Why is Ed DeMarco still employed as the acting director of the Federal Housing Finance Agency (FHFA), the ostensible federal regulator for Fannie Mae and Freddie Mac?
I note “ostensible,” because DeMarco, like his immediate predecessors, is taking his orders from the Administration in power, but DeMarco is and always has been a Republican. Clank!
He has been a Fannie and Freddie antagonist, from his time at the Bush Treasury. Clank!
Yet, he is opining regularly on GSE policy, allowing those uninformed to write about his pronouncements as if he really has some control and influence.
For the Obamaites, Fannie/Freddie service is considered politically heinous, since they refuse to choose any ex-GSE employee for a job which requires Senate approval. (The one major WH appointee, with a heavy and extensive Fannie history, didn’t need Senate blessing.)
But, isn’t the ying to the yang that Fannie/Freddie bashers should be given the same back of the hand employment considerations?
If working for a GSE disqualifies you, why should hating GSEs qualify you?
DeMarco’s continued employment in this post is just another poor reflection of the Administration and how unprepared it is to use Fannie and Freddie in a more responsible way or to plan for their federal release or atomization. He should be shown the door.
There are others at FHFA who deserve similar treatment, but I suspect that they have burrowed into the infrastructure and probably gotten themselves “civil servant career status,” making them impossible to blow away. However, a properly motivated Administration still could make major personnel changes that would improve the regulatory product.
Why torture the companies with the Mickey Mouse FHFA regulatory team featuring a guy at the top who spent part of his career trying to neuter them?
Last week DeMarco suggested that Fannie and Freddie should cease buying loans for their portfolios.
Institutional investors across the world are cutting back on their fixed income purchases, who is going to buy all of these MBS, unless they are deeply discounted or enhanced by some other part of the federal government? Is this really the time, Mr. DeMarco, to advcoate no GSE portfolio pruchases?
DeMarco then took the dais at the Women in Housing Finance luncheon to sing the praises of the Federal Home Loan Bank System, opining that the system “worked” during the crisis.
It may have and I am happy for my friends who work there or represent the Banks and the institutions and people they helped. However, anybody who understands the Bank System understands the trouble those regional banks face, but I guess Ed wasn’t going to criticize them, since he’s their regulator.
But, there still are plenty of people around town, Mr. DeMarco, who remember you—pre FHFA--as being quite antagonistic toward the Bank System (and Fannie and Freddie). You were a major critic of the Banks when Builders, Realtors, their members and the small business community--to whom they lent money--loved them.
You don’t want to say anything good about Fannie and Freddie—despite the Administration’s reliance on them--because that’s near political suicide, but you are complimentary regarding the Bank System, having been very negative in past years.
Which Mr. DeMarco should we believe, if either?
The Fed Bows Out of the Mortgage Securities Business?
I want to share an interesting observation, which comes from a very smart mortgage finance guy, regarding the Fed’s recent announcement to back out of its mortgage security purchases business and begin selling same.
He wrote:
The book is not closed on the Fed's GSE debt and MBS holdings. The Fed is scheduled to stop purchasing these securities at the end of March. It will then have to start working off its $1.2 trillion in GSE securities. It faces an interesting conflict of interest since its major risk of losses is an increase in interest rates which would reduce the value of the securities (though it could avoid any such losses by holding the securities until they pay off). It presumably does not face credit risk since the GSEs will cover any such losses with backup from the Treasury.
This is a fascinating fact by itself, but the Fed, unlike others, will “make money” on the F&F security sales, only because the Treasury--picking up any GSE red ink--will make the central bank whole.
Hearings to Replace Fannie and Freddie
If anyone on the two Banking Committees or their staffs read this blog, it should begin to open your eyes to the real world of mortgage making and “agency securities,” how they really are being handled by the Fed and Treasury and a world of other matters which I am sure most of you won’t comprehend when it comes your time to “abolish Fannie and Freddie” exercise.
How many of you understand the relationship my colleague notes in describing why a mortgage security portfolio might drop in value when rates go up, not because families default on the pooled loans?
How about “TBA,” the “to be assembled” mortgage pools, where prices for pre- sold mortgage securities set the rates that consumers pay for their home loans, what happens to the TBA when F&F are abolished?
Your biggest task will be to maintain equal access to low and moderate income families, who experience shows will be shut out if nobody in the primary or secondary mortgage markets are given that task by statute. And I don’t mean the completely worthless Community Reinvestment Act, which banks have fought for years and has the same impact as putting a band aid on a major cut to the jugular vein.
