Pope Francis, Fannie, Freddie, and
Hope;
Could he Condemn a Mongolian Mormon?
During his two day visit to
Washington DC this week, Vatican sources—whose identities I cannot reveal
because of my adherence to the International Blog Source Secrecy Guidelines
(IBSSG) —implied Pope Francis expects to warn congressional and Administration
policy makers, “Hands off the GSEs.” It was hinted His
Holiness may also suggest that banks not be given early access to the CSP.
My source says this GSE communication
will occur when the President and the Pope play their round of golf at Andrews
Air Force base, since the Pope hurt his wrist and can’t dribble a basketball,
as he smoothly once did. BHO has offered the Pope three strokes--because the
Pope wears his white cassock when he plays--which Francis immediately took,
betting $10 a hole.
I wonder if these talks will get
attention from this town’s jaded media and federally appointed and elected
public officials.
Administration sources madly are racing
to find someone who—by Thursday--can explain to President Obama what
Fannie and Freddie do and why they are so important to low and moderate income
families whom the Pope adores, especially minorities whose home ownership rates
significantly trail whites.
Also scurrying around were clerks to
Judge Margaret Sweeney, who snagged one of the gilt-edged invitations to see
the Pope. Judge Sweeney’s assistants are hoping to secure the proper Latin
pronunciations of “DTAs, lying
under oath, deposition, Ugoletti, and redaction,” should
Pope Francis raise those matters with “somebody.”
(Apparently out-of-town Popes are
not covered by Judge Sweeney’s gag order. After all, how/why would you gag the Pontiff?)
In a related development, Mario Ugoletti, former Treasury
and FHFA employee (see impotence above),
reportedly has moved to Ulaanbator, Mongolia, shortly after joining the Church of Jesus Christ of the
Latter Day Saints. Before leaving, MU muttered something about,
“Francis can’t excommunicate an ex-Catholic Mongolian Mormon novitiate can
he?”
We’ll know by week’s end, if the
papal GSE intervention took place.
Bethany McLean’s Book Tour
Bethany
McLean started her book tour last week for her GSE volume, “On Shaky
Ground: The Strange Saga of the U.S. Mortgage Giants.”
I managed to see one of her four
Washington DC events.
Unfortunately there was no video of
that one at the Politics and Prose book store, but I did get a chance to speak
with her before, after getting two books autographed (one for the very
helpful Mr. Fidlsticks) and one for myself.
Mine replaced my original galley
proof copy, that the author provided to me weeks ago, which disappeared after I
lent to a well-known GSE personality, an author in his own right, whose name I
won’t mention.
(Psst. OK, I confess, it was “the
real” Tim Howard, who joined us at P&P with his lovely wife Debbie. They
also bought books.)
Bethany’s efficient synopsis and
P&P presentation were excellent, with the history and current limbo perils
to Fannie and Freddie floating in conservatorship surrounded by a WH and
Congress uncertain of how to proceed enamored with their love of F&F’s
revenue generating capacity but knowing the present design leaves the GSEs each
year with less and less capital to protect against losses.
That’s even before you mix in the
GOP hate and disdain of anything tied to the Roosevelt Administration or
federal support for conventionally financed home ownership. But, as Bethany told
the P&P assemblage, loosely applying Winston Churchill’s logic and words,
“Fannie and Freddie may be bad, but they are better than whatever is next.”
Ms. McLean recounted a revealing
vignette, unfortunately one shared by too many people “inside the Beltway,” and
which, quickly, got incarnated within another P&P book buyer.
Bethany described, twice, seeing old
pals months ago, on a visit to New England and, separately, when she was in a
friend’s wedding. Two acquaintances, after asking what the four time author and
mother of two daughters was working on and being told “researching a Fannie and
Freddie issue,” both responded with a variation of the line. “Well, I can tell
you all you need to know about them. Their pursuit of bad low income loans
caused the 2008 financial meltdown.”
After her friendly Politics and
Prose audience laughed at that distorted and very inaccurate historical
factoid, a man in the back of the room loudly exclaimed, “That is me, I’ve been
telling that to people for years.”
I later found the man and as he was checking
out his McLean book purchase, and asked him why he believed that and he said,
“Well weren’t all of those bank securities (meaning PLS) backed by Fannie and
Freddie?”
When I explained why the opposite
was true and “$2.7 Trillion in PLS” sold internationally by banks meant Private
Label Securities, issued outside of the GSE systems and not backed by
F&F, he was embarrassed and perplexed, saying, “I have to read this book
right way.”
I hope that gentleman becomes a microcosm
for the nation and learns the truth after reading “On Shaky Ground…” and then engages
others with his fresh knowledge.
By all
means, buy and read Bethany McLean’s book, consume those interviews and watch
the videos.
Remember,
she firmly believes Fannie and
Freddie need to stay operational in the mortgage market to insure long term
fixed rate financing, standardization and efficiency for consumers and as a
counterweight to the market and political influence of the nation’s big banks.
(Related/unrelated. I bumped into
two Fannie employees at the P&P event and both laughed and threw cold water
on any talk of an "employee walkout",
noting that the individual associated with such talk does
not work for Fannie or Freddie.)
