June Is National Homeownership Month

JUNE IS NATIONAL “HOMEOWNERSHIP MONTH”

(Maloni disclaimer: Ed Yingling and Diane Casey Landry are friends, whom I respect greatly. I’ve known Ed for more than 30 years. He once, even, was known to play in an infamous Friday night poker game. Diane’s a newer acquaintance. I met her first, when she toiled with Ken Guenther at the Independent Community Bankers Association and worked with her later, when she took over the ACB top job.)

The following “dream sequence” was prompted by my thought of what could occur —but likely didn’t--at the American Bankers Association headquarters, when the merged ABA and America’s Community Bankers staffs got together for the first time.

EY: Welcome aboard everyone, especially you Diane.

DCL: Ed, cut out the gentlemanly stuff. We have a problem with the Senate Banking Committee leadership and I have a plan to solve it. I want to put Dodd and Shelby, politically, in a box, squeezing them from back home, and then yank them by the short….

EY: Diane, Diane, the big banks don’t operate that way.

DCL: Yes Ed, I know which is why I think I was brought in. I may not be as diplomatic as you, but I can kick butt, and that’s just what….Hey, what are you doing to my voodoo dolls?

EY: Diane. Can I have a word with you, please, in private?

DCL: Sure Cupcake, in a minute, just as soon as I give our troops the green light on my new plan, which I call “Operation Scash ‘Em.” Ed, why don’t you go into that nice office of yours—mauve, its painted mauve, right--and draft an op-ed, try on a new Armani tie, or something and I’ll come right by, as soon as I am finished. By the way, I like my coffee black.

DCL: Now Floyd, get “Jingleheimer” on the phone, or whatever that guy’s name is over at the MBA, and tell him they have two weeks to merge with us, or they are history in this town. Coming Eddie.

Good luck to the new ABA team and may all of their staff and industry challenges be small manageable ones.

###

Writing in the Washington Times, this week, OFHEO Director Jim Lockhart, praised President Bush for his housing initiatives (Huh?), which helped drive the national homeownership rate to 70%. (“Karl. I did what??) And then, he went onto use June’s theme as “National Homeownership Month,” to call for the passage of new GSE regulatory legislation.

I can remember a few years ago, when the bad old Fannie Mae went to the Bush White House and suggested some ideas for it and the President to celebrate NHM, which resulted in a big presidential event in Atlanta and lofty new low income housing goals announced, which the two companies helped produce over the next two years.

But, that was a different era.

So, “Two Gun” uses NHM to repeat his “pass a new GSE bill” theme, saying that the House did OK, but he implies that its work was a bit flawed and now it’s up to the Senate to finish the deal and make life worse for Fannie Mae and Freddie Mac.

As I predicted in this space, recently, “Two Gun” sought to resurrect all of the old GSE risk charges, i.e. in trouble, shaky, weak operationally (bizarrely doing so, after affirming that the nation’s secondary mortgage market is “stable” and is part of the reason for the robust homeownership numbers).

“Two Gun” (I think I will just go to “TG,” within quotation marks) is famous for making this same speech, generally citing GSE shortcomings and risks for the need to bowl over the opposition and act “now.”

Talk about straw man. I’m not sure if anyone is opposing a new GSE regulator.

The problems in the Senate have less to do with the substance of the GSE legislation than other pressing Senate Banking Committee matters. But that hasn’t stopped the Director.

I think it must be theme month or theme day, which tickles him or his handlers’ and determines his speech/article writing timing.

He gave essentially the same speech four times last year, at very “special times.” First on “National Push Your Car to Work Day"; then during “National Open a Bank Low Paying Savings Account Month"; he spoke, again, when we all madly were celebrating, “Take Your Gimpy Neighbor to Lunch Day” ; and last, during “National Sump Pump Week,” calling on Congress to hamstring Fannie and Freddie and to grant his agency expanded powers that none of the other federal financial regulators possess.

You have to wonder just at whom he was aiming his message, this time, since he chose to write in the Washington Times. I am reliably informed that the Reverend Moon already supports increased GSE capital.

Whomever “TG’s” audience, it has to include the four conservative Senate Banking Committee “knee jerks,” Senators Hagel, Sununu, Dole, and Martinez. (I’m likely using an extra word in that group description.)