Next will be how to maintain the “conventional 30 year fixed rate mortgage,” which will become history unless you create a believable implicit Federal guarantee for them.
I don’t care who offers to originate them. If there is a federal guarantee involved, then the loan isn’t “conventional” or the money private.
I don’t think the American public will have any faith in Wall Street or large commercial bank promises for years to come, following the recent financial debacle. So, as you go through your “abolish” exercises, keep some of these issues in mind, although there are many more which you’re hearing witnesses will reveal.
And, if you are a Democrat, maybe you can answer, “Why is Ed DeMarco still holding that FHFA job?”
Maloni, 2-22-2010
Why is Ed DeMarco still employed as the acting director of the Federal Housing Finance Agency, the ostensible federal regulator for Fannie Mae and Freddie Mac?
I note “ostensible,” because DeMarco, like his immediate predecessors, is taking his orders from the Administration in power, but DeMarco is and always has been a Republican. Clank!
He has been a Fannie and Freddie antagonist, from his time at the Bush Treasury. Clank!
Yet, he is opining regularly on GSE policy, allowing those uninformed to write about his pronouncements as if he really has some control and influence.
To the Obamaites, Fannie/Freddie service is considered politically heinous, since they refuse to choose any ex-GSE employee for a major job which requires Senate approval. (The one major WH appointee, with a heavy and extensive Fannie history, didn’t need Senate blessing.)
But, isn’t the ying to the yang that Fannie/Freddie bashers should be given the same back of the hand employment considerations?
If working for a GSE disqualifies you, why should hating GSEs qualify you?
DeMarco’s continued employment in this post is just another poor reflection of the Administration and how unprepared it is to use Fannie and Freddie in a more responsible way or to plan for their federal release or atomization. He should be shown the door.
There are others at FHFA who deserve similar treatment, but I suspect that they have burrowed into the infrastructure and probably gotten themselves “civil servant career status,” making them impossible to blow away. However, a properly motivated Administration still could make major personnel changes that would improve the regulatory product.
Why torture the companies with the Mickey Mouse FHFA regulatory team featuring a guy at the top who spent part of his career trying to neuter them?
Last week DeMarco suggested that Fannie and Freddie should cease buying loans for their portfolios.
Institutional investors across the world are cutting back on their fixed income purchases, who is going to buy all of these MBS, unless they are deeply discounted or enhanced by some other part of the federal government? Is this the right time, Mr. DeMarco, to suggest no more purchases?
DeMarco then took the dais at the Women in Housing Finance luncheon to sing the praises of the Federal Home Loan Bank System, opining that the system “worked” during the crisis.
It may have and I am happy for my friends who work there or represent the banks and the institutions and people they helped. However, anybody who understands the Bank System understands the trouble those regional banks face, but I guess Ed wasn’t going to criticize them, since he’s their regulator.
But, there still are plenty of people around town, Mr. DeMarco, who remember you—pre FHFA--as being quite antagonistic toward the Bank System (and Fannie and Freddie). You were a major critic of the Banks when Builders, Realtors, their members and the small business community--to whom they lent money--loved them.
You don’t want to say anything good about Fannie and Freddie—despite the Administration’s reliance on them--because that’s near political suicide, but you are complimentary regarding the Bank System, having been very negative in past years.
Which Mr. DeMarco should we believe, if either?
The Fed Bows Out of the Mortgage Securities Business?
I want to share an interesting observation, which comes from a very smart mortgage finance guy, regarding the Fed’s recent announcement to back out of its mortgage security purchases business and begin selling same.
He wrote:
The book is not closed on the Fed's GSE debt and MBS holdings. The Fed is scheduled to stop purchasing these securities at the end of March. It will then have to start working off its $1.2 trillion in GSE securities. It faces an interesting conflict of interest since its major risk of losses is an increase in interest rates which would reduce the value of the securities (though it could avoid any such losses by holding the securities until they pay off). It presumably does not face credit risk since the GSEs will cover any such losses with backup from the Treasury.This is a fascinating fact by itself, but the Fed will “make money” on the F&F security sales, only because the Treasury--picking up any GSE red ink--will make the central bank whole.
Hearings to Replace Fannie and Freddie
If anyone on the two Banking Committees or their staffs read this blog, it should begin to open your eyes to the real world of mortgage making and “agency securities,” how they really are being handled by the Fed and Treasury and a world of other matters which I am sure most of you won’t comprehend when it comes your time to “abolish Fannie and Freddie” exercise.
How many of you understand the relationship my colleague notes in describing why a mortgage security portfolio might drop in value when rates go up, not because families default on the pooled loans?
