Monday, August 17, 2015

Allies Can Disagree......

Washington in August…


DC is a nice town this time of year, despite the high temps and afternoon rain storms. Most of the hot air leaves (when Congress goes), roads are less congested, stores and restaurants easier to access, and a pleasant calmness settles over a city that most of the year never is too calm. (For you regular Wash Post readers, I penned these lines two days before Kathleen Parker wrote some of the same in her Sunday op-ed piece, which also discussed her recent medical setbacks.)




Nothing major shaking here on the GSE scene—or behind it contrary to what some suggest (see below)—occasionally a positive comment here an article there. The F&F world remains, all about the HERA and Third Amendment court cases.


I Just Disagree (Gently) and Told Him So….


Quote from Tim Howard 717’s Blog (segment from lead blog piece, as of 8-15-2015):


“I apologize for the delay between posts, but critical developments continue at a rapid pace. On virtually every front of this war, we continue to make great gains. President Obama is facing increasing pressure to do the right thing, I have heard whispers that fractures are developing within the high command. Some of our most powerful hidden allies are prepared to take matters into their own hands if he refuses to take the actions necessary to save Fannie and Freddie from destruction.” 


The tone and substance of the above is one of the reasons I shared my “concern,” last week, with “Tim Howard 717,” the author who is the most ardent/prolific advocate, still suggesting powerful ‘inside the Beltway” forces are clashing--behind the scenes--that soon will produce an Obama free-the- GSEs act which lets F&F get more market responsive and keep some/all of their earnings.


 “Tim Howard 717,” eons ago, adopted that nom de guerre—without seeking (and still hasn’t sought) its rightful GSE owner’s permission. The owner—in this side bar issue--is Fannie Mae’s former longtime CFO and my colleague and friend, J. Timothy Howard. 

Apparently, the ersatz “Tim” wanted to enhance the receptivity for his GSE commentary, so he expropriated a name he thought could accomplish that—and never has given it up—I am sure there is some self-fulfilling success to his choice, since he now oversees a very often visited F&F blog.  

His poor judgment in trafficking in someone else’s name is one thing but, what bothers me most is repeating the meme about an Admin poised to do a GSE-180. It’s cruel. 

Large numbers of 717’s readers self-identify as F&F common or preferred stock shareholders. When he regularly makes the above questionable claim, he is telling his F&F investing posters, who are metaphorically thirsty, “There is an accessible cool bubbly brook—and $20 to $50 per share price--right over this hill.” Maybe, but....

TH717 never identifies the sources for his “it’s coming” stories, but that doesn’t stop him confidentially feeding his readers—who are hard core and possibly a bit politically naïve--a hope for something which may never happen, telling them some variation of “the truth will prevail.”

Unfortunately for those of us who want/hope the truth to win out, federal judges/courts don’t always see the world the way plaintiffs suing the government do, no matter how much common sense the plaintiffs and their attorneys provide. 

Last week, I told the guy still camouflaging with “real Tim’s” name, I have been unable to find any DC evidence of what he purports to be imminent.

While that may suggest his intelligence network is better than mine, I see NOTHING that would substantiate this Administration suddenly reversing field, since it has bad mouthed Fannie and Freddie from its earliest days--not just occasionally but consistent heavy duty blasting, in multiple congressional hearings and public speeches. (Caveat: Except of course this WH feigned, “He worked at Fannie?”, when President Obama dipped into the deep Fannie talent pool for a National Security Advisor.)


Now if TH717’s suggestion--of a coming momentous GSE turnabout decision--is a reflection of this Administration  quaking in its boots because of events in Judge Margaret Sweeney’s court or even developments with the appeal of the original specious Judge Royce Lamberth decision--given the normal snails’ pace of legal action and the multiple appeals still available to the WH (all of which eat the clock)—I submit the b-baller in President Obama, or his AG Loretta Lynch,  just has to run a delaying “four corners offense” through next year’s elections until BHO’s successor is sworn in on January 20, 2017. 

It’s not that far away and that kicks the GSE can down the road for another president and Congress.