Those Republican senators never saw an event, which didn’t portend bad GSE karma for the nation. “Elizabeth, its John, Chuck and Mel. We‘re calling to tell you that the sun just came up in the east. Elizabeth, we think that’s bad GSE karma for the nation. We need you to join us on a letter declaring as much! Yes, yes, you can the autopen. We do!”

Back to my friend “TG.” Now he didn’t turn too much fresh earth in this week’s op ed, but may have uttered an “untruth” and displayed questionable judgment.

While both GSEs have endorsed a strong independent GSE regulator, I don’t think either one suggested that it should be a “bank like” regulator, as “TG” claims in his article. Since neither is a bank, I suspect that Fannie and Freddie don’t want bank like regulation, preferring a reasonable GSE regulator.

I think bank like is what “TG” thinks he wants, except when he doesn’t.

To wit, in his article, Lockhart says that he absolutely needs to “prior approve” all GSE products. But which bank regulator okays new mortgage loans, commercial loans, or checking/savings accounts, before any bank offers those to its consumers? I think the answer is “none.”

(Never happened, but if it did, Bernanke to Kohn: Don. I just don’t know about this 30 day revolving used car loan that that Fourth Oklahoma bank wants to offer Jed Clampett. My God, it’s pegged to LIBOR and the earned run average of the Pittsburgh Pirates pitching staff. Check into that for me, OK? Make sure that it is safe, for the bank.)

A little overdone, maybe, but closer to reality is this question. How many bank regulators prior approved the “covenant lite” or “equity bridge” loans that banks have been so fond of making to their client private equity firms, trying to buy up companies?

Very few, I suspect.

Bank regulators, generally, visit their regulated institutions once a year, seldom more frequently. OFHEO only has two entities in its domain and has people in their shops, every day of the week. Does “TG” really want the more limited “bank regulatory” approach?

This entire “bank like regulator” charade has been part of OFHEO’s effort demanding treatment akin to the Fed or the OCC. But, wishing doesn’t make it so, and actions speak far louder than words.

Lockhart doesn’t act like a bank regulator, at least not an American one.

I never have seen a bank regulator, even the sainted Alan Greenspan, engage in as much public vitriol and demeaning rhetoric as “TG” has aimed at Fannie Mae and Freddie Mac.

Able and confident financial regulators don’t do that.

When the good ones need to act, they act. They don’t engage in cheap speech making and obfuscating PR pyrotechnics, first, casting aspersions on their regulated institutions, as if to justify their regulatory behavior.

People, including regulators, who engage in that kind of disdainful hyperbole, are generally insecure and unsure of their mandates and themselves. It’s like they have to keep reminding their audiences who they are and why they exist, whether those “who’s and why’s” are viable or not.

But, I forgot, “TG” is a “friend of W’s” and that’s all that many—not all—in this administration need for justification.

Well, then, I just can’t wait until August 14, which as we all know is “National Horse Manure Day,” to see what "TG" and OFHEO next have to say about the GSEs.

Maloni, 6-28-07

Politics, Good Moves, Busts, and Research

This is how one Washington Post op ed writer phrased it last week.

“The Bush White House has generally entrusted government agencies to officials devoted either to running those agencies into the ground or negating those agencies’ purposes….”

I wonder where “Two Gun” and his entourage fit in that model?

STRONGER AND STRONGER

More good news for Fannie and bad news for its cabal of business opponents as the company conduct an aggressive effort to control administrative expenses and overall headcount. With a few exceptions, Fannie is offering “early retirement” to all of its employees, who are over the age of 50, from VP level on down. (Fannie’s minimum retirement age is 55, with five years of service.) The company hopes that a few hundred employees take the deal.

I believe that this won’t be the last workforce reduction, as the company seeks to get back to numbers more consistent with its technology based business and the actual needs of its secondary mortgage market focus.

It’s also a signal that the company feels good enough about its major business operations and back office overhaul, as per its accounting problems, to work on an issue it could not address while it was in the middle of the political and specious “systemic risk” fights.

Fannie’s board and senior management deserve kudos for taking thoughtful steps which should strengthen the company.