How about “TBA,” the “to be assembled” mortgage pools, where prices for pre- sold mortgage securities set the rates that consumers pay for their home loans, what happens to the TBA when F&F are abolished?
Your biggest task will be to maintain equal access to low and moderate income families, who experience shows will be shut out if nobody in the primary or secondary mortgage markets are given that task by statute. And I don’t mean the completely worthless Community Reinvestment Act, which banks have fought for years and has the same impact as taking an aspirin to stop a major arterial cut.
Next will be how to maintain the “conventional 30 year fixed rate mortgage,” which will become history unless you create a believable implicit Federal guarantee for them.
I don’t care who offers to originate them. If there is a federal guarantee involved, then the loan isn’t “conventional” or the money private.
I don’t think the American public will have any faith in Wall Street or large commercial bank promises for years to come, following the recent financial debacle. So, as you go through your “abolish” exercises, keep some of these issues in mind, although there are many more which you’re hearing witnesses will reveal.
And, if you are a Democrat, maybe you can answer, “Why is Ed DeMarco still holding that FHFA job?”
Maloni, 2-22-2010
Monday, February 22, 2010
Wednesday, February 17, 2010
All yee, all yee in Free (Part 2)
In Monday’s, first piece of this blog, I established why—in my opinion—the Congress has already created a very efficient and fair secondary mortgage market, around the services of Fannie Mae and Freddie Mac-- and why, following some regulatory changes to their capital structure, portfolio limits, and slight mission change, the two could help resurrect the nation’s conventional mortgage market, far smoother and far faster than anything totally new which Congress could create in the next few years.
It’s an uphill slog convincing the Congress of this because of all of the misinformation about what happened in 2007 and 2008 to the GSEs, but it’s a case that Congress needs to hear and understand.
I also argued that the GSE regulatory regime needs remodled, primarily with new personnel. The Federal Housing Finance Agency (FHFA and its predecessor OFHEO) never has been subject to this kind of efficiency audit and needs to be if Congress wants it to do the job of properly overseeing Fannie and Freddie or something new created by statute.
I ended the Monday segment asking observers to look at the years 2002-2007 as the best and worst of the GSEs and using that microcosm, decide what mortgage market changes were necessary.
Let me short hand those years for you and point out some major issues.
Fannie and Freddie didn’t create themselves. They were designed by Congress (with that model being extended by Democrat and Republican Congresses and Administrations for over 35 years) to fund their own operations, employing private market discipline as made and to provide a secondary mortgage market for low moderate and middle income families, meaning buy mortgage loans from banks, thrifts, mortgage companies and other primary market lenders, which served that demographic.
Until the 1992 law which created the new “risk based capital” rules and OFHEO, HUD oversaw (and has for the past 18 years) achievement of the company's "housing goals," most of which now have been relaxed in with the GSEs in "conservatorship."
Before the 1992 statute, 30% of the GSE business had to serve that group, and then the bill made that 40% with HUD given authority to increase it. Andrew Cuomo, Bill Clinton's HUD Secretary and current NY Attorney General, pressured Fannie and Freddie to do “more” and gradually raised that number so that a whopping 55% of their business volumes had to serve “goals business.”
George W. Bush did his share, too, to try and shackle Fannie and Freddie when his HUD Secretary dramatically shrunk which financed units could be counted towards those goals.
But the key point is that all of the low and moderate income mortgage finance did not financially injure the GSEs. The low-mod, housing loans performed almost as well as the remainder of Fannie's business, which served a higher income cohort but which still fit the low-mod mission obligation.
(Question for the Congress? What conventional lenders—under the law--are responsible for lending to low and moderate income families and people of color, refinancing them, or restructuring their bad loans? Now that Fannie’s and Freddie’s goals have been relaxed and the two companies hobbled, the large commercial banks and their subsidiaries haven’t stepped in, which mean those folks aren’t being supported. See this past Sunday’s Washington Post front page. Link follows.)
(http://www.washingtonpost.com/wp-yn/content/article/2010/02/13/AR2010021303745.html?hpid=topnews)
Wall Street Brings Bad Times for the GSEs and the World
In the early years of this decade, Wall Street got directly into the mortgage origination business--in a major way--competing with the GSEs. The “Street firms” (large investment banking houses and commercial banks) figured they could make more money by excluding Fannie and Freddie and their proven underwriting technology and systems, so Wall Street employed an army of mortgage brokers who wrote mortgage applications for thousands who never would have qualified under the GSE system. But the brokers got paid for every loan they produced, so quantity, not quality, became their imperative.
