Sunday, February 22, 2009

“No good deed……”

It’s great that President Obama and his team are thick skinned and not faint of heart, since no matter what they do seems to generate a GOP political strafing. And, he and his team have been in office a month now.

But that’s a democracy, that’s politics, and that’s Washington.

The latest shot came from some folks complaining that the Obama mortgage assistance program might help some people who got in over their heads while not assisting other mortgagors who “did the right thing” and acquired loans that they could afford.

That’s an understandable position, but it’s those problem mortgage loans that have caused the domestic and international financial agonies. Healing or otherwise fixing as many of those, as quickly as possible, is a national imperative and the goal of Obama’s policies.

I don’t know if there is a “morality issue” here, but--as a country--we’ll have to worry about that borrower distinction later, just as we later will judge the many large commercial banks the Treasury is bailing out, but which still won’t lend until they see gilt-edged borrowers come through their doors.

Oh, and I can’t wait for the first of those Republican Governors to truly reject any federal stimulus cash. He or she will earn the gubernatorial dunce cap. Let’s see if Haley Barbour, Sarah Palin or any of the other complaining GOP governors will “walk the walk.”

Bank Nationalization: “We Don’t Need No Stinkin’ Nationalization…”

That “N-word:” scared the hell out a lot of bankers last week, not to mention the stock market last week, requiring the President to issue a statement that he likes the U. S. banking system run by private interests. And, so do those who run the banks. Many of them, suddenly, were talking about quickly paying back their Treasury obligations, just to avoid the “N” possibility.

But when Ben Bernanke, Alan Greenspan (remember him), Senator Chris Dodd (D-Ct), and other solons discuss nationalizing some of the nation’s banks, then I would think those bankers—and their shareholders--should worry about the connection between smoke and fire.

Fannie Mae and Freddie Mac

The President’s mortgage restructuring plan calls for heavy use of Fannie Mae and Freddie Mac, plus possible further cash infusions from the Treasury.

The optimist in me hopes that this latest step allows the Obama Administration and the market—as well as those “policy makers” on Capitol Hill—to appreciate the value of the two firms and the ongoing role they might play in the mortgage market stabilization.

I have yet to see or hear any plan for the evolution of a “conventional secondary mortgage market” and it seems logical that when the national and international markers rebound and that question is addressed, the U.S. answer starts with Fannie and Freddie .
If it comes out that way, it will occur with the realization that those who demonized the former GSEs and “nationalized them,” did so precipitously (in Fannie’s case) and for ideological reasons, without thought to the market consequences.

One gauge of how much this most recent step means to Fannie and Freddie gaining some life will be the noise on Capitol Hill from those who vilified the two.

The Bush Administration is history, but you still have some voices in the House and Senate who have been active purveyors of “Fannie and Freddie caused everything” tale.

With Karl Rove still out there, along with the AEI’s Messrs Wallison and Calomiris and new initiate, Ed Pinto, former Fannie official, I wonder if the mortgage banshees will return to prominence.

Could we see the return of “FM Watch,” or whatever was their last iteration? I don’t know, since AIG, B of A, the MI’s and other charter members have been pretty beaten down. But, where there is a lobbyist, you still have a chance for a coalition.

This Company Is Part of the Solution and So Near, You Can…..

If I was a senior official at Fannie , Freddie, the Treasury, FDIC or the Fed, I would be beating down the door of a little company, headquartered in Bethesda, Maryland, called Overture Technology.

This firm, with years of mortgage experience, has developed a software underwriting engine that seems to answer every need of any entity managing millions of whole mortgage loans or mortgage backed securities.

Overture was founded several years ago by a former Fannie colleague of mine, Bill Kelvie. I have no financial interest in Overture, nor do I represent the company in any way, except I was blown away by a demo of their new exclusive software, at lunch (sandwiches provided by Kelvie) a few days ago. That’s the full disclosure.

Treasury, the Fed, FDIC, and any other institution facing the management and “pricing” of toxic mortgage assets should insist getting a, Overture systems demo because of their major new tasks. Implementing it likely will save them time and money, plus ease their jobs.