However, in the next round, they might focus their effort a little higher on the corporate food chain. Look left and look right, there is a lot of money and oxygen to be saved at the SVP level and among those who report to the junior brass.

ELECTIONS 2008

One possible 2008 scenario. Senator Hillary Clinton will beat Senator Barack Obama, in the D primary, and go onto win the presidency, no matter the GOP nominee.

I have been slow to come to this thought, since—even as a life long Democrat—I had my doubts about Hillary’s chances of success in a general election, for many of the reasons that most other D’s have.

But, at the end of the day, she seems to be the most capable of the D candidates, with brains, organization, ideas, and money, which generally is a winning combination.

Obama is smart and charismatic, but may be running too soon, since he lacks some experience and seasoning.

For salient reasons, today’s Republican front runners risk getting abandoned by important GOP voting blocs, even if they run against Hillary.

Rudy Giuliani is thrice married, supports gays and abortion; Mitt Romney has to defend his Mormon religion against the right wing crazies, who fear the LDS “mysticism”; and Fred Thompson really isn’t “Ronnie,” plus he has a record--as a lobbyist--which may not sit well with the GOP traditionalists.

GOP stalwarts are a tough bunch and, yes, I think some stubborn GOP voters will sit it out in 2008 or “write in” a favorite, because their party didn’t dish up the conservative candidate they wanted, even if that gives the job to Senator Clinton.

In November 2008, when voters are faced with Hillary versus Giuliani/Romney/Thompson choice, I think a bi-partisan majority of Americans will deduce something like the following, “I may not love her or even like her a lot, but she is smart, tough, and determined. And, maybe a woman is what we need to straighten out the domestic and international mess George W. Bush harvested. What the hell, here is my vote, Senator Clinton.”

But, it’s almost 18 months until November 2008 and there is plenty of time for Michael Bloomberg to scramble everything, by doing whatever a $100 million can do, politically.

BUSTS AND…

“When Does a Housing Slump Become a Bust?”

This intellectually pregnant question was the headline over a New York Times Business section article, last weekend, which sought to define what measurable results would allow most knowledgeable people to agree that housing had moved form its current “slump” to an uglier “bust” scenario.

I won’t quibble with the article or its findings. But, as is my want, I am going to apply some of the article’s draconian possibilities to Fannie Mae and Freddie Mac and turn it on those who have been trying to sell the Congress on the bogus claim that the two secondary mortgage market giants represent “systemic risks.”

Anna Bernasek, who wrote the Times story, suggests if the United States suddenly encountered historically high levels of housing price declines that would be an excellent indicator of a “bust.” She then turns to the best recorded data for national housing price declines, which was during the “Great Depression,” from 1929 to 1933, when home prices across the nation lost 24% of their values.

She then goes onto to cite more extreme regional downturns, pointing to the “oil patch states” of the southwest, during the 1970’s, when oil prices fell around the world and the real estate impact in parts Texas, Louisiana, Oklahoma, Wyoming, etc, was a significant home price drop of 30% and 40%.

After quoting several “experts,” Bernasek seems to suggest that something like a 15% price decline would be a clear indication of a “housing bust.”

Here’s where I depart from Bernasek’s article.

The point for me is the risk based capital formula (RBC), set in law and which both Fannie Mae and Freddie Mac must exceed--with capital on hand-- uses as its default history, the undiluted oil patch states experience in the early 1980’s and it assumes that those horrible conditions exist in all 50 states, simultaneously, for a prolonged period of time. It is against that hypothetical scenario, plus extreme interest rates movements (6% increase and a 6% decrease), which the two companies portfolios currently are “stressed,” to insure their survivability.

Fannie Mae and Freddie Mac have sufficient capital on hand to survive for a decade, Ms. Bernasek’s definition of a “housing bust” and an added interest rate horror story, which she doesn’t even include in her downturn postulation.

When people claim that Fannie and Freddie are undercapitalized or are “systemic risks,” it helps to have some perspective on how much capital each company has and how their portfolios would behave in extreme conditions.

RESEARCH GAMES

Another reason to view OFHEO, with a jaundiced eye.