The Street investment banking firms wrested from the GSEs a large segment of the mortgage market, turning those loans into "Private Label Securities" (PLS), broke those bonds into hundreds of component boutique pieces, selling them to institutional investors throughout the world.
What brought the GSEs down was an elixir that they didn't invent or invite, yet it was a drink which they supped heavily. The business mistakes that Fannie and Freddie made were decisions by their former CEOs (Dan Mudd and Dick Syron--worried about losing market share and revenue to Wall Street--to buy those doomed and poorly underwritten, high yielding PLS securities for their mortgage portfolios.
They were a financial time bomb.
It wasn't the GSE structure or low-mod housing mission which brought them down, but it was acquiring the toxic "subprime" assets--the very name of which indicates their below market quality--compared to the traditional Fannie and Freddie purchase of "prime" loans. The PLS subprime mortgage loans were so poorly underwritten by the Street's brokers that the slightest economic downturn started an avalanche of missed payments and ultimate defaults, which swamped the originating guarantors and their PLS investors, some of the strongest financial names in the world.
Low Income Loans Didn’t Burn Fannie and Freddie
Look closely. Very little of the “prime” mortgages and securities owned by the GSEs went bad. Very much of the PLS subprime did and still loses money.
Congress shouldn’t waste time arguing about the low-mod mission. Nothing about it was unreasonable, except the overly large percentage of business demanded, which is why I suggest trimming it by 20% or so, not doing away with it.
Fannie and Freddie showed that obligatory low-income mortgage lending can be done and was done, quite efficiently. The GOP will howl and insist helping the poor was part of the GSE problem. It wasn't and they shouldn't be given standing with that corrosive rhetoric.
Severe individual sanctions were meted out to the former GSE officials who made the colossally poor PLS purchase decisions. Fannie's and Freddie's common stock fell the $60's to about a dollar, where it sits today, crushing their investors. Other GSE employees were fired, embarrassingly and publicly, and some hounded from jobs, with their reputations damaged, income and benefits all lost.
But previous managerial failings and human shortcomings at Fannie and Freddie shouldn't cause Congress to ignore the nation's primary and secondary mortgage system's strong points.
I've suggested a way that Congress and the Administration can responsibly rebuild the nation's mortgage finance system and avoid making themselves subject of ridicule or even voter hostility for laboring long, angrily, and producing a nothing burger.
I hope someone is listening on the Hill and downtown.
Maloni, 2-17-2010
(Here’s a strong piece by Paul Jackson, in Housing Wire, that was sent to me just after I posted Part 1 of this blog.)
http://www.housingwire.com/2010/02/15/plan-b-for-the-gses-there-might-not-even-be-a-plan-a/
It’s an uphill slog convincing the Congress of this because of all of the misinformation about what happened in 2007 and 2008 to the GSEs, but it’s a case that Congress needs to hear and understand.
I also argued that the GSE regulatory regime needs remodled, primarily with new personnel. The Federal Housing Finance Agency (FHFA and its predecessor OFHEO) never has been subject to this kind of efficiency audit and needs to be if Congress wants it to do the job of properly overseeing Fannie and Freddie or something new created by statute.
I ended the Monday segment asking observers to look at the years 2002-2007 as the best and worst of the GSEs and using that microcosm, decide what mortgage market changes were necessary.
Let me short hand those years for you and point out some major issues.
Fannie and Freddie didn’t create themselves. They were designed by Congress (with that model being extended by Democrat and Republican Congresses and Administrations for over 35 years) to fund their own operations, employing private market discipline as made and to provide a secondary mortgage market for low moderate and middle income families, meaning buy mortgage loans from banks, thrifts, mortgage companies and other primary market lenders, which served that demographic.
Until the 1992 law which created the new “risk based capital” rules and OFHEO, HUD oversaw (and has for the past 18 years) achievement of the company's "housing goals," most of which now have been relaxed in with the GSEs in "conservatorship."
Before the 1992 statute, 30% of the GSE business had to serve that group, and then the bill made that 40% with HUD given authority to increase it. Andrew Cuomo, Bill Clinton's HUD Secretary and current NY Attorney General, pressured Fannie and Freddie to do “more” and gradually raised that number so that a whopping 55% of their business volumes had to serve “goals business.”
George W. Bush did his share, too, to try and shackle Fannie and Freddie when his HUD Secretary dramatically shrunk which financed units could be counted towards those goals.
But the key point is that all of the low and moderate income mortgage finance did not financially injure the GSEs. The low-mod, housing loans performed almost as well as the remainder of Fannie's business, which served a higher income cohort but which still fit the low-mod mission obligation.
