Monday, October 5, 2015

"Pipe up, stand up, stand up for your rights.."

Coming Up this week in DC

The Bipartisan Policy Center is hosting a GSE conference on Thursday, featuring Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.). The politicos are followed by a panel of industry types, moderated by Harvard’s Nic Retsinas.

What interests me here is one of the panelists is Mike Fratantoni, the Mortgage Bankers Association, economist and regulatory chief.

Since his boss, David Stevens staked out that he (and presumably the MBA) supports the continuation of Fannie Mae and Freddie Mac (a view which had some of us scratching our heads, since it seemed far away from his and the association’s anti-GSE actions), I will be curious to see if Fratantoni stands up and repeats the MBA support for extending the GSE operational lives (for reasons like “our smaller members need them” or “we don’t want the big guys eating the world”) or if he evades the subject, raising additional questions of where the MBA is on championing the two entities most responsible for MBA members able to conveniently sell mortgages they originate into the secondary mortgage market.

The mortgage community is watching Mike (and David).

Oh, as a small reminder, all of the reform legislation which Corker and Warner have been associated would do away with the GSE's and cede the mortgage markets to the big banks.

At the ABS East 2015 Conference, last week……

A panel of former GSE regulators, Armando Falcon, Jim Lockhart, and Ed DeMarco, tried their best to rewrite history while collectively covering their butts, hoping nobody had the facts to challenge them.

I wasn’t there but a reliable sources informed me that each of the former F&F regulators left the stage with noses much longer than when they started their spinning. (Think Pinocchio!)

And bad for them, I also have some facts which I believe are incontrovertible.

Here are Mark Adelson’s notes on the Miami event; Adelson is a principal at The Bond Factory.

Now, speaking only for Fannie—although I believe the same lobbying principle applied to Freddie, as well--in my 10 years of lobbying during OFHEO’s existence, we were ordered, ordered (first by Jim Johnson and then later Frank Raines) to never lobby and/or interfere with OFHEO’s congressional budget discussions, negotiations or proceedings and we didn’t.

Just a further explanation for those not familiar with the budget process. Leading up to January of any year, negotiations inside the (any) Administration between an agency and OMB officials occurs and then an annual spending figure is agreed to for that government agency/program. That’s the figure which is sent to the Hill as part of the President’s annual federal spending request (Budget), which traditionally is sent at the end of January or early February, to allow Congress to produce spending figures for the coming fiscal year beginning on October 1.

My best evidence for the validity of my “non-interference” statement—especially when one hears all of the OFHEO caterwauling about the GSEs army of lobbyists--is OFHEO got every dollar, i.e. never received one dollar less, the WH Office of Management and Budget (OMB) sought for them, first in the Clinton administration and later the Bush administration annual budget requests.

Repeat, OFHEO got every dollar OMB asked for and Fannie Mae (nor Freddie)--despite the OFHEO accusations--tried to derail the process or their funds.

Now all three may have wanted more from OMB, but that’s an internecine Administration debate, much different than saying the agency received less operating funds because of outside congressional lobbying.

My Operation “Pipe Up!”

Here is a task for us all, since I/we know the challenge is coming.

During the various presidential campaign machinations, a Republican--but possibly a Democrat--will try and score points berating Fannie Mae and Freddie Mac. (It didn’t work for John McCain, but that won’t stop the newbies.)

The first time any presidential candidate in either party negatively mentions Fannie Mae and Freddie Mac, we “Pipe Up”--and explode with information setting the record straight--to media, other candidates, the networks, and the individual himself or herself.
(For purposes of this exercise, I am not counting that Carly Fiorina mentioned the GSEs in her first “kids’ debate,” which preceded the then front runners, of which she now is one. But, remember, she said it once and could say it again.)

Let’s do our “Chubby Checker”

Here is my twist (think guys!).

As someone who has been trying to tell the Fannie Mae/GSE story for years, I say eschew that initial approach because it’s almost is too complex to tell simply.