Bernasek's article gives credit to the GSEs current regulator, the Office of Financial Housing Enterprises Oversight (OFHEO), as source for some of the writer’s statistics.

What OFHEO bull pucky!

Some years ago, OFHEO decided it needed a “research” capacity (nobody is or was quite sure why), so it just began taking information that Fannie Mae and Freddie Mac provided to it and republishing the data, as if it had created it.

There’s lots of “cutting and pasting” going on at OFHEO and very little original research. All of the data comes from the two companies, with little fresh manipulation at the regulatory agency. But, it gets republished with OFHEO’s name on it.

History suggests that OFHEO’s time, funding, and human resources would have been better put into its primary job, oversight and examination.

But, gee, that would have robbed the agency and its director of the phony PR!

Why not let the two companies publish the information themselves, as they had/have done for years?

Not that I feel any need to be overly fair to OFHEO Director Jim Lockhart, but this research lark started before “Two Gun” was named Sheriff, probably by one of those long time bureaucrats who never should find his/her way into the new agency, when Congress recreates OFHEO.

Maloni 6-20-2007

Cats and Dogs*

(*A subject I used to give my regular corporate memos, when they contained a smorgasbord of unrelated business, industry, and political developments on Capitol Hill and in Washington.)

Independent credit is due Fannie Mae and Freddie Mac senior managers for putting their companies on track, early, for regular financial reporting. To achieve that objective, the GSEs overcame their accounting problems, system and resource shortfalls, and the ongoing political challenges from their business and ideological opponents.

Last week’s separate company announcements does beg the question, “What weaknesses still concern OFHEO and Director James Lockhart, to require Fannie Mae and Freddie Mac to continue holding the 30% capital “add on? Lockhart mandated the extra protection many months ago, when he was concerned about GSE operational issues?

Methinks that “Two Gun” is well aware of the business drag represented by unnecessary capital and is in no hurry to back off. Maybe he just needs some encouragement?

It almost makes you want to see bumper stickers, calling on Lockhart to, “Free the GSE Add Ons.”

###

Belated congratulations to my friend and former Fannie Mae colleague, Bob Zoellick, nominated by President Bush to be President of the World Bank.

Zoellick did two stints at Fannie Mae. When I came in 1983, he already was Chairman David Maxwell’s top assistant. Zoellick left the company to join Jim Baker, in the Reagan Administration. Bob returned to Fannie, several years later when Jim Johnson was Chairman, to run the legal, affordable housing, and government and industry relations groups.

Zoellick is brilliant, extremely able, and a task master, who always stayed on top of every issue in his domain, employing near microscopic hand printed notes. He would use the previous week’s “jots and tittles” to set the agenda for the coming week’s senior staff meeting, virtually insuring that all of his direct reports would be able to answer any of his many questions about their progress on the tasks he sometimes knew better than they.

When you worked for him, as I did in his second Fannie incarnation, you didn’t want to disappoint Zoellick, so you made sure that you were up on everything in your business portfolio.

And, no matter how many people claim they saw him wearing one, I swear there is no truth to the rumor that Zoellick--a great student of the Civil War and world military history--conducted those staff meetings, wearing a “Picklehaube,” i.e. one of those World War I German army helmets with the point coming out of the top!

But, who knows what he will wear to insure World Bank efficiency?

Here's wishing much success to “Z!”

###

The subprime “clean up” business will put lots of fixed rate loans into the Fannie Mae and Freddie Mac portfolios, which is good for both the companies and the families refinancing into monthly mortgage payment certainly. It begs the question, though, why those brokers/lenders couldn’t have offered the safer products to some of the credit flawed borrowers the first time around, saving heartache for so many families. Some estimates are that 50% of those SP borrowers could have qualified for the fixed rate loans at “A” quality interest rates, but didn’t know and never were told by the lenders.

The answer, obviously, is that sticking them with an ARM meant more profit for the broker and more volume, often attracting the lesser credit borrowers with teaser rates. Steering the naive into adjustable rate loans, which they soon would be unable to afford, was great for the brokers/lenders and real bad for the borrowers.