(Question for the Congress? What conventional lenders—under the law--are responsible for lending to low and moderate income families and people of color, refinancing them, or restructuring their bad loans? Now that Fannie’s and Freddie’s goals have been relaxed and the two companies hobbled, the large commercial banks and their subsidiaries haven’t stepped in, which mean those folks aren’t being supported. See this past Sunday’s Washington Post front page. Link follows.)
(http://www.washingtonpost.com/wp-yn/content/article/2010/02/13/AR2010021303745.html?hpid=topnews)
Wall Street Brings Bad Times for the GSEs and the World
In the early years of this decade, Wall Street got directly into the mortgage origination business--in a major way--competing with the GSEs. The “Street firms” (large investment banking houses and commercial banks) figured they could make more money by excluding Fannie and Freddie and their proven underwriting technology and systems, so Wall Street employed an army of mortgage brokers who wrote mortgage applications for thousands who never would have qualified under the GSE system. But the brokers got paid for every loan they produced, so quantity, not quality, became their imperative.
The Street investment banking firms wrested from the GSEs a large segment of the mortgage market, turning those loans into "Private Label Securities" (PLS), broke those bonds into hundreds of component boutique pieces, selling them to institutional investors throughout the world.
What brought the GSEs down was an elixir that they didn't invent or invite, yet it was a drink which they supped heavily. The business mistakes that Fannie and Freddie made were decisions by their former CEOs (Dan Mudd and Dick Syron--worried about losing market share and revenue to Wall Street--to buy those doomed and poorly underwritten, high yielding PLS securities for their mortgage portfolios.
They were a financial time bomb.
It wasn't the GSE structure or low-mod housing mission which brought them down, but it was acquiring the toxic "subprime" assets--the very name of which indicates their below market quality--compared to the traditional Fannie and Freddie purchase of "prime" loans. The PLS subprime mortgage loans were so poorly underwritten by the Street's brokers that the slightest economic downturn started an avalanche of missed payments and ultimate defaults, which swamped the originating guarantors and their PLS investors, some of the strongest financial names in the world.
Low Income Loans Didn’t Burn Fannie and Freddie
Look closely. Very little of the “prime” mortgages and securities owned by the GSEs went bad. Very much of the PLS subprime did and still loses money.
Congress shouldn’t waste time arguing about the low-mod mission. Nothing about it was unreasonable, except the overly large percentage of business demanded, which is why I suggest trimming it by 20% or so, not doing away with it.
Fannie and Freddie showed that obligatory low-income mortgage lending can be done and was done, quite efficiently. The GOP will howl and insist helping the poor was part of the GSE problem. It wasn't and they shouldn't be given standing with that corrosive rhetoric.
Severe individual sanctions were meted out to the former GSE officials who made the colossally poor PLS purchase decisions. Fannie's and Freddie's common stock fell the $60's to about a dollar, where it sits today, crushing their investors. Other GSE employees were fired, embarrassingly and publicly, and some hounded from jobs, with their reputations damaged, income and benefits all lost.
But previous managerial failings and human shortcomings at Fannie and Freddie shouldn't cause Congress to ignore the nation's primary and secondary mortgage system's strong points.
I've suggested a way that Congress and the Administration can responsibly rebuild the nation's mortgage finance system and avoid making themselves subject of ridicule or even voter hostility for laboring long, angrily, and producing a nothing burger.
I hope someone is listening on the Hill and downtown.
Maloni, 2-17-2010
(Here’s a strong piece by Paul Jackson, in Housing Wire, that was sent to me just after I posted Part 1 of this blog.)
http://www.housingwire.com/2010/02/15/plan-b-for-the-gses-there-might-not-even-be-a-plan-a/
Monday, February 15, 2010
All yee, all yee in free!
(This is a special two-part blog, with the next segment coming in two days. I want to thank my former Fannie Mae colleague and friend, Gwenn L. Hibbs, for her collaboration and note that she still is one of the best and smartest financial lawyers in town, despite the fact that she retired a few years ago to—among other things—edit a book and work her musical magic with special needs kids.)
A Simple Fix: Fannie and Freddie Come Home!
I want to help the Congress resolve their conflicts over creating a new residential mortgage finance system. My plan also would allow the Democrat-controlled Congress working--with the White House--to succeed for themselves (read re-election), support the American people, and the world's mortgage marketplaces, where so much US mortgage money originates.
