Wednesday, October 29, 2008

Obama Should Win, But.....

Barack Obama should be the next President of the United States.

I am not going to make any wild offers if the nation doesn’t elect him President. But if Obama does not win handily, including taking states that long have voted Republican in presidential elections, it only will be because he’s a black man and the implications of that are chilling.

George Bush and his failed policies across the board left John McCain with little political foundation and much to defend. And yes, the McCain voting record very much supports the vapid Bush doctrines. The American public, correctly, blame George W. Bush for much of the current domestic financial and international malaise.

John McCain has run a very bad campaign, filled with indecision and bad judgment. McCain no longer is the “maverick,” having given up that title when he scurried decidedly to the right to win his party’s nomination. If given the unavailable second chance, I doubt McCain would choose Sarah Palin as his running mate. Mike Huckabee, Tim Pawlenty, or even Condi Rice would have been superior choices.

On the other side, Obama has run a superb campaign. He has generated excitement among the young, helped generate thousands upon thousands of new registered voters, and attracted millions of dollars in small contributions from those who never have given in the past. He’s attractive, smart, appealing and seems—more than McCain—to have the charisma to lead this nation back to balance and leadership around the world.

Poll after poll—measuring different slices of registered and likely voters from across the spectrum—show Obama the desired candidate.

All of this screams, “Obama Wins.”

So, you see where I come from with my opening statement.

We’ve read it a hundred times. You can’t poll for racism or discrimination. People won’t admit to it, with some not even aware they are subject to it.

One prominent New York Times columnist wrote last week, “There are not enough racists in America to turn this vote for McCain.”

From his lips to God’s ears!!

Fannie, Redux

How can all of those well-meaning folks on Capitol Hill not get pissed at reports like Tuesday’s Wall Street Journal story, “Rescue Plan Faces Delay in Hiring Asset Managers?”

The news article discusses the Treasury problems in finding outside talent to do the initial work to identify, acquire and sell the billions of failed mortgage assets necessary to unclog the nation's credit markets. The WSJ writer records typical and very predictable government related bureaucratic problems.

The article says that once in place, “The managers will help determine which assets to buy, when to buy them, and whether to sell or hold them.”

Golly gee Batman, isn’t that what hundreds of Treasury-indentured officials at Fannie Mae and Freddie Mac do every day for real?

Except for Treasury arrogance or reverse hubris, some smart government official should simply tell the Fannie/Freddie CEOs-- both of whom are Bush choices--what needs to be done, give them the business tapes (identifying the security assets) and tell them to get the best price for the sales, WITH ALL PROCEEDS GOING TO THE TREASURY?

That should take about four phone calls and three email messages to get going! (Are you reading this Barney. Chris, and Chuck??)

The two companies and their eight or more thousand employees, all of the former GSE operational systems, and market talent are already owned/controlled by the Treasury and those work forces surely will do what they are told, at minimal cost to the taxpaer.

Many people have made this totally logical suggestion and more will, as Treasury drags its feet in putting people into place and insists on replicating what already exists at Fannie and Freddie. What a waste or time, especially since everyone says this sales step is necessary “restart the credit markets.”

Fannie Redux, Redux

How many times have I heard the “McCaniacs” say, “And Fannie Mae employees have contributed more to Senator Barack Obama than any other Senator in the Congress, except Chris Dodd!

I have no idea if that is true, but let’s assume it is.

Two things standout. One, both Dodd and Obama ran for the Democratic presidential nomination, so some/part/much of that money is based on Fannie employees (who are citizens, too, with First Amendment rights) liking them in their senatorial roles, but also preferring them as presidential timber.

In addition, Dodd—now Chairman of the senate Banking Committee--always has been a “houser” and someone Fannie always viewed as a supporter.

McCain has been a GSE critic, albeit one with a much lower decibel quality than his campaign purports, and part of the Bush mob which has harrassed and challenged the GSEs at every turn.

Now, tell me again, why Fannie Mae employees, with a large contingent of minorities, should prefer John McCain? Wasn’t it enough (or bad enough?) that Fannie’s former CEO was a McCain financial supporter?

Last Media Laugh

The GOP has been blaming the media for their political and policy weaknesses and certainly McCain and Palin’s less than stellar showing

It almost had me feeling sorry for the Grand Old Party. I started wondering if there was anything to this and then I remembered that these hacks were the same crew that started blaming the media for Bush’s failures and McCain’s missteps months ago, hoping to get some “media guilt” coverage.

These were the guys, in 2004, which couldn’t give a fig about “swiftboating,” and lied about WMD, Iraq, and Bush’s abysmal record and policy decisions. These were the guys who didn’t think cheating in Florida in 2000 and then trampling their own “state’s rights” philosophy to have their Supreme Court steal the first Bush win.

If the media is biased, then it is the Republican’s fault, because they baited and then whacked the very reporters from whom they wanted good coverage.

I have no sympathy for the GOP, their lament, or their cause. I only hope that every Obama poll showing very positive numbers is an understatement of the facts.

If an Obama-Biden victory is forthcoming next Tuesday, the message GOP survivors should take away is simple, “You kept trying to feed America crap. It tastes lousy and we don't the GOP menu anymore!”