Why do we have to learn and re-learn the same painful lessons, over and over? There always will be unscrupulous operators in the mortgage finance business, willing to take advantage of poor and under/uninformed borrowers, who desperately want to own a home, whether they are ready for it or not.

This current subprime dilemma will get fixed, with Fannie and Freddie in the forefront helping. But, many of the same bad actors, who caused the mess, will hide for a bit and then pop up, again to try some other mortgage hustle.

Federal and state officials should root out the wrongdoers and make them “pay,” in fines and jail time. But, the mortgage finance industry is best positioned to do more and keep these “crooks” out of the lending community.

###

I hope that lots of folks read the Wall Street’s Journal’s interview, this week, with former Fed Governor, Ed Gramlich, and saw his comments which suggested Alan Greenspan, strongly opposed Gramlich’s personal importuning, back in 2000, that the Fed move more aggressively on bank holding company subsidiaries, which were involved in large amounts of questionable subprime lending.

Greenspan’s opposition or indifference is not a surprise to those who watched him closely. When the issue was not monetary policy, but more narrow housing issues, Greenspan either was indifferent or toxic.

“Housers” will be the first to acknowledge that their business needs economic stability and Greenspan can lay claim to credit for some of that. But, when it came to the more specific housing matters, AG and his Fed were part of the problem, not part of the solution.

###

“The Hill” newspaper runs a set of pictures suggesting, in their opinion, which MoCs are look-alikes for various movie stars and other well known personalities.

Here’s my related contribution, Governor Mitt Romney and former lobbyist/trade association exec Micah Green.

(I haven’t figured out how to put pictures in my blog to prove my “twins separated at birth” point)

If Mitt ever needs a stunt double, in my opinion, Micah is the man.

###

Flying under the radar scope as the GSE regulatory legislation, just passed in the House, moves to the Senate are the Federal Home Loan Banks.

Along with Fannie Mae and Freddie Mac, the Bank System will be included under the new regulator’s jurisdiction. But, while Fannie and Freddie have seen much discussion about how they do business and what—if any—changes should occur in their mission, very little, if anything, has been discussed about whether to change how the Home Loan Banks work or--in fact—if they still are necessary?

The banks do provide their member institutions, no longer exclusively savings and loans but a large number of smaller commercial banks, with long term fixed rate financing, which hopefully gets passed onto to borrowers in the form of lower mortgage interest rates.

But, the problem is that these Bank System members now lend for everything, not just mortgages. That means the same GSE borrowing that so many opponents claim is bad--when Fannie and Freddie do it for mortgages--becomes loans for cars, businesses, vacations, etc--all things non-housing--when Bank System member intuitions re-lend their System advances (loans) for those purposes.

I’ll let Congress wrestle with the virtue of that one.

###

I loved this past Sunday’s final episode of the “Sopranos.”

There are those, deep into “Sopranomania,” who will tell you that the strange ending really meant Tony was bumped off and the “just no more, cut to nothing,” final scene was reflective of death. There also is lots of Soprano fan mumbo jumbo about the number three and who the mystery diners were in the restaurant, where Tony, his wife and kids had dinner.

Fuggedabotit!

As Dr. Freud said, “Sometimes a cigar is just a cigar.”

If you didn’t see Tony get killed, then he ain’t dead!

The moralists may disagree, but I think that Tony and his two enjoyed a fairy tale ending ("happily ever.."). Plus, if Tony had gotten killed, there would be no “Sopranos, the Movie” in two or three years.

Maloni 6-13-07

Storm Coming

Avast me hearties, there she blows!

Storm warnings for Senators and their staffs; get on your hip boots and your rain slickers.

No, I’m not talking about Captain Jack Sparrow and his swashbuckling cohorts from the stormy Caribbean. I’m warning of a different kind of disturbance, from which you still will need real protection. This one features flying poop or more precisely, poop from bulls, or even more explicitly, bullpoop—which sometimes is called bull----! Oh, you get the point.

I am forecasting a coming maelstrom—complete with tossed excrement—when Administration types and their think tank, media, and business allies assail you with their re-cast claims that Fannie Mae and Freddie Mac are “systemic risks.”

What else can they do?