Here is a
list of the events, with videos in which Ms. McLean engaged. In addition, I
also linked some articles and reviews about her and her book, as well as a link
to upcoming events.
___________________________________________________________
Columbia Global Reports: 'Shaky
Ground' Launch Event Video McLean, Bill Ackman, and Frank Raines)
Tuesday, September 15, 2015
___________________________________________________________
Charlie Rose: A discussion about Fannie Mae and Freddie Mac with Bethany
McLean, author of “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants,”
and Bill Ackman of Pershing Square Capital.
___________________________________________________________
MarketPlace: U.S. mortgage
giants under the microscope
___________________________________________________________
WNYC: The battleground that's Fannie
and Freddie
___________________________________________________________
Museum of American Finance: Bethany
McLean on "Why Does the US Government Want Fannie and Freddie Dead?"
___________________________________________________________
Yahoo: Video interview: The biggest
remaining risk in today's financial system, hiding in plain sight
___________________________________________________________
CNBC: Mortgage giants on 'Shaky
Ground'?
___________________________________________________________
New America: Shaky Ground,
The Strange Saga of the U.S. Mortgage Giants
___________________________________________________________
The Street: Fates of Fannie and
Freddie Need to Be Settled ASAP Says Bethany McLean
___________________________________________________________
Columbia Global Reports Upcoming
Events Link
___________________________________________________________
What’s New With David Fiderer’s Book
David Fiderer is someone who has written extensively about the bank
PLS investment madness documenting their sloppiness, blunders, lying and, most
importantly, their huge losses, far larger than any set of F&F securities.
In a surprise to me, a week ago,
David Fiderer published his e-book on Amazon, “The Plot to Destroy Fannie Mae, Anatomy of a
Power Grab, which excoriates in great detail senior government and
regulatory officials, starting with former Treasury Secretary Henry “Hank”
Paulson, for their haphazard, reckless, and demagogic treatment of Fannie Mae
and Freddie Mac.
In his author’s zeal, David later
admitted that the book was not totally ready for prime time and needing some
reorganization, cleansing of typos, and made easier to read.
While I didn’t disagree, I also told
anyone who asked me, Fiderer’s research and fact finding are solid and his conclusions
so disturbing, that his work’s surface flaws do not undercut what he produced.
Read it and see for yourself.”
The good news is DF is working with
an editor and hopes shortly to reissue his work, possibly in print form. But,
I’ll remind all that, the original is on Amazon, you don’t need a Kindle to
read it; any sort of e-reader can access it.
Senators reintroduce F&F “Jump Start”
This Jon Prior article in Politico last
week (below) caused some angst in the
GSE community because Sen. Elizabeth Warren first supported this bill, then
opposed it taking off her name, and finally jumped on a new version but with
the same poisonous impact. Its fate still is up in the air because the SDC ranking
member, Sen. Sherrod Brown (D-Ohio) opposes it and reportedly has a “hold” on
the legislation?
By Jon Prior
09/16/2015 11:13 AM EDT
Members of the Senate Banking
Committee, led by Bob Corker, Mark Warner, and Elizabeth Warren, reintroduced a
bill today that would prevent the government from selling its stake in Fannie
Mae and Freddie Mac without instructions from Congress.
After failing to be fast-tracked
through the Senate this week, the bill is being pushed for a vote after
language was added that would prevent lawmakers from raising fees charged by
the two companies to be spent on other government programs. The committee's top
Democrat, Sherrod Brown, had put a hold on that process. He told POLITICO
earlier today he was against a piecemeal approach to housing reform and wanted
the proposal to go through regular process. Warren had thrown up a roadblock,
too, after language centering on the fees was taken out. Another provision was
separated out that would suspend pay hikes for the chief executives of Fannie
and Freddie, but that was pushed through the Senate last night.
"While comprehensive reform is
my preference, we must not allow a small minority to prevent us from making any
progress at all," Corker said in a statement today.
The bill stands long odds of
becoming law, as it's unknown whether Senate and House leaders will want to
take up the controversial proposal. The bill would hurt shareholders who are
suing the Obama administration seeking a court to allow Fannie and Freddie to
pay down the government's stake in the firms after they returned more in
profits to the Treasury than the $187.5 billion they received in bailouts.
What Others Are Saying?
Presidential Corner
Latest GOP Candidates Rankings
Trump and Carly Fiorina at the top
___________________________________________________________
Support me so I can sell your info
(Carly)
Common Question: Hillary’s
Achievements??