Maloni 10-29-2008

Wednesday, October 22, 2008

Desperation on the Right

“Beelzebub to the Seventh Level, Beelzebub to the Seventh Level. Bee paging Senator Joe McCarthy. Paging Senator McCarthy. Joe, get your skinny butt up here and bring John Birch and J. Edgar with you. Make sure Hoover isn’t wearing that damn frock. We’ve got problems in McCain land and you three are needed.”

Let see, in the past week one of the McCain-Palin surrogates suggested Barack Obama and many (Democrats) in Congress are “un-American.” Governor Palin, herself, implied Obama and Biden were “socialists,” and then—the coup de grass--Rep. Lamar Smith (R-Tex, senior Republican on the House Judiciary Committee and several other senior R’s asked the Attorney General to investigate the GSEs and, implicitly, the Congress for failing to pass GSE regulatory legislation, when the Republicans were in control of both chambers and George W. Bush was President!!

Mulder, Scully, are you listening? It hardly gets better than this.

But, it will, the nasty right wing poop throwers are out in force, because the GOP is facing significant congressional electoral defeats and its troops are panicking. That frenzy is forcing decent folks like Spencer Bacchus (R-Ala,) to sound silly, while whacko folks, like Rep. Michelle Bachman (R-Minn.), sound even more wing-nutty.

Bachman started it last week, calling for the “media” to investigate all of the “anti-Americanism” in Washington, which she justified by saying Obama recently hung out at corporate board meetings with Bill Ayers, the 60’s “Weatherman,” who served time for Vietnam War era domestic hostilities (when Senator Obama was 8 years old). Bachman not only wants the press to examine Obama, which it seems they have been doing, but she also wants the media to look into the entire Congress, too! (Has anyone heard her current rant, denying she said what she said, all of which was captured on national TV Uh, Michelle, and they have you on tape?)

Then, Governor Palin, after trying to escape her self-inflicted gaff of calling some parts of America more “pro-American” than others, suggested that Senators Obama and Biden have socialistic tendencies.

Socialistic tendencies………Hmm.


Socialism refers to a broad set of economic theories of social organization advocating state or collective ownership and administration of the means of production and distribution of goods, and the creation of an egalitarian society

As my good friend John Buckley reminded me, “Socialism” looks like what Hank Paulson produced when Congress gave him that unbridled “financial bailout authority.” John said that Hank first rolled up Fannie Mae and Freddie Mac, ending their lives as shareholder owned companies and making them federal instrumentalities. The Treasury Secretary moved on to the federal takeover of insurance giant AIG, taking on all of its financial obligations. Still acting very “Leftist,” Paulson—channeling his best Karl Marx-- blackjacked several of the nation’s largest banks into accepting Treasury equity investments and guaranteed the debt and securities of dozens, maybe hundreds, of other financial institutions?

And that was just in a month’s time. Those damn Republican Socialists work faster than their D wannabees.

Are Paulson’s audacious acts the kind of socialism Governor Palin worries an Obama Administration will undertake? Maybe she fears a continuation of the Marxism that the GOP, without much Democratic input, decided was their chosen/preferred way to fix the nation’s financial and economic problems.

Or, is there another kind of “GOP pro-American Marxist Socialism,” which Paulson has been practicing? I guess we need only to wait for the next McCain-Palin press release to find out the answers.

Marxism and the Brothers!

What Lamar Smith (R-Tex) did this week is Marxist, too, but more Groucho or Harpo, than Karl!!

In a sequel to the “Gang that Couldn’t Shoot Straight” book and movie, the House Minority Leadership, acting through Smith and others, blew the whistle on themselves and asked Attorney General Michael Mukasey to investigate the nasty dealings of such thugs as Richard Baker, Jim Leach, Tom DeLay, John Boehner, and Mike Oxley, many in the Bush Administration, and a gaggle of GOP Senators and their Fannie/Freddie tormenters—since those public officials and the White House controlled the levers of congressional power when Fannie escaped getting nailed!

What a rogues’ gallery of perps and conspirators! Where’s a good guillotine when you need one?

The congressional descendants of Lincoln’s party argue that the GSEs failed to acquiesce to their demise. Fannie and Freddie refused to go along quietly with the GOP’s planned legislative beheadings and, instead fought the efforts, even employing some Republicans to do so! Shocking, shocking! What would Jack Abramoff say or do??

The House R’s want DOL to investigate that outrageous behavior investigated and name names!

Now, the reason the Democrats are exempt from this witch-hunt, obviously, is that the minute they took control of Congress in 2007, following the 2006 elections, they went to work on GSE regulatory reform legislation Those efforts became law this year, with broad GOP support.

So, where did those aforementioned R’s come up short—between 2000 and 2006--when they controlled everything? Maybe Mukasey does know?

I have a suggestion, since this investigation won’t happen in the next two weeks nor will it save those House GOP seats. The Republicans just should confess their guilt and seek contrition.

Institutionally and morally, there is a certain catharsis in coming clean and atoning for your sins.

I urge every single GOP Senator or Congressman--who thinks they have been manipulated by Fannie Mae and Freddie Mac-- to give back any political contributions he/she received from Fannie and Freddie’s PAC, immediately, including those several $10,000 totals sent to House GOP Members. (See past three cycles of GSE political contributions.)

