—they do.  

Right now, FHFA looks like a clucking maiden aunt snickering and pointing fingers at her niece’s and nephew’s actions, saying, “In my day, GSEs didn’t……!”  

(See Carisa Chappell’s FHFA report article from Inside Mortgage Finance, below.

By Carisa Chappell

Fannie Mae and Freddie Mac have made progress in improving their corporate governance structure and managing credit risk, but they still face significant headwinds, according to the FHFA’s annual report to Congress.

The report noted that the prospect of negative net worth in future quarters for Fannie might be more likely than in recent periods thanks to a reduction in income from Fannie’s shrinking investment portfolio. Also income from loss reserves and legal settlements is diminishing.

While the report noted that Fannie has significant initiatives underway to improve its governance, risk management and systems infrastructure, it said the magnitude of the projects would expose the enterprises operations to heightened risk.

It also said “critical work remains” for Freddie, despite its efforts to change its overall risk management framework. The organizational changes accompanying that project elevate Freddie’s risk profile during the transition period.

Wallison: Gift from the Past 

Good friend David Fiderer—doing Saturday night research, I am certain—sent me this comment form a 2014 NY conference panel discussion in which AEI’s Peter Wallison speculated on why the Geithner Treasury opted for the “sweep.” 

It’s not that revelatory but underscores what some of us believe it had a lot to do with Geithner carrying forward Paulson’s plan to dust the GSEs from the mortgage scene. Fiderer wondered if Wallison’s candid assessment might have come from one of more of GOP officials still involved with the FHFA, at that time. 

“The Treasury Department decided in August of

2012 instead of receiving a normal dividend on that preferred

stock that the Treasury Department got for making these contributions,

which paid about 10% on the stock annually and

it’s cumulative, instead of that, what they would do is require

Fannie and Freddie to send them all of their earnings. They

modified the stock in other words so that Fannie and Freddie

were going to be sending the Treasury all of their earnings.

Why did they do this? Now I’m not privy to all the internal

discussions, but the reason that many people like me thought

they did it is that the then-Secretary of the Treasury Tim

Geithner was always a strong opponent of Fannie and Freddie,

and he was afraid that if they became profitable as they have

now, if they became profitable and began to have earnings,

they would recapitalize themselves. And the more capital they

had, the more they looked like a profitable, a successful, corporation,

the more likely it would be that Congress would be

pressured into letting them out of the receivership and to return

to the market probably as government-sponsored enterprises



Presidential Campaign Commentary 

Before I could acknowledge that Donald Trump had joined the gaggle of GOP presidential candidates, Louisiana’s Governor, Bobby Jindal, made himself the 13th Republican to toss his hat in the ring. (Chris Christie’s rumored to be #14, with an announcement next week.) 

Rumor: GOP looking to reserve Grand Canyon for its presidential debates, since few venues can accommodate 14 or more speakers and the resulting hot air. 

I’m no longer rooting for former Texas head man Rick Perry to get the nomination because he would be easy to beat, but have shifted my support to Trump, hoping the GOP names him its candidate. (I was not influenced by Jon Stewart’s response to Trump’s announcement.)

Lenders Hit Watt over CSP for Big Guys

In a letter to FHFA Director Mel Watt, two national small lender trade association small lender trade associations questioned Watt’s endorsement of giving the nation’s largest lenders access to the common securitization platform (CSP).


Let’s Hear it for the Big “B” in DC
And Hope for a Lot More of it….. 

Bipartisanship showed its long missing but still beautiful head last week in Washington and President Obama and the American people—as they generally are when the two p[arties work together--were the beneficiaries. 

Overcoming its own divisions, the Supreme Court twice favored Obama on the healthcare decision and with its support for same sex marriage across the nation—with court Conservatives and those outside of SCOTUS predicting hellfire and damnation. 

The GOP Congress, with help from Democrats, did its share—separately in the House and Senate—combining D’s and R’s and giving the Administration its fast track trade request. 

In the wake of the devastating attack on members of the Emanuel AME Church, South Carolina Republican Governor Nikki (R-S.C.) Haley stepped up and called for removing the Confederate flag from the SC Capitol grounds, which showed real courage and political smarts. Haley struck, quickly, while the iron was hot in support of such a gesture and her actions stimulated other similar developments both in and outside of government. 

No, the “Stars and Bars” did not cause that evil church act but it has been, for 150 years, a symbol supporting Black suppression, subjugation and mistreatment, whether its supporters will admit it or not.

What Others are Saying 

Glen Bradford writes in Seeking Alpha how former Treasury official Mario Ugoletti’s current deposition supports F&F plaintiffs.


The demographics in our nation are changing and it’s worth responsible GOP leaders considering this phenomenon, as per Timothy Egan in the NYT.


Charles Harrison’s thoughts on Wheeler’s AIG decision in Seeking Alpha.


Again, the always thought provoking Glen Bradford, also writing in Seeking Alpha. 


Echoing my blog prediction that the Wheeler decision will bring forth lots of articles and commentary of the question, “Did F&F need a bailout,” Trey Garrison’s Housing Wire carried this very tantalizing/heavy “GSE forensic accounting” article by Adam Spittler and Mike Ciklin.

Go Ahead Uncle Sam, I Dare You to Stop Me…..


This certainly will get “The Donald” and the GOP all those desired/important Hispanic votes. 


I hope 24-year old Bristol Palin's second out of wedlock pregnancy doesn't ruin her Mom's VP chances with the Republican’s party’s rank and file!



Enjoy these! And thanks to former Fed colleague and friend, Ed Ettin, for sending them and of course to Winston Churchill for spouting them...          


Paraprosdokians: (Winston Churchill loved them.) are figures of speech in which the latter part of a sentence or phrase is surprising or unexpected, and generally humorous.

1. Where there's a will, I want to be in it.

2. The last thing I want to do is hurt you. But it's still on my list.

3. Since light travels faster than sound, some people appear bright until you hear them speak.

4. If I agreed with you, we'd both be wrong.

5. We never really grow up, we only learn how to act in public.

6. War does not determine who is right - only who is left.

7. Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.

8. To steal ideas from one person is plagiarism. To steal from many is research.

9. I didn't say it was your fault; I said I was blaming you.

10. In filling out an application, where it says, 'In case of emergency, Notify:' I put, 'DOCTOR'.

11. Women will never be equal to men until they can walk down the street with a bald head and a beer gut, and still think they are sexy.

12. You do not need a parachute to skydive. You only need a parachute to skydive twice.

13. I used to be indecisive. Now I'm not so sure...

14. To be sure of hitting the target, shoot first and call whatever you hit the target.

15. Going to church doesn't make you a Christian any more than standing in a garage makes you a car.

16. You're never too old to learn something stupid.

17. I'm supposed to respect my elders, but its getting harder and harder for me to find one now.



Maloni, 6-29-2015

(Today starts the second week of the annual “Camp Maloni,” when five of six grandkids (the 2 ½ year old, Seaver Star Maloni, stayed in San Diego) descend for three weeks of Grammy and Grandpa—mostly the former (the kids say I’m a grouch)—last week’s activities list is too long to record but tent camping is this week (this year, Swallow Falls park not Skyline Drive) and a week at the beach after that. My wife is an angel with Spartan energy.)


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