Yes, the “platform” strikes directly at the illusive, “How can we price mortgage assets when there is no market” issue? It also is filled with what I call “consumer friendly” features which can help even the most unsophisticated mortgagor chose restructuring elements of a new loan, making it affordable.

I hope those federal agencies—now weighted down with a new obligation to underwrite, manage, and sell mortgage assets--don’t waste time, money and effort trying to build their own underwriting engines when an amazing one—designed by mortgage market experts 7 miles away—“and ready to be driven out of the showroom” sits in suburban Maryland, just waiting for them to test it.

According to the designers, positive results can flow from the system in about two months. Consider that, you new toxic mortgage managers.

Maloni 2-22-2009

Tuesday, February 17, 2009

Elephant Tears!

Boo Hoo

I wish I was in the “tissue business.” Based on comments they’ve made in the past few days, the Republicans in Congress are going to go through boxes and boxes of it in coming years, just wiping away their tears.

GOP Senators Lindsey Graham (R-SC) and John McCain (R-Ariz), the most recent “criers,” complained about the lack of Obama bipartisanship and the fact that Republicans were being ignored and were not allowed to shape the President’s “stimulus” bill.

This was about the same time as the House Republicans voted in bloc against the Obama legislation. Every single one of them! Hello?

Again, for Republicans in Congress, let’s keep it simple.

We have an economic failure affecting the nation and the world. Virtually all experts and many non-experts agree that some massive mix of new federal spending and tax cuts are needed to boost the economy and create jobs. Our commercial banks need to begin lending again, which also is part of the deal.

The Obama Administration—working with the Congress--cobbled together a “package,” which likely satisfied no D, totally, but which had all of the requisite macro elements. It initially passed the House with zero GOP support, no Republican votes.

So much for bipartisanship coming from right to left.

Three cooperating moderate GOP Senators--in return for cutting the bill’s overall cost and removing from the House-passed bill some “less job generating" elements, i.e. the R’s definition of “political pork”--produced a politically acceptable package.

President Obama urged passage and stated his wish/hopes/prayers that this huge spending bill helps jumpstart our economy. In getting out front, he aggressively led cheers, held hands, encouraged and coddled, and spanked a few butts.

He’ll sign the bill into law today.

Hooray Mr. President! You provided the leadership, herded cats and pulled it off in three weeks. Is it the final answer?? Nobody knows for sure. More work may be necessary. But it’s a helluva start and your political DNA is all over it.

Meanwhile the congressional Republicans moan and complain bewailing because they claim the Democrats/President didn’t allow them the opportunity to put their biases into statute.

Senator McCain and his fellows need to face it. Their party lost last year. They get a bite at the apple, but not the entire piece of fruit.

The American people didn’t vote for you or for a "Republicrat" last November. They elected Barack Obama, a Democrat, to shake some things up in Washington and make changes. They gave him Democratic majorities in both chambers to aid the effort. Three major bills became in his first three weeks—including the mammoth stimulus package--and he was not reluctant to seek Republican help or use his political capital to secure his priorities.

That strategy should produce even more goodwill for Obama, when the GOP wakes up to 2009’s economic and political realities.

What Now?

The President seems to be trying to engage the GOP.

I have no idea whether Obama was offering the right mix of bipartisanship. The overall Republican reaction to the stimulus bill, minus the Senate moderates’ behavior, suggests why it is difficult to change behaviors in Washington.

But, I think President Obama will keep trying and, ironically, try and save the GOP from its own worst self-destructive instincts.

Congressional Republicans have put themselves in a position where many of them hope President Obama just fails and his initiatives crumble. That is a very tough platform to sell the American public in 2010 and 2012, by which time the “stimulus” should have born fruit, let alone other coming Obama efforts on health care, global warming, a national energy policy, and foreign policy initiatives..

I would hope that some R’s, beyond Senators Specter (R-Pa) Snowe (R-Maine), and Susan Collins (R-Maine), want to be part of the national solution, not its ongoing problem.