However, what could be far more valuable and enlightening to the public--in this GOP campaign to confess and do right--is if each of those House and Senate R’s would “monetize” (“Fed” terminology to put a dollar value on something that doesn’t necessary lend itself to quantifying) the bountiful, high quality, and “reaffirm my incumbency” press coverage/PR each of them obtained by joining personally with Fannie and Freddie in the dozens of housing initiatives announced all over the country, in their congressional districts, and in Washington.

Let Me Count the Ways…

I am referring to those huge politically valuable congressional appearances at all of the GSE bilingual housing fairs, where those GOP Member/Senators were asked to participate; the Partnership Office openings and regular briefings and reports, detailing GSE mortgage finance created in their cities and states, with those GOP pols present and taking credit; the ribbon cuttings on senior citizen housing events or handicapped housing facilities, which each company financed and which each managed to have some local Congressman/Congresswoman or Senator present, making appropriate comments; the hundreds of industry group meetings with local builders, Realtors, lenders, and consumers, where these now self-righteous public officials could bathe in the “GSE-provided” aura of being "housers,” ingratiating themselves to their constituents, and also getting valuable face time and introductions to local housing finance industry movers and shakers, who also were helpful at fundraising time.

Quantify the value received, convert it to dollars, and give it back. Re-establish your political virginity! Seek public absolution for your “GSE-driven fall from grace” and donate that money to a community group at work helping the less fortunate.

In doing so, repeat, “When we Republicans ran the Congress, we were ‘taken in’ by those damn GSEs and our elected Caucus leaders, too.”

Given what they seek, I think the R’s should relieve the Justice Department of this burden, simplify the AG’s tough job, and save the nation the expense. The House GOP guys and girls should join hands, walk down to the DOJ, hang their heads and offer AG Mukasey a “Pogo” explanation.

“Yep Son. We have met the enemy and he is us!”

Maloni 10-22-2008

Sunday, October 19, 2008

Not Good Being John and Sarah

--In the latest Maloni blog, I hope to start a regular occurrence, a “guest segment,” where a knowledgeable financial services individual shares his or her views in the blog for the readers.

--See our first contribution from a long time friend and colleague, following my pithy contribution!

Bad week for the GOP. “Flush, swirl, swirl, down, down.”

It’s the sound of the McCain-Palin campaign going down the commode.

Senator McCain tried—again--to play Fannie Mae “whack-a Mole” on Barack Obama’s head, in their final debate. McCain resorted to that chestnut three times in three debates. Add Governor Palin’s same tactic in her one debate with Joe Biden and you have four times the GOP ticket, on national TV, tried to con the American public and blame Fannie and Freddie for our nation’s most serious economic problems.

That either makes the Republicans egregious liars or candidates unwilling or unable to understand and explain the real causes of some of these problems.

John McCain and Sarah Palin apparently haven’t read my recent blog, suggesting McCain is a “fraud” for trying to assume alpha dog leadership of the “GSE whistle blowers?” Does he think his name is Sununu, Hagel, Shelby, or even Richard Baker, whose real anti-GSE personas, he’s trying to claim as his own?


And what is Governor Sarah smoking?

Her response to the Alaska Legislature’s “Trooper Gate” report, which detailed her and husband Todd’s part in trying to get her brother-in-law fired from his State Police job, was, “I’m very, very pleased to be cleared of any legal wrongdoing…any hint of any kind of unethical activity there.”
The report very clearly says that she violated the state ethics laws! Were the words too big for her?

I guess in the “I’ll get back ta ya.” wink, wink Palin world, the state investigator’s words mean something else.

My Almost Nobel

Congratulations to Princeton University professor and New York Times columnist Paul Krugman for winning this year’s Nobel Prize in Economics. Krugman just barely edged me out. No Swede told me that I was in the running, but I knew I was.

Notably, just before Krugman’s award was announced—while I was measuring my office drapes at the Nobel Institute--I added two of Krugman’s NYT articles, to the fabulous “index” in my last blog, which contained a variety of high quality works blowing large holes in many of the McCain and Bush distortions about Fannie and Freddie being the cause of the subprime mortgage problems and the broader economic collapse. It must have gotten Krugman over the top.

Good work, Paul, A kronar for your thoughts, or 10 million to be exact.

Just to repeat the obvious, “subprime mortgages securities”—named because Fannie and Freddie only originated “prime” quality mortgages”—were created exclusively by Wall Street outside the GSE systems, employing a direct mortgage broker to investment bank network which delivered loans for packaging and resale throughout the world.

Private label subprime securities (PLS) did not come through or from the more traditional Fannie and Freddie automated underwriting systems.

The financial services companies and hedge funds, chasing high yields in 2006 and 2007, bought hundreds of billions of PLS securities and/or dealt in their derivatives distillations, making huge financial mistakes. Fannie and Freddie were guilty of those same PLS and Alt A mortgage purchases.

These self-inflicted mortal wounds have taken their corporate toll, at Bear Stearns, Indy Mac, Merrill Lynch, Wachovia, Countrywide, WAMU, Lehman Brothers, and AIG and on and on. Fannie and Freddie still exist in some more dead than alive “zombie state.”

I expect that others soon will make that trip to capitalism’s Boot Hill.

All of these businesses made the same egregious error. They bought the poisonous PLS subprime garbage or similar low quality mortgage backed securities. The poorly underwritten mortgage loans backing the bonds went bad so completely and quickly, that the private guarantors could pay not their debts and/or ineffectively bought sophisticated hedges upon other sophisticated hedges, with the results not changing.