____________________________________________________________
Trump on “Obama is a Muslim”
Have
Trump antics driven up Hispanic voter registration
http://www.politico.com/story/2015/09/donald-trump-hispanics-213831
___________________________________________________________
Fannie and Freddie Corner
__________________________________________
“Big Banks Can’t Be Trusted to Replace GSEs”
____________________________________________________________
Paul Muolo in IMF
Short Takes: Almost All GSE-Related
Legislation is DOA / Don’t Kill the Golden Goose / Those Crazy Common Investors
/ The GSEs Are Worth $35.2 Billion? / Brian Webster’s Resume
By Paul Muolo
What will happen if Congress gets
the authority to block (or approve) the Treasury Department from
selling its senior preferred stock in Fannie Mae and Freddie
Mac? First off, it’s unlikely that such a bill will ever pass. Industry
lobbyists suggest that the only GSE bill that might have a chance in the
current Congress is one that guts the recent pay raises implemented by
the Federal Housing Finance Agency for the CEOs of the GSE
Keep in mind that few think Treasury
would be willing to unload its senior preferred shares because that means the
$20 billion to $30 billion the two contribute to the Treasury each year (at
least) would go away. Then again, if Treasury received a bid of $100 billion
(for example) for their holdings maybe…
GSE FACT CHECK #1: Meanwhile, the common shares of Fannie and Freddie have a
current market capitalization rate of $19.60 billion, based on trading
prices Tuesday afternoon. Many consider the common shares worthless,
but no one has told the dreamers and speculators who continue to buy the
stocks.
GSE FACT CHECK #2: So, what are Fannie and Freddie really worth? At
three-times annual earnings (based on 2Q15 results) that would be $35.2 billion.
The calculation excludes franchise value and goodwill.
General Politics Corner
The Odd Couple
Bye-Bye Randy, Good move, enjoy your
family
Bank Screw Up Corner
_________________________________________________
Maloni,
9-21-2015
(Note: This is going up after original publication. There is no Pope, golf, Ulaanbator, Mormon GSE discussion, etc. etc. it is Maloni tongue-in-cheek humor.)
(Note: This is going up after original publication. There is no Pope, golf, Ulaanbator, Mormon GSE discussion, etc. etc. it is Maloni tongue-in-cheek humor.)
3 comments:
Hi Bill,
Thank you for sharing your comments and wisdom!
I posted a challenge in efforts to support a shareholder-friendly narrative of FNMA at TH717, but will ask you directly. (we're talking a personal discussion with my ex-banker brother here - nothing more)
The GSE Forensic Analysis "2008 snapshot" on surface seems to indicate that Fannie could survive quite a while on existing assets. In discussion recently, the idea of GSE survival sans bailout was questioned, because one cannot see potential impacts of other "risky behaviors" in which the GSEs were then engaged - for example activities that might generate Mother of all margin calls that might have instantly wiped out every bit of GSE liquid assets.
Do you have an opinion on this, or can you direct me to resources where I might find info?
OTHER CONFUSION
Fiderer has clearly shown (years ago) that the Alt-A and subprime segments were the main MBS " culprits" in the crisis, and also that the GSE more conventional loan pools performed exponentially better. I had this as meaning that the GSEs were in far more survivable shape than the banks during 2008.
With the announcement of SEC backing off Lund and Dallavecchia (yesterday), I reviewed that complaint. The SEC contends that the Alt-A and subprime content of Fannie's portfolio was approaching 18% - this is far higher than I had guessed, and given the severe troubles in that MBS genre, seems to support that maybe the GSEs were in severely unsound condition.
Can you share any thought on this, or dispense some relevant wisdom?
Sincerely,
Tray Jay
TrayJay--
Thanks for the question and I will try and answer it and then--since I know he is traveling--I will put your question to "the real" Tim Howard when he gets within email range.
But remember the relative nature of needing government help or not needing help, "it's in the eye of the beholder."
Paulson made that call seven years ago and while many of us believe he was wrong, he and the government's lawyers will and have argued otherwise.
Before giving you my best answer, know that I have "some issues" (that's putting it mildly) with how any government agency, regulatory or otherwise, historically has qualified GSE assets or capital adequacy.
Invariably some official either doesn't understand their business (true, read Tim Howard's book) or the agency officials have an agenda, which does not support the GSEs. (That "indictment," based on my own experience, includes the Fed, the SEC, and The Congressional Budget Office to name three.) Somewhere in Howard's books are descriptions of endless meetings with Treasury and Fed staff where they just could not grasp what F&F did.) This was long before "conservatorship."
Sounds made up, but believe it.
On your specific question, the best source--going back to the person I think is one of the smartest in the nation re mortgage market and securities activities--is the amicus brief Tim Howard filed on behalf of Fairholme plaintiffs.
As he does in his book, "The Mortgage Wars," Tim writes in his amicus why he believes Fannie Mae did not require the Treasury bailout in 2008.
If you have trouble acquiring this filing, let me know and I'll try and get you a copy.
Lastly, I believe you can rely on much of Fiderer's work here, as well. But even David will defer to Tim on your specific question of whether F&F needed the 2008 bailout to maintain market operations given their financial conditions at that time.
As I was wrapping up this answer, I also thought of the Adam Spittler-Mike Ciklin "forensic accounting" paper, which supports, also, that neither F nor F needed a bailout.
TrayJay--Apropos your question, see Housing Wire, today.
http://www.housingwire.com/blogs/1-rewired/post/35143-trending-thursday-more-research-questions-why-treasury-snatched-fannie-mae?utm_source=dlvr.it&utm_medium=twitter&utm_campaign=housingwire
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