I am going to suggest to Congress a way to keep alive the long term fixed rate mortgage with semi-private capital and later with totally private money; earn the love/support of their constituents; reinvigorate the national real estate market by encouraging banks, thrifts, and mortgage companies to make responsible home loans to American families; keep alive a national secondary mortgage market, so local/national lenders are not burdened by mortgage risk; strengthen mortgage market regulation; serve low and moderate middle income families, with homeownership aspirations; and save yourselves the anguish of untold volumes of hot air on Capitol Hill.
Admittedly, this option has a few minor drawbacks for the most popular congressional approaches to post-Crisis reform, i.e., playing verbal “Hangman.”
Many Members also might have to sidestep the rivers of Wall Street money sloshing through Congress right now to protect the status quo for "Goldmine Sachs," Citibank, AIG and the other "Even Bigger to Fail" mega banks created in the panic of 2009. That is a status quo in which the housing sector remains incredibly weak; millions of underwater borrowers are likely to walk away from their loans; and even more millions will experience foreclosures over the next two years as investors, servicers and lenders sit on their hands rather than participate in principal reduction or mortgage modification.
Congressmen and Senators might also have to sacrifice the titillation of holding endless hearings designed to “Swift Boat” informed debate. Sophomoric insult fests about the GSEs' implosion -- tailored for evening sound bites for the Tea Party crowd -- might have to yield to consideration of actual facts. And some would be forced to dial down the blood lust quotient of recent public statements, like the wish to "abolish Fannie and Freddie" as well as the unidentified House Democratic staffer who promised many opportunities for the majority party to excoriate Fannie and Freddie.
(Have the Democrats stolen a page from the GOP and now resort to desecrating the graves of the formerly helpful, but now commercially dead?)
Restore Rational, Professional Oversight.
Here is the how-to guide to a much better prospect for a housing recovery and more stable economy overall.
The White House--because at the end of the day, this is a political issue-- needs to direct Fannie Mae and Freddie Mac, currently operating under Treasury’s ersatz and failing form of "conservatorship," to reestablish their individual mortgage underwriting standards and begin pricing mortgage risks appropriately. Require the two companies to repay the federal government what Uncle Sam has lent them, at a reasonable interest rate, over the next 30 years (just like a mortgage). Congress should ask why the GSEs are now paying interest rates of 10 percent on their government loans while the TARPsters like Goldman and Citibank got a 5 percent loan rate.
The Administration should agree to sponsor F&F debt for the next two years or so (in effect letting them borrow as GSEs), reduce their "housing goals" to 35% or 40% of their annual business volumes; increase their capital requirements (slightly); limit the two companies’ portfolio growth; direct the Fannie and Freddie managements and unload the garbage securities in their portfolios, as expeditiously as possible.
Then the White House should step up and fire most of the current Federal Housing Finance Administration regulatory staff and fill those posts with responsible professional examiners and mortgage finance/securities professionals, who know their trade and have not built careers undermining the former GSEs.
Deconstruct the Myth of Perverse Incentives
"Oh, the Congress can't do that. Why, it would reward....Who, what? Who benefits if Congress thoughtfully resurrects Fannie and Freddie, with limits and controls as mentioned?
In my plan, the American people, the national mortgage finance system, and the national treasury would be the beneficiaries and get the rewards. The GSEs would again be self-supporting and tax-paying citizens, rather than the source of trillions added to the federal balance sheet, if we "abolish" them but add them to the budget to avoid a “Chinese fire drill” fiscal panic.
Let's wake up and acknowledge that the Federal government is now funding and running the nation's entire mortgage market and not very well. That is not a sustainable or efficient model.
The banks and other lenders won't make mortgages, unless the decks are so stacked in their favor that they can't possibly lose money. And, still the markets are moribund, save what a handcuffed Fannie and Freddie are bringing.
Yep, some GSE employees could enjoy business success and earn remuneration, under my scheme. But, so what, someone has to do the hard work and why not people who know how to get it done, if properly incented? Congress should never underestimate the power of Fannie and Freddie to drive primary market lending.
Please, Congress, try and remember that the old GSE bad guys are gone; the operations now are being run (wastefully) by government employees, not company workers.
Our nation’s single family and multifamily markets are suffering. The former GSEs aren't making enough money to pay back the government because they aren't being allowed to bring any entrepreneurial skills to the products and services they offer. Better regulation can manage congressional concerns about excesses.
Fact, Facts, Facts
The Congress should examine what went right at the mortgage giants and what caused the wheels to come off and encourage the first and protect against the second.
Go back a few years--say 2002-2007--to see the best and worst if you look closely--assuming you understand why they were created and what Congress expected the GSEs to do and how--you'll quickly see the shortcomings (few but obvious) and the strengths, many and super beneficial.