A bunch of “smart financial services people” outsmarted themselves and the nation is paying for it.

If you must have someone or something to blame, you might ask how did all of these financial services companies and hundreds more--each of which was regulated by one of the following federal regulators SEC, Fed, Comptroller, OFHEO, or the OTS—avoid having their primary regulator flag, stop or slow down their financial stupidity, before they had no option but to go belly up?

Rather than own up to that, it’s easier for McCain and fellow travelers, including our very unpopular President George W. Bush, to prevaricate and blame for the fault two “cutesy pootsie great headlines named companies,” than to tell the truth about disengaged or neglectful federal financial regulators, playing their GOP parts as lovers of laissez faire business practices.

Let’s Use the GSEs!

There were other notable developments this past week, as the nation lurched from bailout crisis to bailout crisis and as most people saw their 401 (K) shrink to 101 (B) size. These included non-choreographed but complementary—and possibly prescient-- statements by banker Lew Ranieri, economist Susan Woodward and Rep. Barney Frank (D-Mass.), of House Financial Services Committee fame.

Their common theme was “don’t forget Fannie Mae and Freddie Mac (the heretofore Maloni-designated “dead”), when the real work starts.

Frank and Woodward (she in a Washington Post op-ed) reminded Treasury not to ignore Fannie and Freddie when it took on its Herculean new task of cleaning out the Aegean mortgage stables.

Ranieri, the “father of mortgage backed securities” and a delightful and very smart individual who has been in the mortgage business for 30 years, said the following to an audience at Harvard’s Joint Center for Housing Research.

"The biggest and most necessary challenge will be rebuilding Fannie and Freddie. We are not going to have a market unless we have a deep, stable institution or institutions willing to take appropriate risk and carry it into the future….A properly reconfigured Fannie and Freddie is the most important thing we can do."

Fannie, Again

Speaking of which, with all of the focus on the new $750 Billion initiative and everybody wondering how it’s going to get done and who is going to do it and will it be enough, etc. etc, has anyone seen the US Treasury put one emergency dollar into Fannie? Has Treasury paid any of Fannie’s creditors or sent checks to those holding GSE MBS? Did Treasury step up and meet a Fannie payroll?
The answer to all of these is “No,” because Fannie seems to have their own money and continues to meet all of its financial obligations.

Did anyone look at Fannie’s Second Quarter business report and notice that the company paid federal taxes? You only do that when you make money, not lose it.

Those “Second Quarter” losses, which caused the Admin and the Hill to go to the racks, were accounting losses, based on the same accounting rules which regulators now seem to be relaxing.

If Fannie’s “Third Quarter” report—due out in a few weeks--shows that they paid federal taxes for the last three months, some of the bright Senators and Congressmen, who rolled over when Paulson “at the last minute” asked for “emergency” authority to nationalize the GSEs, just might want to ask, “What in the Hell just happened” and on what basis did Fannie stop being a viable company, since it had and still has positive capital?

For those who just don’t understand how the mortgage market really works, let me state that our markets require a dedicated mortgage investor, so lenders readily can sell their originations and not have to hold mortgage loans on their books.

The Congress and the new Administration either will awake to this commercial reality and either create a new one or set; utilize the remnants of Fannie Mae or Freddie Mac, or as my friend writes below, the country better learn to like adjustable rate mortgages, because that’s all the banks will make.

In the wake of this current real estate meltdown who wants top hold mortgage debt or MBS, unless that is your exclusive and unquestioned market role?


I first met Gwenn Hibbs 25 years ago, when I went to work at the old Federal Home Loan Bank Board, the savings and loan industry regulator, and she was a staff attorney. The Bank Board, under the late Jay Janis and his very able assistant Rita Fair, had a covey of super bright young lawyers, many of whom I’ve been fortunate enough to stay associated with over the years.

Gwenn was part of that group of smart financial regulatory lawyers who worked extremely hard in the nation’s last financial services crisis, when the thrift industry imploded. In addition to her technical legal skills, I remember that Gwenn once wrote every lyric for a dozen lawyer sung songs for a Bank Board holiday party.

When I first could, I hired Gwenn to work with me at Fannie Mae, as my legislative counsel.

I told people that Gwenn, as a lawyer, “could do more with two commas than most attorneys could do with 10 words.” She retired from Fannie before I did and, since, has worked with kids in need, taught music and instruments (she’s an accomplished musician), helped write a family book with her sister, trained many dogs, and can freeze you with one look, when you cross her.

Gwenn Hibbs: Bait and Switch

Houston, we have a problem. Since July, the Hank Paulson Sleight-of-Hand Magic Show has swallowed the other branches of government. Working with the FHFA, and the enormous new powers of the TARP, he’s already started a process to disappear the GSE underpinnings of the housing sector. As a nice bonus, the same Wall Street companies who sold $1.5 trillion in subprime neutron bombs to investors will live to play another day, and their shareholders will be sleeping soundly for a long time to come.

September 7, Hank Speaks: The GSEs, albeit solvent and exceeding statutory capital requirements, will be “rescued” into conservatorship -- supposedly to remove systemic risk, address moral hazard, and restore solvency and investor confidence. Hank also says that we must bury the “flawed” GSE business model of thin capital, mixing private profit incentives with a public purpose. Way too risky. No more shareholder dividends, no more lobbying and no more talking to anyone else in government without permission.