Just before the Memorial Day recess, when the House approved a new GSE regulatory bill, it refused to buy the Administration’s over hyped rhetoric and squeeze the life out of the two “target” GSEs. The only way the White House and its cronies now can capture the Senate’s legislative attention is to convince the chamber that the House was wrong and Fannie Mae and Freddie Mac need enhanced regulatory chemotherapy.

The House gave the new regulator interdiction authority, equal to that of other federal financial regulators, which makes sense, but the Bush Administration claimed that was not sufficient and the new regulator should have even more expansive power. The “other body” wasn’t buying it.

So, the old campaign--aimed at the Senate--will begin anew, casting the companies as unstable financial wobblies, requiring a heavy legislative dose of Bush regulatory medication.

Arguments Against the Systemic Risk Claim

Here’s a suggestion for Senators, their staff, and the media. Demand your visitors prove their charges.

The next time an Administration official, a rep from one of the conservative think tanks, someone from the old “FM Watch” cabal, or anyone else claims that the housing GSEs represent a “systemic risk,” make them describe exactly what they mean and answer a few of your questions.

Start by asking, “If Fannie and Freddie aren’t risks to themselves (see positive reports of Fannie’s and Freddie’s financial health, compiled quarterly by their current regulator), how can they be risks to the entire financial system?”

Ask them to tell you, in plain English, “not Fed speak,” exactly how the GSEs could upset the national apple cart and bring most of financial America crashing down with them?

Force them to be specific, give you details, and in layman’s terms, so that the average Senate staffer and his /her boss easily can grasp what “systemic risk” means. Make them explain how and why thousands upon thousands of American families, suddenly, will stop making their monthly mortgage payments and default on their loans, starving Fannie and Freddie for income, and ultimately cause a domino collapse among a whole skein of federally insured depository institutions?

Senate folks should get mad and question critically these “snake oil” hucksters. It’s your constituents and their mortgages--along with low and moderate income families and their mortgage loans in the other 50 states—for whom the Bush Administration is predicting doom.

No Matter How Often Greenspan Gets Mentioned in the Washington Post, the Fed Is Not a “Reliable Source”

Don’t let them get by with buzz words or say, “That’s what the Fed believes.” Remember, the Fed’s housing opinions sometimes are worth squat. The Fed didn’t believe that subprime was a big enough problem to do anything about it, except to mumble and later point fingers. The central bank’s housing analytic capacity is suspect, especially given its history of anti-GSE activity. That fact was made very clear by Alan Greenspan’s role discrediting the GSEs, as point person for this Administration.

(BTW. What was Chairman Greenspan thinking about when he urged borrowers to take out variable rate mortgages, at the very time the Fed dramatically was raising rates? Does the Fed believe that its 17 step federal funds rate climb, from 1 percent to 5.25 percent, had anything to do with today's subprime problem? )

When the “systemic risk salespeople” come to your door, ask them, “Aren’t Fannie Mae and Freddie Mac, both, capitalized under a stringent statutory risk based capital rule—more demanding that the capital regimes of all other financial institutions in America—which requires the GSEs to have sufficient capital on hand to survive a 10 year financial “nuclear winter,” that never has occurred in our nation’s history?” Aren’t both, currently, holding more than those required capital sums? Doesn’t that RBC rule also assume that—during that 10 year period--both will keep their doors open to lenders and buy loans, providing liquidity during this “economic Armageddon?”

Didn’t the Fed do a study in 2005--all but squelched by Alan Greenspan but reported by Steven Pearlstein, in the Washington Post--which suggested that Fannie Mae and Freddie Mac were not as risky as some Fed officials had suggested publicly and, in fact, the GSE “hedging activities,” employing derivatives, both facilitated safety and soundness and kept mortgage rates down?

Ask why so many why, foreign central banks—counterparts to our Fed—buy regularly and still own $720 billion in GSE debt, issued by the very US companies that our central bank claims are systemically risky? Those German, English, Chinese, Japanese, Swiss, Belgium, et al central bankers must be whacky risk takers and not very smart, or maybe their politically non-rabid view is that the GSEs are quality borrowers!