You’ll first have to talk about GOP political crusades, amateur or eye popping regulatory abuse, blatant dishonesty, and Treasury’s constitutional violations—spanning two administrations--which produced more than 20 HERA and Third Amendment lawsuits today pending against the government.

When you do that, watch eyes glaze over.

Yep, it’s a very tough row to hoe, but my suggestion is to reverse the telling and not talk about Fannie and Freddie.  You’ll get to the Fannie and Freddie part soon enough, but start with another chilling certainty.

Here is your immediate WEAPON

A majority of the government, political, ideological, and mortgage industry bad guys who want to abolish Fannie and Freddie would replace them with some configuration of the nation’s largest financial institutions (who in turn want more federal guarantees against their mortgage losses).

That’s what we talk about and shout from the rooftops.

They want to Kill F&F and Replace them with ….!

Face it, despite our best communications efforts, we won’t be successful repairing F&F’s image, maybe a new President could, but not us.

But we could have a helluva lot of fun and open some knowing/understanding eyes with a full discussion of who/what the GSE enemies would substitute for Fannie and Freddie.

As “public educators,” we need to explain that most of the mortgage system alternatives coming from GSE opponents would give the primary and secondary mortgage market controls to America’s major financial institutions, with practical control falling to the dreaded Too Big to Fail (TBTF) banks, which themselves are GSE’s (Government Sponsored Enterprises) of a slightly different sort.

That connection shouldn’t be hard to show with the Administration’s mortgage reform positioning and the Senate Corker--Warner legislative exercises, which last year later became the Johnson-Crapo bill.

The American people generally dislike the behemoth financial institutions—for many of the right reasons-- but often have no substantive idea of their many specific transgressions, or the severity, variety, and the naked consumer aggression the bank wrongdoings represent.

Think systemic industry aberrance, as in “It runs in big bank DNA to cheat the government and seek profit, no matter the rules.”

The immense crap wall around Fannie and Freddie, built and maintained, by their business and political enemies, may make GSE rehabilitation tough, but we need to remind American consumers/voters of this sobering “successors” fact.
Most who would do away with Fannie and Freddie, substituting some other lending mechanism, would put in charge of our mortgage needs some of the worst financial predators in our nation’s history, which still continue the rampage against supervisory rules and regulations, years after the 2008 financial meltdown—when their actions, more than the GSEs, nearly crushed our domestic economy as well as the world’s.

It’s one of the reasons why Bethany McLean, author of “On Shaky Ground: The Strange Saga of the U.S. Mortgage Giants,” believes that Fannie and Freddie are positive market forces, which still are needed for their mortgage standardization, efficiency, fair pricing, and systemic reliability—all of which benefit American home buyers—but, also, are irreplaceable as a bulwark against big bank market and political power.

When you next have the opportunity to discuss the state of our national mortgage market, assume your audience doesn’t know or misunderstands what happened to the GSEs. But, be sure and detail what the GSE critics want to run the mortgage markets in Fannie’s and Freddie’s place.

Arm and inform yourself beyond the “Banks are bad” line and educate and advocate. I believe that it will be far easier then to discuss Fannie’s and Freddie’s future.

Here is a general list from the Financial Times of $150 Billion in US banks fines in the past few years, but this article doesn’t give color to many of their heinous “reach around” (the regs) schemes, like ripping off veterans’ housing programs, laundering money for Mexican Drug lords, doing business with US enemies and other extremists in the Middle East, rigging the London Interbank Borrowing Rate (LIBOR), to which most US adjustable rate mortgages (ARMs) are measured/indexed. (Now you know another reason why most banks wanted to sell you an ARM rather than a fixed rate loan).

Bank Violations and fines in 2013


Bank Violations and fines in 2014

Bank fines and violations in 2015

The billions of dollars in fines paid in recent years for these offenses are spelled out in bank regulatory agency press releases which the public seldom sees or reads, although the public’s correct instincts are to distrust the major financial depositaries.