Also for the greater good – but clearly harming capital, solvency and investor confidence -- Hank announced that the GSEs would shun turning a profit, increase support for housing, lower guarantee fees, and go on a starvation diet after the election. Translation: Shareholders lose their shirts and employees may lose their pensions; asset sales and reorganization could occur without any further congressional oversight; but America recaptures Free Market Discipline.

Fast forward to September 16: ”ginormous” Paradigm Shift alert.
The new rules: highly leveraged buccaneer firms on the verge of bankruptcy (well, except Lehman Brothers, don’t ask) are allowed to socialize their losses at taxpayer expense. Oh, and we don’t need to send another message on that whole "you need more capital/moral hazard" thing, do we?

September 16: AIG gulps down an initial loan of some $80 billion; it uses the bailout pot to lobby against stricter regulation and throw itself $400,000 parties.

October 3: Congress allots $700 billion to rescue every Tom, Dick and Harry Hedge Fund who ever made a bad subprime loan or underwrote toxic MBS. Mysteriously, Lockhart refuses to say if Fan and Fred will be allowed to sell assets through TARP

October 15: Hank announces a new, improved TARP plan never mentioned to Congress – inject equity in ailing banks, guarantee interbank loans, and guarantee all non-interest bearing deposits. Any firm that participates can continue to pay dividends, and overpay executives as they please. The common shareholders will live to see share values rise again in the near future. Pundits say the real all-in cost will be $2 trillion.

What we learned in school today: Our regulatory regime at every level failed to appreciate the risk of subprime securitization, and didn't require enough capital from anyone. But if no one had enough capital to survive the Wild West of subprime profiteering, how come we're only blaming Fannie Mae? Because what's good for Wall Street is good for America. A GSE-free market means much higher profits for Wall Street with lower risk -- say goodbye to 30-yr. FRMs and learn to love ARMs.

Maloni 10-19-2008

Monday, October 13, 2008

“Throw Out Your Dead!”

(This blog is long, but I think worth it. Lots of detail, mixed with my controlled rage, especially at the end with the index which puts a lot of McCain/Bush “ BS-exposing” info in one place.” Maloni)

“Throw out your dead” is a line made famous in Monty Python’s classic movie, “The Holy Grail.” But lately it has been co-opted by Senator John McCain’s presidential campaign and its bizarre new pleasures. Naturally, the foul play is abetted ably by the GOP establishment. Joining the McCain orgy are Hill Republicans, some in the media and, naturally, the always clueless Bush White House.

Why the sudden Republican interest in the deceased?

Simple, they all are neo-necrophiliacs or “Neo-Necs.”

How else do you explain the mindless “screwing” the Right is giving Fannie Mae and Freddie Mac, both of which are dead and gone?

“And the Neo-Necs sing, ‘Throw out your dead. We want to par-tay, par-tay with them!’ "

What the GOP Did and What They Say (as their noses get longer)

The Right killed the companies, but apparently they aren't satisfied to let them rest in peace, but want to satisfy their election lust with the “dead” GSE corporate husks.

McCain et al are blaming the companies—which have been overseen by Republican appointed regulators for the past 8 years--for tanking the US real estate market and making abusive investments in subprime mortgages and taking down the entire economy.

Consider this slick Neo-Nec move against the GSEs which have fallen, died, and can’t fight back, as the ultimate GOP “party gift,” one which keeps on giving.

It’s so easy to lie about the dead, especially when they were vilified in life. Their surviving “relatives” have been enjoined—by this Administration—from defending them or saying much of anything.

Thank God for us bastards in the family, who aren’t muzzled.

Fannie and Freddie currently are under utilized wards of the federal government and true corpses in any corporate sense. Their employees have been warned not to talk to anyone about what’s going on inside. Their headquarters are all but cemeteries. But it hasn't stopped McCain and his “Neo-Nec” cronies from blaming the two for today’s scary headlines, as well as related complex problems known to many, but understood by few.

For McCain’s crowd and his election efforts, the more public ignorance and confusion the better, since the true culprit—Wall Street subprime mortgage lending, outside the Fannie and Freddie channels--and virtually all of the resulting financial failures and systemic economic problems are covered in GOP fingerprints and DNA.

The GOP posse first helps garrote Fannie Mae and Freddie Mac, plunders their capital accounts, has it sick “Neo-Nec” way with them, and then decides to make the corpses hateful poster children--in McCain TV ads--claiming that the GSEs caused the subprime mortgage mess, which has racked the nations’ residential real estate markets and brought down our economic and financial systems.

If that isn’t a “GOP Neo-Nec GSE screwing,” what is?

C’Mon Anderson et al, Get the Facts!

I am really upset about this, not so much at the Republicans for whom this is a standard play, but at the media who gullibly pass on those charges. I'm also galled at the public officials who are afraid to challenge this nonsense because there are fearful of standing up, too vapid, or too lazy to do the simple research to show the transparency of the Neo-Nec lies.

The Republicans hope they can fool enough people and further demonize Fannie and Freddie, hoping that the mud will slop over onto Obama and somehow make McCain a winner. The Bushies, the congressional GOP Neanderthals, the think tanks on the Right, and many in the media have turned "Fannie and Freddie" into an epithet which both angers and frightens people. They are "cute words"--which nobody really understands--but they sound clubby, inside the Beltway, and possibly ugly and evil. (Whatever happened to, “Never speak ill of the dead?”)