That is less humbling for Obama than giving up now, even though “release, recap, and return” is more honest, bold, forthright, pro-middle class, and legacy building, than jumping because Uncle Sam’s ass—and the Obama Admin’s--may get kicked in one court. 

But, until the first federal judge makes a pro-plaintiff decision, GSE advocates will have to exist on hopes and rumors (speculations found in several GSE blogs, not just 717’s) and pray the Congress doesn’t screw up too much of the F&F operational side with blatant legislative interference.

The Positive TH717 News 

I read 717’s blog regularly. He often details provocative things; has some very bright, GSE- aware posters (far more than write into my blog), who offer riveting items,  many of whom post as “anonymous,” so I can’t follow exactly who is offering what sage like advice. But, the dialogue is fascinating. 

Other blogs I follow are GSE Links, Investors Unite, the GSE blog on Google, which some posters call “PBJ,” Investors Hub, Fannie Mae Shareholders, and more.  

They all contain insight and value for me. There are very few websites where F&F-smart people congregate, who believe in the GSEs as institutions, support their historic housing mission success, and follow their fate. 

I don’t think my blog contains too much hype, beyond my admitted cynicism. I try and source most everything I discuss or tie it to events/activities others, independently, can review and then decide for themselves. 

If it turns out that 717 is correct and Barack Obama flips, I’ll be the first to offer “mea culpa,” apologize to him for my doubts, and cheer the results. 

But, until that time, I just don’t believe. 

(Note: Sources on 717’s site—not the author--seem worked up over some, unidentified, major GSE event they believe is happening today, Monday, 8-17, when my blog publishes. He professes no knowledge of same and doesn’t seem to sign on.)

A Coming Departure?


Oddlot Prediction: Remember where you heard it first. It seems to me only a matter of time before Fannie CEO Tim Mayopoulus bids good bye to the enterprise. Mel Watt’s increased salary decision  got started with TM’s desire to earn additional compensation and the HBC’s Ed Royce (R-Cal.) legislation re-buffed that and him. I am betting Mayopoulus—who has impressed observers--will be in great demand and soon will go elsewhere to earn what he believes he is worth.

Hold the calls. This is my opinion and I have no knowledge from TM—whom I’ve never met--or his associates that he is packing his Fannie Mae professional bags. 

Another Big Bank Business Perversion


Latest big bank travesty. Citizens Bank—Rhode Island headquartered and the 13th largest US bank by assets--will pay a $35 million fine for failing to credit the proper amount to checking/savings accounts when the customer provided a lower figure than they actually gave the bank employee, holding on to those excess dollars and pennies . That’s major nickel and dime poop, BS, but it happened.

How hard can that be for banking institutions? 

It’s also a good reminder, no matter how much you like your favorite bank, large or small, always carefully check all of your transactions (credit card bills, too). The institutions make mistakes, sometimes intentionally.

What Others Are Saying


Former Senator Joe Lieberman (D-Conn.)—newly minted head of United against Nuclear Iran” (UANI) argues why Congress should reject the Obama Iran deal.



“If I were a carpenter and you…,” the NYT’s Tom Friedman looks at how different Israelis might look at the Iran deal.


Which Senators still are available to support President Obama on the Iran deal?


Kissing Trump’s Gluteus Maximus! 

Huff Post on Roger Ailes’  “Megyn who?” actions. 


I’m not from Iowa or New Hampshire, but I am rooting for you Donald to get the GOP nod!! 


Maureen Dowd takes her foot from ck long enough to oloto sup with the Donald>
HRC’s neck long enough to sup with the Donald.


Trouble in Bernie-land?


Wells Fargo Hires ex-Warner Aide to Lobby 

The best part of this story is the post article comments and the fact that Wells had one of the worst low-income housing records of all the big banks. So, are they hoping this new lobbyist will help them match or exceed that infamy?


Bloomberg’s Al Hunt offers a sober and non-sensational view of the US economy.


The Hill Soldiers On


Maloni, 8-17-2015


Anonymous said...