The GOP soon will have other opportunities to show that they can work with Democrats, not just against them.

Don’t Look Now, But…..

Virtually every federal financial regulatory agency has some new responsibilities (real or self-aggrandized) dealing with “toxic mortgage assets,” which either they have acquired or which burden the balance sheets of their regulated institutions.

Reportedly, there is active hiring of new staff and loading up on “mortgage experts” to help them figure out what to do with the whole mortgage loans and mortgage backed securities which they now possess or soon will.

Here’s hoping someone in the Obama Administration discourages this duplication and reminds the bureaucrats that they have access to several thousand existing employees--sitting in the offices of Fannie Mae and Freddie Mac--who do and have done this very job and who could help each of those agencies, without the latter hiring scads of new employees.

Save money and contract or otherwise use the thoroughly underutilized former GSE employees!

How long? How long?

John Reich has announced his early departure from the Office of Thrift Supervision (OTS).

When will Jim Lockhart get the word that his presence is no longer desired? Rumors of a successor to Lockhart’s FHFA job turned up last week; a certain former Delaware state official was identified as a possible candidate.

Will Lockhart vent and fire some/one of his senior staff before he leaves, as has been rumored for weeks?

If any of you FHFA execs are on the outs with Mr. Lockhart, I wouldn’t stay away from your desk too long. You could return and find it and you gone.

If bad things do happen, I heard that FDIC is hiring lots of mortgage types. That’s the good news, the bad is that Ms. Bair might insist that you know something about the mortgage business!

Fannie and Freddie

Reportedly, Freddie Mac has borrowed $13 Billion from the US Treasury, already, and recently has asked for about $35 billion more. Fannie Mae has now asked for its first $10 billion in Treasury financial assistance.

Who knows how much money they will require from the reportedly $100 billion that Hank Paulson’s Treasury “set aside” for each of them. But the “vig” alone on the announced needs--at 10% per annum which was the negotiated term--is a billion dollars in 2009 for Fannie and up to $5 billion for Freddie, without any reduction in principal??!!

Where do the former GSEs go to get some debt relief/restructuring, China’s central bank?

Maloni 2-17-2009

Tuesday, February 10, 2009

The Psychology of Stimulus

“Repent. The end is near!”

No, Sen. Dick Shelby (R-Ala.) didn’t carry that sign with him on the Hill when he roared about what a mistake it would be to pass the Obama stimulus legislation. Shelby just engaged in exaggerated rhetoric and hit the traditional Republican bromides about financially overtaxing our children and the risk to future generations.

He’s fortunate that, as he spoke, his nose didn’t grow or that he didn’t turn to stone.

I shouldn’t be amazed at that behavior from a man who never saw a borrowed federal dollar (covered with red ink) going to Alabama that he didn’t like, but I was. Also, I didn’t hear too much of that talk from Shelby—and none of the “walk”—when “W” was in office and consistently hitting deficit records.

I picked out Shelby only because he was easy. But the hot air, foolishness, tall tales and just plain lies one heard on Capitol Hill the past week, from both sides of the Hill—mainly from GOP obstructionists--made me wonder if those folks really are listening to the public.

Congress’ phone lines are being swamped; they are receiving record mail and emails; and newscasts and newspapers lead with stories about the bad economy. The American people want to see Congress pass something and to do so now.

Economists of all political stripes seem to agree that more crafted federal spending mixed with fiscal relief, tax cuts, can stimulate the economy.

But, some congressional Nero’s seem to prefer violin practice.

Most people understand that eventually we are going to have to pay this mammoth financial “butcher’s bill.” The right kind of "stimulus" spending, oversight, and governing will produce a robust jobs rich economy that will make that task far easier.

By the time most read this blog, the Senate will be finishing its work and approve legislation. Then the all important conference will start to iron out the differences between the House and Senate passed “stimulus” bills.

The macro issues have been decided. The knit picking is on smaller stuff, which the Republicans don’t have the votes to stop but on which they will hector and threaten to employ their “41 vote" club to smite, if they don't get their way.