So, fan those flames, let your audiences decide who the greater threat is Fannie and Freddie, now well-regulated, successful (albeit denied capital by Treasury), and unlikely to return to the norm of 2008, or the big banks and their cohorts, which never have stopped their financial rampage?

What Others Are Saying

Presidential Corner

US News Says 2016 nomination belongs to Cruz or Rubio (with the R’s at my Friday poker game saying it will be Rubio).


Enjoy him while you can, Rand Paul says Cruz “pretty much done in the Senate.” (But, Maloni says, he could come back as Trump’s VP.)


Huckabee’s Campaign Targets lobbyists and donors. (I am certain Huckabee-backer Ronald Cameron has no political agenda he might want to see his fellow Razorback implement.)

'WASHINGTON: IT'S A STRIP CLUB': Mike Huckabee released a new ad taking aim at K Street, charging "the political class dances for the donor class," over an image of crumpled dollar bills near a stripper pole. The super PAC supporting the former Arkansas governor's campaign raised $3 million, almost its entire haul, from Ronald Cameron of Little Rock, the CEO of the agribusiness giant Mountaire.

Jeb on Community College Killings

What Trump Said

Fannie and Freddie Corner

Banks still abuse after settlements


Inside Mortgage Finance’s Carissa Chappell on “Jumpstart GSE Bill.

 GSE Reform Bill Reintroduced but ‘Passable’ Reform at a Standstill
By Carisa Chappell
A streamlined version of the “Jumpstart GSE Reform Act, ” recently reintroduced in Congress then placed on hold and reintroduced again, could be considered before the end of the year.
The bill, sponsored by Sens. Bob Corker, R-TN, Mark Warner, D-VA, and Elizabeth Warren, D-MA, would bar the Treasury from selling its stock in the two GSEs and prevent increases in Fannie Mae and Freddie Mac guaranty fees to pay for other government spending.
An earlier version of the bill that Corker tried to fast-track through the Senate did not include the prohibition on using g-fees to pay for unrelated government spending. Warren reportedly refused to back that version, and the Senate instead passed a much narrower bill that only repeals pay hikes provided to Fannie’s and Freddie’s chief executive officers this year.
With Congress pressing to enact legislation to keep the government running beyond a short-term continuing resolution, industry groups are concerned that GSE g-fees could be tapped again. For more details, see the new edition of Inside Mortgage Finance.

 “Conservatorship wasn’t necessary”….


Investors Unite

Looking for hope on this legislative possibility, one GSE veteran noted, "If you want to find two Senators to guarantee a provision will die before it hits the floor or get altered, start with Corker and Warner.”


Wash Post carries (positive) review of McLean’s book

Wayne Olsen on the GSE courts cases.

Hedge Funds in the “Neighborhoods”

Maloni puts on his best Don Quixote outfit and seeks audience with Post editorial types. (Since I haven’t heard from the Post’s Mr. Hiatt, I assume I am back to windmill tilting.)

First off, I can't offer a huge rationale for you meeting with me, save being 45 year subscriber to the Washington Post and someone who enjoys reading newspapers, as well as the new electronic media.

The purpose for my request is to get some insight into the Post's editorial (and reportorial) thinking on a subject I think I know well, federal support for home ownership and Fannie Mae and Freddie Mac, in particular.

Again, yesterday, the Post editorialized against Fannie and Freddie and I am mystified why the paper has such a bleak outlook for these local companies, which employ probably 10,000--12,000 residents in DC, Maryland, and Virginia, major federal taxpayers (plus providing the Treasury with all of their current earnings) and, ironically, in the case of one them, moving into the Post's physical location after new construction.

As I often explain in my sometimes letters to the Post editor, I worked on the Hill for a dozen years, at the Fed for Paul Volcker, and at Fannie Mae for 21 years--as their chief lobbyist-- before retiring almost 11 years ago. For the past five years, I've written a financial services/GSE blog, which from time to time mentions the Post. I don't represent anyone, not a housing or bank interest, no trade association or an individual institution.