So, in a very successful coordinated election year attack, McCain and the GOP try to blame Fannie and Freddie for the subprime mortgage scourge and for dramatically weakening the economy. Will this desperation play—one of several for the flagging GOP ticket--help McCain’s flagging efforts?

At the end of this blog, I list several sources which reject the thinly disguised McCain effort to cover the Bush Administration’s financial regulatory and mortgage policy failings. I also list websites, articles, and reports rejecting the "GSEs caused subprime” myth, and other discussions of the McCain campaign’s attempts to morph John McCain’s mundane performance on GSE matters from its current “chicken s—t” consistency to “GOP chicken salad.” ready for voter consumption!

Forget the content of those bogus, subtlety suggestive racist ads that McCain is putting on about Fannie Mae. Just remember that the latest one was produced by the very same guys who did the 2004 “swift boating” of John Kerry. That ad campaign--later shown to be factually wrong--successfully convinced too many voters that Kerry, the wounded, decorated Navy Vietnam war veteran, didn’t see much combat and was un-American.

McCain decried this scandalous “swift boating” tactic in 2004, when aimed at against Kerry, because it also had been used again him in the GOP primary. But, his team has gone back to the same guys to further defile the GSEs.

McCain on GSEs: The Record and The Facts not the TV Ads

Let me give you the sum total of John McCain’s last five year Senate record on Fannie Mae and Freddie Mac, the one on which he and his spinners claim that he blew the whistle on GSEs. (Again, all of my comments will be buttressed by “indexed” commentary, at the end of the blog.)

Listen fast so you don’t miss it, since McCain only made one floor speech in 2005 and announced on that same day that he would co-sponsor a bill introduced more than 12 months previously by GOP activists.

That’s it! Who knows what GSE thoughts he might have had moving between his eight homes or driving one of his thirteen automobiles, but McCain’s actions were pretty thin.

Senator McCain, the “maverick” and the self designated watch dog protecting against a whole range of GSE problems, chaired a subcommittee on the influential Senate Commerce Committee, from 2000 until the Democrats took back the chamber in 2006, but never employed it on Fannie/Freddie issues.

From 2000—until the GOP lost the Senate to the Democrats in 2006--John McCain NEVER HELD/CHAIRED a subcommittee hearing on any GSE legislation or issue. Nor did he testify before any other congressional committee on the issues on which he and Governor Palin, on McCain’s behalf, claim the Senator acted as a seer.

Plenty of others, in both the House and Senate, did harass and challenge the GSEs, as Fannie and Freddie lost its congressional loyalty and support. But, there’s not much evidence that John McCain was one of those regularly banging on the GSEs houses.

My Friends, I……?

Instead of doing anything original, creative or even active, Senator McCain in May of 2006 went on the Senate floor, a few days after Fannie’s and Freddie’s regulator had issued a scathing report on the two companies, and delivered a 360 word “I told you so” floor speech. (Told us so, when?).

McCain was so energized with that speech, so girded for battle, that the Senator declared that he…..he…..he would “co-sponsor” a rather weak GSE bill which had been introduced 12 months previously by fellow GOP Senators Chuck Hagel (R-Neb,) and John Sununu (R-NH) and generally reviled by most conservatives.

Wow, what courage and leadership!

Hagel and Sununu, unlike McCain were GOP pols who regularly did kick Fannie’s butt, unlike John “Talk the talk but don’t walk the Walk” McCain.”

As Fannie Mae’s chief lobbyist through 2002, I can remember strategizing about Hagel and Sununu, because they both were so smart and active. Fannie sent prominent GOP emissaries into see each Senator to present our case and try and turn them around or at least make them neutral on GSE matters.

Stories about the GSEs hiring McCain’s campaign director, Rick Davis, to run the Homeownership Alliance and placate McCain, are not accurate. John McCain never generated that kind of political angina within Fannie Mae. He was an opponent, but not one who caused any real concern, because he seldom did anything and wasn’t liked by the Senate GOP rank and file.

The Hagel--Sununu proposal, which McCain co-sponsored, died in the Senate Banking Committee, controlled by the GOP and chaired by Sen. Dick Shelby (R-Ala.), mainly because the GOP right wing believed that the bill was too easy on the GSEs.

The GOP held out and, indeed, got a tougher bill reported in 2008, when the Democrats controlled the Senate. But, up to and including that legislative odyssey, which took most of 2008, there is no legislative or rhetorical trace of any McCain GSE legislative GSE activity.

Whistle Blower?

Did the Whistle Blower blow his whistle in the forest with nobody around to hear or didn’t he blow it at all?

There is no record of Senator John McCain haranguing Shelby to act, when the latter chaired the Senate Banking Committee. There is no record of McCain calling a press conference or introducing new legislation on GSE matters, in 2006, 2007, or 2008. There is no trace of John McCain speaking out on GSEs matters in person or for “the record.” before the Banking Committee, when it was chaired by Shelby, or in 2007 when Senator Chris Dodd (D-Ct.) was the Chairman.

