Monday, December 22, 2008

Wishes and Hopes for 2009

It’s the time of the year to bestow gifts and wishes on rich and poor, friend and foe, family and others. So here’s my list.

--For the American people—and therefore the world—I wish for a strong Obama presidency, a thoughtful and hardworking Congress, a revived and vibrant national economy providing many new jobs, accompanied by a rip roaring wild bull stock market, and serious work begun on a national health care system and major renewable energy sources.

--For Fannie Mae and Freddie Mac, I wish them powerful friends in high places, ideally a guy soon moving into 1600 Pennsylvania Avenue and others now sitting on Capitol Hill.

--For the nation's large commercial banks, which have received billions of taxpayers’ dollars from their “Uncle” Henry Paulson, I wish them some integrity, corporate conscience, and recognition that they now have a major obligation to their customers and the nation to start lending money, quickly.

--For the Detroit automakers, see previous Christmas wish and the need for car buyers to have access to financing.

--To Governor Rod Blagojevich, I hope he can secure a defense team with the combined skills of Abraham Lincoln, Perry Mason, Alan Dershowitz, F. Lee Bailey, and Johnnie Cochran, because G-Rod’s going to need them all and then some!

--To President Obama and his Cabinet, I wish that they enjoy the sustained and deep support from the American public and that their efforts produce peace and international prosperity which can come from bold United States leadership.

--For Angelina Jolie, I wish that she finally realizes her life long dream to go out with me.

--For the Pittsburgh Steelers, I wish for them the Super Bowl XLIII Championship, to go with the five others they’ve already won.

--I wish in 2009 that the McCarran-Ferguson Act, which cedes to the states regulatory control over the insurance industry, dies and is replaced by a national insurance regulatory regime. Consumers then can look forward to efficiency and lower product prices, which is not the case now. This development could also end the title insurance rip-off which costs new homebuyers $1500 to $2000 for the insurance with almost the lowest claim rate in the industry. (Digitize those local title and sales records and watch how quickly you lose the need for “title search” and even appraisal fees. The savings to homebuyers would be large!)

--In 2009, I hope former President George W. Bush remembers never to accept a hunting invitation from Dick Cheney.

--To the Pittsburgh Penguins, I wish them a Stanley Cup Championship to go with the two that the Marion Lemieux-led Pens won for the city and their fans in the early 90’s.

--For the AEI, Mike House, Peter Wallison, Charles Calomiris, Tom Stanton, and Bert Ely, and the other professional GSE irritants, I hope they can find another target for their rancorous energy, like global warming or world hunger, since Fannie Mae and Freddie Mac can’t carry them anymore.

--I hope the nation’s mortgage insurance companies—which owed their modern existence to the GSEs, but were so rabid with their overheated support of the campaign to kill off Fannie and Freddie—didn’t sow their own industrial demise with the effort. Too much of a good thing is bad! (See title insurance above!)

--For the editorial boards/writers of the Wall Street Journal and the Washington Post, I wish for a lifetime supply of kaopectate and lots reasons to use it!

--To Senator Dick Shelby (R-Ala.), I wish for the United Auto Workers to buy the house next door to his and then entertain the Senator, nightly, with continuous polka and yodeling contests. To aid that move into his neighborhood, the UAW should use the Shelby family title company to do their mortgage search. (To the UAW. I agree that yaks are totally acceptable neighborhood pets. Dick will love them!)

--To the senior Democrats of the House Financial Services and Senate Banking Committees, I wish for less acquiescence to Treasury officials, even in 2009 when they will represent the same party as the committee majorities. Lead don’t follow!

--To the Republican management of the Federal Housing Finance Agency, I wish you good luck in securing employment in 2009 in the fast food industry or at your friendly Wal-Mart store.

--To those investors who keep going “long” Fannie and Freddie, because they are so cheap, I wish and hope that you see and know more than I do about the two companies!

--For the Pittsburgh Pirates, I wish an end to their 15 consecutive losing seasons. Come on guys, it’s called “Major” League Baseball. Try playing some!!

--To Mr. Z, I wish that you stay a curmudgeon in 2009!

--To the Mortgage Bankers Association, I wish that you would drop the pretense and just merge with the American Bankers Association. It just a matter of time before it happens, anyway.