What is disheartening to me is that so many congressional “stimulus opponents” seem to be ignorant of the national psyche. The public is frightened and worried and they want their elected representatives to do something quickly.

The American people are telling Congress, "Stop your posturing and approve the new government spending. The sooner you do the sooner it gets into the system and the sooner it begins to work? Whatever legislation President Obama signs into law will lift our economy as well as remove some of our national gloom."

The Washington Post

What is with the Post and their news coverage of Fannie Mae and Freddie Mac?

Unless the paper can pillory one or both of the former GSEs, they seem, to ignore them, even with regard to recent history.

In a Sunday, Feb. 8 article, discussing how the federal government can aid financial institutions, the two Post reporters discussed “nationalization” and went onto write, “The most recent domestic example was the July (2008) nationalization of Indy Mac Bancorp, a California mortgage lender.”

Hello. That might come as news to the officers, employees, and investors of Fannie Mae and Freddie Mac which were “Paulsoned” last December, when the Treasury Secretary –using fresh, brand new federal authority in the TARP law--decided to take over Fannie and Freddie, fire their senior officers, disband their boards, dilute their private ownership, and turn over their day to day control to their new federal regulator, the Federal Housing Finance Agency FHFA).

A few weeks later, the Bush Administration—before leaving office—named new 10 member boards for each “agency”—and then waived bye-bye.

I am sure that the Post’s official dictionary has some caveats to its definition of “nationalization,” but those people who lost their investments, lost their jobs, and saw the nation’s secondary mortgage market structure savaged--merit a mention--might think differently about what was the most recent example of a nationalized financial institution.

How about just a mention because this “nationalization” carnage was “local,” in the Post’s (dwindling) readership market, affecting people and families who pay taxes in DC, Maryland, and Virginia?

Fannie Mae and Freddie Mac Salaries, Oops?

I don't know which Bush Administration official talked Herb Allison (Fannie) and David Moffett (Freddie) into assuming “leadership” of these newly acquired federal entities. But the two execs were offered million dollar salaries to do so.

Yet, last week the Obama Administration announced that any financial institution accepting Treasury bailout funds could only pay their top officials no more than $500,000.

Since, Freddie, first, and now Fannie has signaled its need for a Treasury cash infusion, does that mean Allison and Moffett get a 50% comp “haircut?”

Jim Lockhart, in Las Vegas?

Why did Jim Lockhart go all the way to Las Vegas to address a securitization group? What’s wrong with teleconferencing?

Doesn’t any industry group which parties there, I mean conferences in Vegas, get sullied?

When will the new Administration seek Lockhart’s “resignation?”

Maloni 2-10-2009

Tuesday, February 3, 2009

Pittsburgh and the President

Hail Super Steelers!!

The Pittsburgh Steelers won Sunday’s Super Bowl and prevailed in an exciting—maybe the most exciting game—in SB history. Pittsburgh won its sixth Super Bowl championship, a feat matched by no other professional football team.

The football Gods almost played a cruel trick on new Steelers’ fan, President Barack Obama. They almost let an upstart and very courageous Arizona Cardinals team win that dramatic contest, but the Steelers roared back in the last two minutes to set the world correctly on its axis and prevail, 27-23.

The relationship between President Obama and Dan Rooney, current owner of the Steelers--a franchise which has been in his family’s hands since his father, the late Art Rooney Sr., founded the team in 1933--began when Dan Rooney, lifelong Republican, announced his support for the candidate Barack Obama in 2008 and campaigned heavily for him in western Pennsylvania and Ohio, two key states in the Obama presidential victory.

So, when earlier last week, Obama--a lifelong Chicago sports fan--announced that he was backing the Steelers in the Super Bowl, I am sure that he was giving back to Mr., Rooney some of the support that Rooney showed Obama before last year’s election.

However, if you believe in sports superstitions—and who among us doesn’t—Washington Redskins lore has it that when the Redskins are defeated in their game just before the quadrennial elections, a Democrat will win the White House.

Not only did the Skins get skunked 23-6 last Nov. 3--generating headlines about what it meant for candidate Obama’s chances--but the team delivering the beating was the Pittsburgh Steelers.