It was Dodd, Chuck Schumer (D-NY), and Shelby, and House Banking Committee Chairman Barney Frank (D-Mass.), who this year shepherded a GSE regulatory bill through the Congress. President Bush signed it into law in August, two months ago.

But McCain and his "homies" sought to re-write history, when McCain got the GOP presidential nod. Suddenly he cast himself as a watchful bull dog tearing through the GSE garden. Instead, his real record looks a little bit like “Tiny Tim,” mincing through the tulips.

I think that McCain’s team saw the confusion and anger surrounding Fannie and Freddie and tried to cast his largely “nothing burger” GSE senatorial performance into some sort of heroic role, based on one short, 350 word, Senate floor speech, and one co-sponsored bill, introduced by others more active on the GSE case.

As Senator McCain urged the New York Times and others--when the story of Rick Davis working for Fannie and Freddie and heading the Homeownership Alliance surfaced and McCain brayed that news didn't prove any ongoing link with Davis and the companies (save for the fact that Freddie krpt paying Rick lobbying wages for four years, after Fannie stopped, right up until August of 2008)--I urge people to check the Congressional Record for McCain’s true GSE performance.

It’s a far cry from what he and the Governor and all of the right wing spinmeisters are suggesting. (See Index.)

But as one financial analysts said to me last week, "Who cares, Fannie and Freddie are dead and gone?”

Sadly he was correct. But for now, John McCain and the GOP right wing are disrespecting those once valuable national mortgage assets and wrongfully assaulting Barack Obama.

That really pisses me off!

Maloni 10-13-2008

Links and Citations to Others Talking about Subprime and McCain on the GSEs

(This is a Google site, identifying the veracity of McCain statements and allegations on a variety of GSE issues and the genesis of subprime, as well as the now international economic problems flowing from the US real estate meltdown. It might also have some of the items identified below.)

McCain on the GSEs

The GOP’s “Blame the GSEs” Plan

Subprime Mortgages, The Source and the Problems It Caused

BIS 78th Annual Report, Part VII. The financial sector in the advanced industrial Economies, Highlights,

BIS, The financial turmoil of 2007-?: a preliminary assessment and some policy considerations, by Claudio Borio,
Working Papers No 251, March 2008,

Is the 2007 US subprime financial crisis so different? An international historical comparison. Working paper 13761,

Understanding the Securitization of Subprime Credit, Federal Reserve Bank of New York, March 2008

(President's Working Group Financial Crisis Report,

Sunday, October 5, 2008

You Want to Blame Who?

“Barack Obama was on Dallas’ grassy knoll--and not as a 2 year old kid--but in his current personage and holding a smoking rifle. He’s right there, look!”

Sounds pretty silly, right? But it is no less absurd than a ton of things being hard sold around the country linking Obama to Fannie Mae or trying to blame Obama and Fannie for the subprime mess which has sunk so many financial institutions and swirled and flushed our national economy downward.

Circulating these lies either is a group of diehard GSE haters--who don’t realize that they have succeeded in driving a wooden stake through Fannie’s and Freddie’s tickers--or, as is more likely, some “MMMs,” (Mischief Makers for McCain).

This fact came home to me this past week, when last Sunday I drove to Pittsburgh on some family matters, returning on Tuesday, and listened to a good bit of “talk radio,” mostly with conservative hosts from Limbaugh to a half dozen locals across Pennsylvania and in Maryland.

Again and again, I heard the same anti-Fannie slurs, the dated Maxine Waters and Barney Frank audio snippets, and the same erroneous charges, all winding up trying to lionize John McCain and blame Barack Obama and the Democrats for all things “Fannie Mae and Freddie Mac,” the failure of the residential real estate and everything else bad in the US markets.


In the attack mode, these disparate voices complained about Fannie’s housing goals, linking them to subprime (not true), 100% down payments, growing minority homeownership rates, corporate earnings, excessive executive compensation, and much more. Even owning a home seemed to draw complaints and, in their conservative view, shouldn’t have been an option for some of “those people” whom the GSEs financed.

When I got back to town, coincidentally, friends sent a propaganda piece these groups are using, while a reporter--who regularly gets the front page of his national newspaper--told me that twice in the week, he had received emails inviting to go to websites carrying the same sort of trash. “Shot in the Fannie Mae”—a document holding many of these lies--was like reading the “Elders of Zion” or the “The best of Joseph Goebbels,” except the anti-GSE tome had tons of typos.

Today’s blog will push back at that garbage and try and show that, while Fannie Mae (and Freddie Mac) hardly are blameless regarding their own plight, “Democrats” had very little to do with the GSEs demise or the subprime woes which brought our national mortgage markets and the national economy to the point where it needed a $700 Billion red, white and blue cash infusion.

Fannie’s and Freddie’s problems were caused by Fannie and Freddie officials gobbling up subprime securities for their portfolios. Period, end of story. Everythign else is just “color.” (This crucial point now has been recorded in today’s Sunday New York Times, by reporter Charles Duhigg. With pride, I’ll note, my largely unchanged blog draft was finished on Friday, Oct.3.)


The Right likes to blame the congressional Democrats for Fannie’s problems, noting also the high profile individual D’s, notably Jim Johnson, Frank Raines, and Jamie Gorelick, who held top jobs at Fannie Mae, as further evidence of some partisan evidence. The long time R culture at Freddie seems to earn a pass.

Let me throw a little rock salt on this snow.