I don't think something as fundamental to the housing market, and thus to the US economy will ultimately be decided by the courts nor do I believe that the Obama administration willingly will change its stance. They are locked to the strategy where their hand will be forced to do what's needed. It's lately the general strategy of the US bureaucrats. At this point, their ability to chose an exit is gone. They will be forced to act by the market. That's what Ackman means when he says that there will be an administrative release. Unfortunately, that puts a lot of people in the corner. Nobody sane should chose an option of forced resolution, but unfortunately that's what the government painted themselves into. And unfortunately, the government being in the corner will not limit themselves only to the GSE's. It's a poor public policy to fight until the bitter end. The people in charge don't seem to understand it. It ends one way or the other, but it will not end on the government terms.

Bill Maloni said...

I don't disagree.

But, also there is a time factor, as well as the cynical "it's only F&F," which come into play. I think this WH will everything it can to avoid backtracking here, which they might if a court doesn't strongly rule against them.

Absent that, they can blithely claim they are right, keep dodging the bullet, and before we all know it, there will be a national election, a new President, and these current Admin guys--including BHO--can retreat to wherever and the new guy/woman will have to deal with it.

Anonymous said...

Refusing to cut losses has destroyed many men and institutions. They try to control the entities that's were comparable to the US Treasury by fiat. Its a much safer bet they fail spectacularly than the weak tactics of stalling to buy time that's employed. Again, this approach has ended badly through out history, why would it work here? It's uncharted territory too, as far as the size and economic footprint are concerned, so who knows what will happen? I believe they can control the courts, the markets, not so much. They need market confidence, so at some point something will get sacrificed, or maybe the worst case scenario plays out. I don't know. I know that this is hope and prey from the government side, and I know how that ends.

Bill Maloni said...

I don't have real good answers to your questions/observations.
But, I'll return to something I wrote initially.

For a huge percentage of these officials their official memories and responsibilities end after the next national general election (Nov. 2016), unless someone chose to wrote a "tell all GSE book.".

Who will say anything to them or care about them in 2017, if they screwed up in 2012 and kept up the ruse for three or more years?

The DoJ lawyers will go to law firms; Treasury officials might end up on Wall Street or close.

I know it is very frustrating, but it's what happens in DC--and not just with the GSEs.

Anonymous said...

According to anon @ 10:41 AM there are 2 actors: adminstrative (the President) and the courts. The third one, Congress, has been deemed meaningless right out of the bat. But anon adds a 4th and fundamental actor: the markets.

I truly fail to see in which ways the markets will force the issue and defeat whatever strategy (delays, delays, delays) the government has put into place.

What form this market storm will take? Will there be a mass exodus of employees? Or will they barricade and strike in front of their headquarters? Will some institution(s) dump all MBS hitting long term yields and bonds? Will someone call China, Russia and Japan and to dump their mortgage bonds and stop any further buying?

Where is that market force going to come from and how will it make this end? You are not talking about the shadow board of directors representing shareholders that Ackman mentioned in his latest CC, are you? lol. Or are you saying there will be a colossal scare market dive and scare a-la-2008 by which Obama will decide on his own to end the conservatorships and let the companies operate freely and independently hoping that this will restore order?

Anonymous said...

Bill, you are confusing punishment with the resolution. I have no doubt nobody will get punished except random people and US populace. That's the whole point of irresponsible government operating with no recourse.

To Bill, and Anon.
You think the resolution is going to be somewhat willing. The whole point is that markets are unpredictable and random. They have many manifestations. All your arguments assume the people in control now will be in control of the decision then. It is probably not going to be the case. That's the whole point of the markets, people who like too tight a control lose it rapidly and unexpectedly. I only have terrible examples off the top of my head. It may not be the worst case scenario.

Bill Maloni said...

Ironically, the only "market resolution" I can envision is if bad things happen, across the board (think 2008), the market goes nuts, and the government (or Congress) tries tinkering with the mortgage market's operational apparatus.

But, I've always believed that the "market," from consumers and professional players (builders, Realtors, and lenders--including the TBTF guys), and institutional investors in F&F debt and MBS love having the two around.

I don't see the "market" however it is defined rising up and demanding F&F being dramatically be altered or euthanized legislatively (some version of the old CWJC).

Anonymous said...