--To the National Association of Realtors (NAR) and the National Huilders Association (NAHB), I hope you never forget that you are the last commercial voices for homeownership and possibly the most powerful. Wear that mantle well and responsibly. Once again, don’t follow, lead!

--To the media chroniclers of Fannie Mae and Freddie Mac, several of which are writing books on the two companions and the economic meltdown. I wish that you successfully separate the truth from the lies and remember that the GSEs didn’t invent/design themselves, with their three-cornered statutory requirement to satisfy housing mission (55% of all of their business going to low-mod homeowners), shareholders, and safety and soundness regulators. That was Congress, reiterated again and again, from 1970 through last year.

--To all of those phony-baloney members of the House and Senate—who uttered those “Casablanca, gambling at Rick’s “ hypocritically hilarious comments about Fannie and Freddie making profits or helping too many poor people--I wish you’ll receive a prompt education and understand about the reality of the GSEs, so you will make some more thoughtful decisions in 2009.

(I hope your holiday gift of wisdom allows to realize that until Fannie and Freddie managers (not the long gone “scorned and evil Democrats”) in 2006 and 2007 succumbed to the need—wrongly—to buy toxic subprime and Alt A product, the companies did a fabulous job, i.e., just what Congress wanted them to do, carrying out their federal mission, supplying trillions of trillions of dollars in liquidity to America’s low, moderate and middle income homeowners. The two birthed and successfully managed a national secondary mortgage market, which now is missing from the mortgage finance system, and is part of the reason why housing still is suffering.)

--I wish that all of the GSEs critics come to realize that the GSE function is desperately needed and that the commercial banks, alone, can’t/won’t serve that “dedicated investor” role.

--I wish Shawn Donovan, the HUD Secretary-designate, a huge shovel and a sharp fat cutting knife, as he takes on the modern Aegean stables which are HUD.

--For Selma Hayak, I hope that she gives me at least a week to recover from my previously noted celebrity date, so that Ms. Hayak can have her much sought after evening with me.

--To my family and family’s family and to all of my friends, thanks for being there. I wish you all good health (which is most crucial), personal and professional success, and a ton of good wishes in 2009. Oh, and for myself, I wish for a typo-free 2009 blogging experience and some more grandchildren to go with our wonderful three we now have!

Maloni 12-22-2008

Thursday, December 18, 2008

A Dream Before Christmas!

After reading Christmas stories to my grandchildren and helping put them to bed, I sat back in my easy chair and looked at those old tales and slowly drifted off to sleep, perchance to dream of an Elves and Reindeer CALL TO ACTION!

Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz! Snow was swirling about the North Pole and the denizens were gathered and angrily shouting over one another.

“The large commercial banks are making a mockery of the American people and billions of taxpayers dollars they have been given—with no strings—by the Bush Administration, with the banks all but refusing do their part to stimulate the economy by lending that money to individuals, businesses, or other banks,” shouted Dancer!

“Presumably the Treasury and the Federal Reserve made these taxpayers funds available to the banks so they would lend that money in the markets they serve, break the nation’s credit logjam, and do their part to bringing an end to the economic slowdown gripping the United States,” screamed Foppie the elf intellectual.

“Instead the banks are holding onto this free money and arbitraging it or, worse, using it to pay higher dividends, larger salaries, or acquire other banks,” roared Dancer.

“Most people on earth, recently, have learned of a new form of protest and disdain, when an Iraqi journalist threw his shoes at President Bush, an Arab cultural gesture meant to suggest that, ‘You are not worth the dirt beneath my feet,’ ” pointed out Mrs. Claus, who always read the newspapers.

“I think we should take advantage of that new found understanding and turn it on the big banks, “ proclaimed Prancer.

“People should take their old shoes and just deliver them to the front of bank offices, all across the nation, as a protest against the banks for failing to do their part and NOT LENDING money to their individual and business customers, “ declared Rudolph.

“They should let the large banks know that their continued selfish, gluttonous, and piggish behavior makes them, in their eyes, the banks are ‘not worth the dirt beneath their feet,’ ” added Vixen.

“I hope folks don’t throw your shoes at anyone or at the bank offices, they just need to put them the front doors as a silent protest and reflection of their unhappiness with bank actions. If the banks are smart, they will take those collected shoes and donate them to local charities supporting those who need help. “Said Clarence, the oldest and wisest of the Elves.