In that epoch, you'll find close to the GSEs zenith and their nadir and probably easily can point to the management errors and separate those from the structural strengths. If you're sophisticated enough, you'll also see the regulatory weakness, few of which were improved when Congress recently transformed the Office of Federal Housing Enterprise Oversight (OFHEO) and replaced it with the Federal Housing Finance Agency (FHFA).
You can change names and organizational boxes but when you leave the same incompetent regulatory officials in place, you reap what you sow A skunk, by any other name, still is a polecat!
(To be continued later this week.)
Maloni, 2-15-2010
A Simple Fix: Fannie and Freddie Come Home!
I want to help the Congress resolve their conflicts over creating a new residential mortgage finance system. My plan also would allow the Democrat-controlled Congress working--with the White House--to succeed for themselves (read re-election), support the American people, and the world's mortgage marketplaces, where so much US mortgage money originates.
I am going to suggest to Congress a way to keep alive the long term fixed rate mortgage with semi-private capital and later with totally private money; earn the love/support of their constituents; reinvigorate the national real estate market by encouraging banks, thrifts, and mortgage companies to make responsible home loans to American families; keep alive a national secondary mortgage market, so local/national lenders are not burdened by mortgage risk; strengthen mortgage market regulation; serve low and moderate middle income families, with homeownership aspirations; and save yourselves the anguish of untold volumes of hot air on Capitol Hill.
Admittedly, this option has a few minor drawbacks for the most popular congressional approaches to post-Crisis reform, i.e., playing verbal “Hangman.”
Many Members also might have to sidestep the rivers of Wall Street money sloshing through Congress right now to protect the status quo for "Goldmine Sachs," Citibank, AIG and the other "Even Bigger to Fail" mega banks created in the panic of 2009. That is a status quo in which the housing sector remains incredibly weak; millions of underwater borrowers are likely to walk away from their loans; and even more millions will experience foreclosures over the next two years as investors, servicers and lenders sit on their hands rather than participate in principal reduction or mortgage modification.
Congressmen and Senators might also have to sacrifice the titillation of holding endless hearings designed to “Swift Boat” informed debate. Sophomoric insult fests about the GSEs' implosion -- tailored for evening sound bites for the Tea Party crowd -- might have to yield to consideration of actual facts. And some would be forced to dial down the blood lust quotient of recent public statements, like the wish to "abolish Fannie and Freddie" as well as the unidentified House Democratic staffer who promised many opportunities for the majority party to excoriate Fannie and Freddie.
(Have the Democrats stolen a page from the GOP and now resort to desecrating the graves of the formerly helpful, but now commercially dead?)
Restore Rational, Professional Oversight.
Here is the how-to guide to a much better prospect for a housing recovery and more stable economy overall.
The White House--because at the end of the day, this is a political issue-- needs to direct Fannie Mae and Freddie Mac, currently operating under Treasury’s ersatz and failing form of "conservatorship," to reestablish their individual mortgage underwriting standards and begin pricing mortgage risks appropriately. Require the two companies to repay the federal government what Uncle Sam has lent them, at a reasonable interest rate, over the next 30 years (just like a mortgage). Congress should ask why the GSEs are now paying interest rates of 10 percent on their government loans while the TARPsters like Goldman and Citibank got a 5 percent loan rate.
The Administration should agree to sponsor F&F debt for the next two years or so (in effect letting them borrow as GSEs), reduce their "housing goals" to 35% or 40% of their annual business volumes; increase their capital requirements (slightly); limit the two companies’ portfolio growth; direct the Fannie and Freddie managements and unload the garbage securities in their portfolios, as expeditiously as possible.
Then the White House should step up and fire most of the current Federal Housing Finance Administration regulatory staff and fill those posts with responsible professional examiners and mortgage finance/securities professionals, who know their trade and have not built careers undermining the former GSEs.
Deconstruct the Myth of Perverse Incentives
"Oh, the Congress can't do that. Why, it would reward....Who, what? Who benefits if Congress thoughtfully resurrects Fannie and Freddie, with limits and controls as mentioned?
In my plan, the American people, the national mortgage finance system, and the national treasury would be the beneficiaries and get the rewards. The GSEs would again be self-supporting and tax-paying citizens, rather than the source of trillions added to the federal balance sheet, if we "abolish" them but add them to the budget to avoid a “Chinese fire drill” fiscal panic.
Let's wake up and acknowledge that the Federal government is now funding and running the nation's entire mortgage market and not very well. That is not a sustainable or efficient model.