I blog (and produce typos) and I read and talk

I understand the call for more private capital, less government involvement, but based on my near 40 year involvement with these issues, no comprehensive alternative system I've seen (in the various commission reports, legislative proposals, etc. etc.) has the consumer benefits, the systemic efficiency, common pricing, and standardization of the Fannie/Freddie model.

Not that they can't be improved or that they didn't make mistakes in the post-2005 era (when competent leadership was forced out in a regulatory putsch) but doing away with them and substituting--over an ill-defined but certainly lengthy, chaos inducing period--some large bank dominated system, as most of the hill and this White House advocates, seems so unwise and chaotic. That approach ignores the history of just 7 years ago, when with no Fannie and Freddie competition the large banks and investment banks unleashed $2.7 Trillion of their own (created outside the Fannie and  Freddie systems) toxic mortgage backed securities. The banks sold them worldwide, with inflated labels and insufficient backing, so that our US real estate downturn had dire international consequences. Bank PLS (private label securities) losses were horrendous, three times larger than losses from Fannie and Freddie backed mortgage bonds.

Every week in my blog, I try and list the latest major banks transgression or rule busting--which have been lengthy, frequent, and quite varied offenses-- to remind people why these institutions hardly are the correct stewards of the nation's primary and secondary mortgage markets.

So, that's where I am coming from and I truly hope you could find time  to discuss with me--maybe with some of your team present--some of these matters in your office or outside over coffee.

Why might this might make sense from the Post's or your own perspective? If it is one thing I've learned in dealing with Congress, other policy makers, media, a plethora of federal agencies, many people think they know and understand what Fannie and Freddie did leading up to the 2008 financial Armageddon, but invariably they are wrong or they don't have the entire story.

That's a significant issue when elements of both congressional parties, not to mention a new President, will be looking soon answer, "What do we do with Fannie Mae and Freddie Mac?"

Thanks, Bill Maloni

Bank Screwup Corner


Barry Ritholz says lenders engage with hyperbole over new disclosure rules.

Bernanke says banker should have gone to jail. (There’s still time!)

Politics/Government Corner

Delay in House sub-Speaker elections?

McCarthy Says Benghazi probe all about Hillary; but others R’s say he misspoke???

Schumer-Ryan Highway & Tax Talks?

Was Rep. Chaffetz upset with the Secret Service because it once had rejected him?

Foreign Policy Corner
Why Putin is desperate for some international acceptance? (The same reasons why Obama should keep the screws tight.)

Is Syria Putin’s Tar Baby?


Maloni, 10-5-2015


Anonymous said...

If each of us picked one GSE enemy and used your "immediate weapon" on their social media pages, I believe we would get their attention. My personal choice is Ed Royce. Just takes a steady stream of comments like "Ed Royce wants to kill Fannie Mae and Freddie Mac and turn their business over to the big banks. Guess who his top campaign contributors are? If you guessed Wells Fargo, pat yourself on the back." I posted that very message on Ed's Facebook page this morning. I'd love to see someone target Bob Corker and Jeb Hensarling in the same way. Royce actually responded to one of my posts recently saying he was proud of his votes against bailing out Wall Street (whatever that means).

Bill Maloni said...

Anon--Thanks for the suggestion, I hope others follow your lead.

I was able toincldue--at the lats minute, thanks to Mr. Fiddlsticks (yes, that's how he spells it)--the Bernanke comment about "more bankers should have been jailed."

But, having not read BB's new book, I am sure he has some pithy--if not pissy--anti-GSE comments in it, too.

G. Buckman said...


First, I liked your "pipe up" segment. Copying the "immediate weapon" portion into a post on the various boards (PB&J, ihub,...717) might help get the idea moving along.

Second, good luck with your attempt to meet with the Post. How long ago did you send your request? Let us know if it happens or if they even respond.

As always, thanks for your efforts!