“But when have the banks been smart?” asked Dancer

I awoke with a start. Was I dreaming. Did it happem, would it happen, could it happen. I don’t know, I guess we’ll find out!


A Holiday Wish for President-Elect Obama

My thanks to Mr. X—who has been a first hand witness to so many significant industry and regulatory events--for reminding me of this historic anecdote, which has so much parallel in today’s events.

It’s 1993 and newly elected President Bill Clinton, who had just campaigned and won on, “It’s the economy, stupid” is meeting with his senior financial advisor—soon to be named Comptroller of the Currency--Gene Ludwig. Ludwig explains that more bank lending would stimulate the struggling economy but notes some minor justification for banks laying back and accumulating capital.

Clinton makes up his mind to an appropriate course of action and then goes on to convene two White House meetings--to which everyone who is anybody in financial services is invited—and his message is, “You God damned lenders will begin making loans to your customers and it is the job of you God damned regulators to make that they do!” (Mr. Z assures me that was the tenor or the exact words Clinton employed.)

President Bush (remember him) and Secretary Paulson won’t hold this meeting and President-elect Obama must, once he takes office.

Maloni 12-18-2008

Monday, December 15, 2008

“Hey Dawg. You got Soul!”

It’s all in the telling and in the video, but is it possible that this frustrated Iraqi journalist--who fired his size 9 Florsheim shoes at President Bush—is being condemned incorrectly? Maybe, he just was trying to praise President Bush for “W’s” ghetto humanity?

Or did the man really think that Bush was a heel?

Arab custom would indicate that the thrower was not happy with our President for the current state of his country, but then we aren’t either. Yet we don’t throw our clothing and accessories at the guy.

Well, when in Rome or when in Baghdad….

I don’t know about you, but I feel sorry for President Bush and hope that he stops taking global victory tours and just stays home. Possibly he could visit Texas multiple times and then show those videos in the countries he wanted to visit before he helicopters from the White House lawn on January 20.


Virginia, it’s the holiday season, right?

Have the large commercial banks—with their coffers full of Uncle Sam’s money--started lending to anyone, individuals, businesses, other banks, to help break up this credit logjam? Tell me sweetheart, what are they doing?

What? They are sitting on their assets?

Ho, ho ho. Don’t they know it’s soon Christmas and Chanukah?

Do you think the three bank regulatory kings, “Ben, John, and Paul” might suggest to their commercial bank minions, “Keep the frankincense and mir, but loosen up on the greenbacks and start circulating them the way you once did, by “L-E-N-D-I-N-G!”

Speaking of gift giving, I am sure that all of these financial services company execs, who lined up for their dole of federal wassail, are thanking their lucky stars that the Bush folks—as reported in today’s Washington Post—added a sentence in the final bailout legislation, to not force those poor souls to take compensation haircuts if their Uncle bails them out.

Where are my damn shoes when I need them and I mean the smelly sneakers??


Democratic biases aside, I have been very impressed with the Obama nominations and how the President-elect has carried himself during this “transition.”

He has chosen to surround himself with some very talented future cabinet appointments and senior staff, all of whom will be necessary to support this President as he tries to lead this nation out of a profound and very deep economic mess, not to mention a variety of other domestic challenges and the global issues facing us, as we fight two wars.

But, at my monthly poker game this week, I asked a GOP friend his opinion of Obama’s choices, his cabinet and top staff.

He said, “Oh you mean the old Clinton crowd? “

It’s not a new line, but it underscores a point—in a much different way--that I made several times in opposing the McCain presidency.

Had John McCain won the election, he would have turned too many of the same people or their clones who had served George Bush.

That would have been doubly tragic because McCain never showed the vision to change the GOP priorities which produced such carnage in Bush’s eight years.

“There is no moderate GOP talent pool,” I wrote and while some/many of the Obama nominations might have worked in past administrations, two things are different. Obama is in charge and setting the direction and tone and the instincts of most of the individuals Obama has named seem far more in concert with what America wants in its public officials than many of the conservative extremists/wing nuts who worked for President Bush.

Not every Republican appointee was out of the mainstream, but enough were to heavily color in the negative Bush’s two terms.


Alan “The Bear” Abelson

Barrons Alan Abelson seems “bearish” 12 months of the year and in every business cycle. He’s the Great Grizzly, a curmudgeon and says so, but he’s a fabulous writer.