Ask your visitors, “Haven’t Fannie Mae and Freddie Mac just undergone dramatic cultural and structural changes, with many old officials fired or retired, and new men and women running the companies? Haven’t both companies streamlined their operations and instituted new underwriting technology and reporting requirements, since their accounting setbacks? Don’t both companies have OFHEO regulatory officials on site, every day?”

Hasn’t Fannie Mae just spent over $1 billion dollars to clean up its books and soon will be up to date in its financial reporting? Hasn’t Freddie Mac done the same, although not spending as much, and soon, too, will be on a regular financial reporting schedule?

Overcapitalized and Still Market Responsive

Fannie has more than $43 billion in capital and Freddie some $36 billion (4^th quarter, 2006 totals). Those numbers include a 30% capital “add on,” which OFHEO Director, Jim “Two Gun” Lockhart deemed necessary because he perceived that the GSEs had “management and operations risk.”

Lockhart knows that there is a business and financial cost to excess capital and he well understands that overloading the companies with his capital mandates--or any other individual costs--helps their competitors. Is that the game plan?

Despite the corporate cleanup, in both companies, of matters cited in the Lockhart’s “add on” demand, he hasn’t rescinded his finding and some people think he’s holding the companies financially hostage, to insure they don’t get out of line.

Extortion, hostages? Maybe Lockhart does think that he’s Captain Jack Sparrow?

Fannie Mae and Freddie Mac have more than $80 billion in capital protection, just to deal with any future problems. Additionally, they have loan loss reserves and mortgage insurance, protecting their low down payment mortgage assets. That mortgage insurance provides both companies cash if borrowers default on their loans?

Both companies just stepped up recently and pledged over $40 billion in private financing to try and fix subprime problems, which Wall Street, greedy brokers and lenders, and others—but not the GSEs-- foisted on low income America? (See the Fed’s subprime role, noted previously.) That’s $40 billion of their shareholders money, not federal government funds.

Look Who Is GSE Trash Talking

Don’t you think it is ironic that two of the entities, which historically took up the mantra of “the GSEs are too risky and need more oversight” are GE and AIG, two huge financial service companies, each with more assets than either Fannie Mae or Freddie Mac, but which have no effective federal financial regulatory oversight, whatsoever?

Don’t forget the Wells Fargo role in those campaigns? Oh, and weren’t all three of those companies charter members in “FM Watch,” a group of mortgage business entities which formed when Fannie and Freddie pro-consumer market efficiencies began costing those fat cats revenue?

Hmm? Business foes demand intrusive oversight for Fannie and Freddie and more GSE capital; anyone sees a cause and benefit here?

Force those proselytizers of GSE financial doom to explain exactly how they would applying their same “systemic risk” concerns to every large financial services company in the nation (several of which have far more assets and far less oversight than Fannie Mae and Freddie Mac)? Tip: Three of those commercial entities, needing tighter federal review, were mentioned in the previous paragraph.

“It’s Just The Same Old Song, With a Different Beat And A ..…”

Lastly, ask them, “Isn’t this whole GSE systemic risk charade the same old GOP campaign against Fannie Mae and Freddie Mac, started first by Ronald Reagan and designed to help the large commercial banks displace the GSEs in the secondary mortgage market, at higher costs and less mortgage variety for your constituents?”

Several years ago, some smart people carefully examined the variety of anti-GSE proposals and arguments, brought into congressional offices, since David Stockman first headed the OMB in 1993, and reduced them to one never changing, but still truthful, plaintive congressional plea:

“Senator/Congressman: Will you help me whack Fannie Mae and Freddie Mac so that my company/industry/other investors can charge your constituents higher prices for similar mortgage products, but not be as fair or efficient as the GSEs in their delivery?”

Always was--and still sounds like--a whining loser’s lament to me, just like the much flogged claim that the GSEs represent unique systemic risk.

Maloni, 6-1-07

(Bill's note: Let me reiterate what I stated, when I began this blog a few months ago. I am retired. I do not work for Fannie Mae, Freddie Mac, any of their law, PR, and firms, or other interests in the financial services world. I have strong views on these GSE business and political issues, from working on them--for 20 years--for Fannie Mae. In an earlier 15 year period, prior to joining Fannie, I worked on similar and related matters, on Capitol Hill and in the federal financial regulatory world.)