GB wouldn't happen to know an actuate unemployed kicker would you? Or, a head coach that understands game/time management for that matter? If so, send them to western PA please. Man, that one is gonna sting for a while. :(

Bill Maloni said...

Thanks, GB--

Post letter sent a week ago.

I know a current HC who doesn't understand NFL clock management issues; he's he same guy on third and two and fourth and one OKd NOT handing the ball to his all-world running back.

And there are plenty of unemployed kcikers out there; why, do you wnat kick one?? How about Josh Scobee.

Bill Maloni said...

I blew it, twice with this one. First the layout and then leading with the Bipartisan Center conference story, saying it was Thursday. In fact, it was today, Tuesday.)

The perils of an aging blogger, sigh, sigh.

Anonymous said...

All good Bill... you've earned too much goodwill for us readers to be mad. What did you think of the Bipartisan conference today by the way, both from the panel and then Corker/Warner's comments after?

Bill Maloni said...

Thanks Anon--Because of the earlier admission, I missed the event--which was available on streaming video, I believe--but will need to catch up.

I promise my opinion will be in the next blog or if truly significant/ground breaking, I'll post here.

G. Buckman said...

Hey Bill, was wondering if you caught the Ackman/Bloomberg interview today. He mentioned a research paper produced by the Political Alpha Group was being looked at by the Administration as they are working behind the scenes to develop an endgame before President Obama leaves office.

More info is on PB&J under topic...Ackman on today's FnF rally (10/6/2015).

I was wondering if you and/or your sources might be able to dig anything up. Looks like it "could be" big news, but you never know.


Political Alpha is event-driven geopolitical risk intelligence, providing institutional investment managers a unique advantage from within macro-related situations around the world.

Based on our real-time access to key global decision-makers and thought leaders, we collect and analyze public policy information that enables managers to mitigate policy risk and formulate successful trading strategies.

Bill Maloni said...

Yes, got the paper early and thought it was a gold mine, until my source admitted it wasn't his product and he had passed on someone else's work; now and I am hearing a mixed bag.

First, I have to assume that PA got its info "somewhere?"

I think Ackman used the PA paper--with which he wasn't familiar or endorsing--to suggests it could have been one of the reasons the stock went up today.

But, then later, I also heard from a senior DC trade association exec, the entire PA paper was BS and the WH "soon" will scuttle the PA report.(Why I love this town? Still later I exchanged emails with a guy I often quote but never name, who told me the trade association person, doesn't know squadoosh!)

Right now, I am holding onto my analyses until I see/hear more. But, it certainly is a tantalizing story.

I hope this helps, GB, and feel free to share that on PBJ.

Chris said...

Bill- if i wanted to email you something, what address can I use? (not spam, i promise!)

Bill Maloni said...

I do accept cashier's checks and certain cashable bonds.

Bill Maloni said...

I put this out late today!


Calling the Senate Ethics Committee;
Situation, here in the Corker office!

What a thoroughly stupid, unethical, and just plain dumb thing to do.

I am speaking about Sen. Bob Corker (R-Tenn.) going on national television with Rick Santelli, today, and suggesting investors “short” Fannie Mae and Freddie Mac stocks.

Why would this public official—or any public official--tout buying or selling stock in any publicly held company?

The man is a GSE critic, fine. But he has his DNA all over legislation to abolish and otherwise handcuff the companies and certainly their current public shareholders. (Can the Admin—owners of 79% of the entities--be happy with their guy Bobby?).

The Senate Ethics office immediately should be asked look into Corker’s antics.

Plus, there are more than 20 (some consolidated) court cases pending against the US Treasury over Fannie and Freddie mistreatment.

How can Corker know what will happen with those cases, especially the Delaware case, which on the face of it, seems to suggest Treasury had no authority vis-à-vis Delaware corporations (which Fannie is) to manipulate the preferred stock Treasury created in Fannie and Freddie as a preparation for its 2008 takeover called “conservatorship?”

Someone should give Senator Corker a ride out of town on a Tennessee walking horse!

Maloni, 10-7-2015