You don’t have to read him for market advice, since his advice always seems to be some variation of, “Bad times are here or bad times are coming, so get out or stay out of the market.”

But, Alan Abelson is a superb writer and he should be read for his wit and observations of human behavior, garnered from decades of his work on and with Wall Street.

Of all of the stuff written about Governor Rob Blagoevich and his tawdry behavior, nothing was more clever than this line of Abelson’s:

“If it emerges that Mr. Blagoevich did proffer the seat to anyone with the itch to be a senator and the scratch to purchase it, he merely was following in the footsteps of his immediate predecessor, a Republican named George Ryan “

I am sorry, I find Abelson punning phrase just exquisite, like most of his column’s other petard hoistings!


Just so Fannie and Freddie and their fans don’t feel ignored, the “Houser of the Universe,” also known as FHFA Director Jim Lockhart. Told a Washington luncheon of the Women in Housing Finance that the US soon would have access to 4.5% home mortgages, with Fannie and Freddie playing a major role in financing them?

Really, Jim??

Exactly how do the late lamented GSEs borrow money that cheaply—even ignoring the 100 basis points the companies traditionally would add to the rate at which they borrowed to protect them over the loan’s life--without Uncle Sam’s stamp all over their debt?

It’s the US Treasury which is borrowing 10 year money for around 2.5 percent, not Fannie and Freddie. Or, do you have a double secret plan to turn that arrangement around? And if so, when are you going to tell us…...before you leave town in a few weeks, I hope?


Shawn Donovan

I don’t know Shawn Donovan, the New Yorker whom Barack Obama plans to name as HUD’s new secretary, but I hope, when Donovan was invited to serve, he asked the President-elect, “What was first prize?”

Just teasing.

HUD is the Aegean stables. It needs a massive clean up removing lots of dead wood, dead programs, and dead ideas. Try and restructure everything that moves, Mr. Donovan. It can only result in the department being more efficient.

A few of my friends who know and have worked with Donovan claim that he is “first rate and up to the job.”

I wish him nothing but the best in a post which grinds up top people.

Maloni 12-15-2008

Wednesday, December 10, 2008

“Quit Moaning, Start Loaning”

Many thanks to old friend the Alex Pollock at the AEI for reminding me of that old bromide, which was real advice once, given to a prominent financial institution in New England, that was complaining about market conditions and competition.

It’s the kind of advice one would hope that our Treasury Secretary, Comptroller of the Currency, and Fed Chairman would give some of those big banks, feasting at Uncle Sam’s table, while forcing force the banks to do their part and thaw our national credit freeze.

The Fed and GSE “Receivership?”

Why would the leadership at the Fed be pushing for GSE receivership, as has been rumored “around town” this week?

I realize that is the large commercial banks “wet dream,” but doesn’t BB have enough on his plate and isn’t the ultimate Fannie/Freddie fate—two largely dead entities in the Treasury’s garage—the responsibility of the Congress, so given by itself in this year’s GSE regulatory restructuring legislation?

Of course forcing Fannie and Freddie into receivership would do away with any evidence that the companies were prematurely put into “conservatorship,” but that thinking takes us into fantasy land, right?

A better reason to delay final interment of the now non-GSEs is that nobody has come up with a viable mortgage market replacement, which presumably is what the congressional charge, to themselves for calendar year 2009, is all about.

Memo to Obama Transition Team

Speaking of rumors, while the Obama has been spending plenty of time with the Treasury Department (as they should!), insiders are saying that not as much time has been spent at the "new" Federal Housing Finance Agency (FHFA), the old "OFHEO." Big mistake. Unless the “Obamas” know they are going to recommend dumping the new agency because there won’t be any “Fannie and Freddie” left to regulate, someone needs to remind the incoming Administration that this “Keystone Cops” gang has presided over a whole range of regulatory disasters.

As recently as yesterday at the Waxman oversight hearings, it was noted that the OFHEO/FHFA troops have occupied the GSE offices and been onsight observers of about four years of management decisions.

If, as some claim, that management decisions were disastrous, what’s that say about the OFHEO/FHFA people who watched and blessed them?

Also, personal note to John Podesta, many of the senior FHFA managers have been GSE-haters from day one. Those aren’t good credentials for federal overseers.