They may need to be forced to sell GSE's at what they can get now instead of cashflows in the future. To sell them, you need to settle shareholders issues. Look at Greece. UK had to privatize everything to raise cash. But they didn't have the debt we have and now things move much faster. That's one scenario.

The bad one is of course Pinochet after Allende. I hope we don't have that. There are worse scenarios as well.

Bill Maloni said...

Don't confuse the F&F common and preferred stock--behind which nothing/nobody stands--with the $5 Trillion in GSE debt and mortgage securities about which the government cares and likely stands behind (certainly enough to stop a run if that ever happened).

Those are the instruments owned by the foreign central banks and large institutional investors, whose fate (and balance sheets) Treasury/the WH certainly hold dear.

Anonymous said...

Let me ask you this. Did you think FNMA would be in the situation its in in 2005? If someone asked you in 2005 who stands behind the GSE's equity and preferred stock, what would your response be? That's what randomness means. It does applies to the US too.

Bill Maloni said...

Well nobody ever has been behind the stock which is why so many shareholders (including lots of Fannie employees) lost lots and lots of money when the stock went from the high $65 dollars a share to a few bucks. Same thing at Freddie.

One of the issues I worked on--in 1994, I believe--was when then Congressman Phil Gramm R-Tex. (later to become Senator Phil Gramm and Chairman of the Senate Banking Committee) added statutory language to the F&F charters saying (paraphrasing) "The securities of Fannie and Freddie are not backed by the full faith and credit of the US government," to draw a distinction between our debt and MBS and Treasury securities, which explicitly had the federal government behind them.

I believed that was the law and all of our debt and MBS securities had to bear that printed inscription so that purchasers would have no doubt and think they were buying government backed debt or mortgage bonds.

That was the case for the 21 years I worked at Fannie and Gramm's language de facto what had been the case previously. (The best evidence for that is Treasuries always traded better than F&F debt.).

That was my opinion and belief, until the Paulson Treasury took over F&F in 2008 and formally put "Uncle Sam" behind the GSE securities, although they'll still weasel word about it. (The reason the Admin/Treasury fly two flags here is, if they admitted the government backed the GSEs, their $5 Trillion in F&F debt and securities would have to go on the federal budget.

Anonymous said...

But in 2005 did you think events would play out like they did? How far off were you on your base case scenario and your worst case scenario? Do you think people in DC could be misjudging what might happen in 3 years? Do you think it could be possible that GSE's would have a better financial situation than the US government and they may HAVE to release them if they want people to get mortgages? Or sell them if the government will need to raise the money. There are so many scenarios just on the unsuitability of the path DC is on. What if things get so corrupt Watts will just take whatever Ackman is offering before the SHTF? The constant is the GSE's are needed by the markets. The GSE's are not FHA, FHA is a disaster comparatively speaking, and the government cant' control the entire mortgage market, when they can barely control themselves (if you call it control). Nobody knows what random direction a kick of a can down the road can take. Maybe the Delaware court rules against them. Who the hell knows what unstable government like we currently have can do. You do realize they are unstable, right?

Bill Maloni said...

Anon--If you go back in my blogs--and all are available on that "calendar prompt" in the upper right of the site--I doubted they needed the "help" given (certainly not Fannie).

IMO, written often, it was more more a combination of "use the opportunity to get F&F" and show the world we are doing something, rather than legitimate intervention.
It was an overreaction which could have been handled by declaring, "They are fine, have sufficient capital, we are going to watch them closely." Instead, starting with Paulson, the government engaged in a several lies, got caught when F&F revived, and then followed up with the "sweep," which put Uncle in court against a lot of unhappy investors.

And, you are right about the instability, which is why the simplest thing is to keep F&F, make some minor adjustments, and let them hold onto the earnings to recapitalize. But those of us who suggest that are being logical and DC--especially now--is anything but logistical, in lots of policy areas.

I don't think there is a coherent policy sitting somewhere downtown even now. F&F isn't a priority for the Admin, they like the cash coming in, and in less than two years, it's someone else's problem. Plus, for la intents and purposes, F&F are working and in Congress few things are addressed when there is no immediate problem, especially when so many other issues (Iran, Syria, North Korea, China, Russia, immigration, equal rights, abortion, etc.) are off track.