There have been some reports suggesting Mr. Rooney might be the President’s Ambassador. While, it is possible, Rooney likes to keep “hands on” his Steelers, which won’t be easy from Dublin.

Wrong Headed GOP Stimulus Grief

I think the House GOP is making a huge political mistake by denying President GOP votes for his stimulus package.

Something needs to be done and soon to jumpstart the economy (Psst. Someone should say something to all of those commercial banks!) and--by squeezing their lips and withholding their support for the President--it won't be faces of the House Republicans that will turn blue, it will be many of their congressional districts.

By any measure President Obama is a popular guy, right now, and House Minority Leader John Boehner is wishing and hoping that the President’s efforts fail, so the Republicans can say, "See, we told you so."

But chances are that some/much/all of the stimulus will produce results and then those R’s will wail something else about, "Big government. We didn’t mean that all of it was bad, just parts of it, blah, blah, blah."

We just had eight years of GOP big government spending and control, which most of those Hill Republicans suckled and cuddled. They were in charge for six of Bush's eight years of power and supped like pigs at a trough, when all but the wealthy seemed to do poorly. The public’s 2008 votes showed that.

Hypocrisy is easy to find among politicians, but it's massively present in the House GOP camp these days.

Tom Daschle

One of the best guys in either party called his HHS nomination quits and did the smart thing for himself and for President Obama.

Having made some type of mistake on his taxes, Daschle, who numbers D’s and R’s alike among his many admirers, realized that he would be a distraction to the President’s agenda and grist for Obama’s political enemies, so he pulled the plug on his appointment.

The President was fortunate that Tom Daschle “got it.” Tim Geitner didn’t and despite his approval, because of his own tax matters, Geitner should have stepped aside and made room for another, Larry Summers, Paul Volcker, or whomever else President Obama has in his economic corner.

Obama has set a high standard for those who will work in his Administration and, more importantly, he campaigned on it and people expect him to follow through on those campaign promises.

He acknowledged an error with the Daschle nomination and life will go on.

Post Front Page News??

The Washington Post just trumpeted on Page 1 that many banks, which have been receiving Treasury funds, have not been making loans with that money. Hello, is anyone home on 15th Street??

Your op-ed pages have been filled with this fact, where have the news pages been?

Good for the GOP!

Michael Steele was an obvious choice to lead the Grand Old Party’s National Committee.

I hope the RNC just isn’t dressing windows in electing a black man to its top job.

Some people claimed that was the situation three years ago, when the Pittsburgh Steelers named Mike Tomlin their head coach. I’ve just written about that history. And, some people claimed that was the situation when the Democrats picked Barack Obama to lead their party and I’ve written about that.

So, maybe the Republicans are getting the message. It’s about time. The sooner they join the 20th century (my GOP expectations of progress are low!!), the better off the nation will be. The GOP still is a party of the south and of blue haired old men and ladies. The next major Republican event that truly is racially diverse will be their first.

Go ahead Mr. Steele create your art, you have plenty of canvas on which to work.

Many Thanks to Former Colleagues

Former Fannie colleague Gwenn Hibbs, called my attention to an article written by Susan Woodward and Robert Hall, in the current RGE Monitor, which makes the case far better than I why the federal government should maintain Fannie Mae and Freddie Mac in their secondarymarket investor role. The link is below.

Of course, if the federal government is going to become the new mortgage market investor, you won’t need any private investors and only those primary marker originators necessary to write the new government loans.

But, if we ever hope to have a vibrant “conventional mortgage market,” again, with private investors and long term fixed rate financing, the Obama Administration and the Congress might want to carefully read Ms. Woodward and Mr. Hall’s arguments.

Serious mortgage market observers understand why long term fixed rate financing sits in the balance. And, it doesn’t hurt to remind policy makers and those who watch policy being made that most of the world’s industrialized nations do not have long term fixed mortgage financing in their mortgage markets.

The American public prefers 15, 30, and even 40 year financing and those folks also vote.

Maloni 2-3-2009