Thank You, Barrons and “Nat from Pittsburgh”

Now maybe we can get some thoughtful action from Hank Paulson and his troops. They’ve stiff armed Susan Bair and the FDIC over mortgagor relief. They stiff armed the Congress over the same and then---with their wall-to-wall discretion-- decided to give money to banks which seem intent on using it to buy other banks, increase dividends, pay bank officials more, or just arbitrage it in their Fed accounts.

God forbid those banks should decide to lend it to individuals, business, or even other banks!

But, now, now Barrons has come out in its current issue—via an article by Jonathan Laing (certainly no great fan of Fannie Mae and Freddie Mac)—and called on the Treasury to initiative a massive mortgage refinance effort, utilizing the aforementioned “late” GSEs, to buy the loans.

High fives to Barrons, which now seems to agree with other great minds (me!) who claim that Treasury refuses to use Fannie and Freddie over some ideological hang-ups, totally ignoring the capacity and ability which those two “things” possess and their underutilized ability to help balance some of the mortgage market ills.

But, now we have a major New York financial publication--owned by the parents of the Wall Street Journal--calling for that result.

Barrons would have the Fed create a special lending facility, allowing Fannie and Freddie to borrow at near Treasury rates, which—after a small margin for overhead—would allow local lenders selling those loans or securitizing them with the entities, to offer a 4.5% or less loan rate to millions of American families.

(Ironically, the Barrons plan looks much like one that has been circulating in Washington for weeks, created by Nat Cohen, a Pittsburgh closing attorney. It’s not identical, but “close enough for grenades” and I know Cohen has been shopping his proposal to any number of mortgage market policy players in DC. I am sure that Barron’s didn’t “borrow” Cohen’s ideas. Instead, it must have been a case of bright people coming to the same conclusions about the same time, although “Nat from Pittsburgh” clearly was first!)

Go Barrons. I hope some of those deaf ears on the Hill might open themselves to you and your ideas. They make sense for the American people and the mortgage finance system, which is why Paulson et al might chose to ignore them. Solely, because it “wasn’t invented at Treasury or by this (outgoing) Administration.

Obama Leadership

This week over lunch a freind told me how moved/impressed he was with something Barack Obama told an interviewer, regarding energy conservation. Obama confessed to turning off certain lights in his home to save electricity and discussed other fairly easy to do things by which most families could conserve as well as cut down on their personal energy use and expenses.

My friend went onto describe all of the wonderful things that could happen if we truly got serious about saving energy, instead of just employing the rhetoric of same which has been the case for 20 years, and follow the President-elect's lead, here and elsewhere.

This caused me to go back to something I had hoped would evolve with an Obama win, the next President having the capacity, character, and vision to lead.

This may just be one of the times in history when the right man, with the right message,takes the right office at the right time, to lead this nation on a variety of successful efforts that sow the seeds for a much brighter future for all of us and our children and their children.

I think Obama has that wherewithal to achieve major environmental, tax, healthcare, education, financial and economic changes, in part because the American people—as they have shown time and again—will follow a thoughtful leader who lays out effective policy.

After eight years of disaster and “village idiocy,” I believe that the American people will insist that the Congress and the new President defang the special interests, who have found homes in one or both political parties io the detriment of all but a few, and bust phony barriers inhibiting future national greatness.

It's there for Obama to do and his early incilinations seem right on point.

Legal Times and Fannie/Freddie Books

The Legal Times had an article/interview this week with Beth Wilkinson, former Fannie Mae General Counsel.

Ms. Wilkinson, who the article notes is married to David Gregory, the new host of Meet the Press, discussed her time at Fannie and the specifically the Treasury and Fed meeting when both Fannie and Freddie were told that they were going to be put into conservatorship.

People who had read me know that I believe that decision was based far more on ideological and political grounds than market facts. *See earlier reference to fed and receivership.) But, what was done was done.

I think it’s fair to say that Ms. Wilkinson and I share a belief that when Fannie was taken down, in what I call Paulson’s “Sunday Smashdown,” the company had sufficient capital and market access to survive. I asked then why the Fannie board didn’t fight against this Bush Administration-led effort. Something Ms. Wilkinson was inclined to do.

I still haven’t found an answer to that question.

Maybe the writers currently working on Fannie Mae books--four at last count--can decide what really went down and why.

Maloni 12-10-2008