In point of fact, one could point to subprime decisions made by Fannie “Republicans” and decisions made by the Bush Administration as causing much of Fannie’s financial ills and perpetuating other elements of it.

Suffice to say that Raines was the last one of those three individuals to leave Fannie Mae in December, 2004. The company then was turned over to Dan Mudd, a former GE Asian operations exec whom Raines had hired. Mudd, a life long Republican (and later a McCain supporter), firmly took hold of the company in 2005, introducing his own priorities, one of which later became voluminous subprime mortgage security purchases.

Indeed, in the Mudd inner circle, there was very little direct Democratic influence, as his top assistant and his number one legislative strategist and chief lobbyist both were long time R's with extensive GOP networks on the Hill and inside the Administration.

But, it was Dan Mudd’s subprime business decisions which killed the company, not his and the company’s growing links with the GOP and dwindling ties with congressional Democrats.

Both the Wall Street Journal (9-9-2008) and the Washington Post (8-19-2008) point out that business decisions made specifically in 2006 and 2007, on Mudd’s watch, were the devastating catalyst.

The purchase of billions of dollars of low quality subprime securities and “Alt A” loans (below A quality) were the culprit. By the second quarter of 2008, those bad loans had gone so sour that the company reported these products produced 60% of Fannie’s credit losses, while only representing 11% of the company’s mortgage portfolio.


However, looking deeper, it is noteworthy to see what the Bush Administration did before they chose “conservatorship” two months ago for the GSEs.

In 2004, the Bush Administration pushed the “ownership society” and lauded Fannie’s and Freddie’s work to achieve those homeownership ends.

In 2005, via regulation, Bush’s HUD upped the Fannie and Freddie housing goals to further enhance homeownership. (Source: Bloomberg.)

In the 2005 rule making process leading to jacking up the goals, HUD wrote:

“The GSEs state of the art technology, staff resources, and share of the total conventional conforming market, and financial strength strongly suggest that they have the strength that they have the ability to lead the industry in making home purchase credit available for low-income families and underserved neighborhoods.” (Source: HUD regulation, during rulemaking process.)

Indeed, the Bush Administration, as recently as six month ago, pushed the companies to buy more mortgages and specifically more risky mortgages.

Here is what the solons at OFHEO wrote, this spring, when they lowered the capital requirements they recently had increased.

“Simply put, fully implemented will make available to the Enterprises sufficient capital to permit them to purchase or guarantee about $2 Trillion in mortgages and mortgage backed securities, That support will be there not just for the Enterprises’ traditional conventional market but also for loan modifications, the subprime market, and the temporary jumbo conforming market.” (Source: OFHEO statement, March 19, 2008.)


But, it was the subprime toxic poisons--knowingly purchased by the GSEs-- that killed them as privately owned companies.

Thoughtful or aggressive regulation could have stopped those purchases at Fannie/Freddie and other investors throughout the financial services community had there been anyone with enough guts to blow the regulatory whistle.
The Bush Administration affirmatively refused to regulate the mortgage bankers and mortgage brokers who generated the subprime loans. It raised no issue with heavily regulated banks which bought some of the worst mortgage companies.

Yet, it was the Bush SEC, Bush OFHEO, Bush nominee running the Fed, the Bush Counsel of Economic Advisors, and other Bush regulatory appointments who either missed Wall Street’s greedy subprime creations--which those same investment banks sold to financial institutions all over the world—or just saw them as divine GSE retribution since those loans were coming out of a set, had they been conventionally financed, would otherwise had gone to Fannie Mae or Freddie Mac.

Whatever the case, no official in the Bush loop said much about the subprime scourge. (Of course, much of that most of the Bushies were busy subverting if not shredding the Constitution.)

Officials at Indy Mac, WAMO, Wachovia, First National of Nevada, Bear Stearns, Merrill Lynch, Countrywide, Lehman, Fannie and Freddie and hundreds more bought the poison and most paid the price, unfortunately bringing down much of our economy with them.

How many Democrats walked those executive offices? And, unless the GOP wants to rewrite history, the Democrat didn’t control Congress in this decade, until 2006, and then the biggest thing they did was to approve legislation creating a stronger GSE regulator and giving Henry Paulson the tools to takedown both companies on “Smashdown Sunday.”

Fannie’s Board of Directors had several nationally prominent Republicans serving on it, during this time, including Ken Duberstein, former Reagan Chief of Staff and currently and adviser to John McCain (Duberstein recently resigned from the Fannie Board); Steve Friedman (Bush National Economic Adviser); Fred Malek; and Ann Korologos (Labor Secretary for Ronald Reagan).

Sorry, McCain Campaign, George W. Bush, WSJ, Peter Wallison, Chuck Calomiris, Rush Limbaugh, and hundreds of others with a media forum, you’re spinning,

Where can anyone—except the haters, the liars, and the right wing nuts--find the “Democrats” in all of this, whom the conservatives blame so much, in anything more than a cheerleading role? They just aren’t there for the blaming.

As I have written before, the GOP’s DNA is all over the subprime mess and the trillions of dollars and untold pain, suffering and dislocation, economically and spiritually that it is costing our nation.

I just hope that any voters as well as other thoughtful people--who encounter this hateful effort to politically scapegoat Fannie and Freddie--have the facts to refute it.

Maloni 10-5-2008