The banks and other lenders won't make mortgages, unless the decks are so stacked in their favor that they can't possibly lose money. And, still the markets are moribund, save what a handcuffed Fannie and Freddie are bringing.
Yep, some GSE employees could enjoy business success and earn remuneration, under my scheme. But, so what, someone has to do the hard work and why not people who know how to get it done, if properly incented? Congress should never underestimate the power of Fannie and Freddie to drive primary market lending.
Please, Congress, try and remember that the old GSE bad guys are gone; the operations now are being run (wastefully) by government employees, not company workers.
Our nation’s single family and multifamily markets are suffering. The former GSEs aren't making enough money to pay back the government because they aren't being allowed to bring any entrepreneurial skills to the products and services they offer. Better regulation can manage congressional concerns about excesses.
Fact, Facts, Facts
The Congress should examine what went right at the mortgage giants and what caused the wheels to come off and encourage the first and protect against the second.
Go back a few years--say 2002-2007--to see the best and worst if you look closely--assuming you understand why they were created and what Congress expected the GSEs to do and how--you'll quickly see the shortcomings (few but obvious) and the strengths, many and super beneficial.
In that epoch, you'll find close to the GSEs zenith and their nadir and probably easily can point to the management errors and separate those from the structural strengths. If you're sophisticated enough, you'll also see the regulatory weakness, few of which were improved when Congress recently transformed the Office of Federal Housing Enterprise Oversight (OFHEO) and replaced it with the Federal Housing Finance Agency (FHFA).
You can change names and organizational boxes but when you leave the same incompetent regulatory officials in place, you reap what you sow A skunk, by any other name, still is a polecat!
(To be continued later this week.)
Maloni, 2-15-2010
Monday, February 8, 2010
The Volcker Rule
Ho-hum, there they go again. Former Fed Chairman and current Obama financial advisor Paul Volcker has proposed a limitation on banks financially speculating, creating conflicts with their federally insured deposit responsibilities.
The inevitable “Why now, why us, what’s the problem?” crowd comes out and opposes it. Retiring Senate Banking Chair Chris Dodd (D-Conn) has some doubts about the idea and, naturally, Sen. Dick Shelby (R-Ala) has concerns, and the big banks have their constant doubts about codifying in law what Volcker wants.
They tweet and twitter, “Maybe give the regulators that authority, but don’t put it in statute.”
In 1992, Fannie Mae and Freddie Mac insisted that the new GSE risk-based-capital rule—which had no precedent in US financial laws--be put in statute and made very explicitly. We did not want our inexperienced regulator interpreting vague legislative directives, making a tough new law even tougher. We wanted the law clear for all to read and see, including the regulator, so if the regulator decided to take out some anger in an extreme implementing reg, the world would have easy access to the facts.
You seldom get that kind of certainty, if a statute is vague and represents just a general call to the regulator to put something in place.
Most business interests seldom want statute, seeking regulations instead, because while the risk is there for tougher regulatory treatment, regs are not laws and regulators often can be lied to, cajoled, or even threatened, out of their regulatory intent. (“If you issue that reg, we will lose our market for widgets and 10,000 Ohio workers will lose their jobs and benefits and go to bed hungry.”)
The two biggest untruths the financial regulators hear now from their regulated entities are, “We need to grow. If we can’t grow to be the biggest in the world, we won’t be able to compete with foreign financial services companies” and, “We need to pay our senior employees top dollar or we will lose them to other employers!”
Bull pucky! Haven’t we seen this show before?
Whether it is the “Volcker Rule” or any related reform, Congress should listen carefully to every commercial banker, investment banker, and financial spokesperson and then do exactly of the opposite of what they advocate.
It’s simple, no bank exec or trade association official ever will endorse anything that might limit their money making ability. Risk reduction is one of those things. Remember the Wall Street bylaw: “The greater the risk, the greater the reward.”
The path is clear, if Congress wants to do anything on the “Volcker Rule,” just head for where the banks—and their congressional apologists--say don’t go.
How much BS does it take before Congress understands that and then just does right thing?
Voters to the Congress: “Scott Brown, Scott Brown, boogah, boogah! The public is tired of you kowtowing to the banks.”
Hank Paulson, the GSEs and his book “On the Brink”
After reading Hank Paulson’s account of the takeover of Fannie and Freddie, in his new book, I didn’t come away with many insights. Maybe he’s saving them for a sequel.
At the time of the takeover, many of us thought the action re Fannie was premature and that the DC Company was in much better shape and better managed than Freddie Mac.
Paulson seems to share those views in his book, but that relative “financial strength” was meaningless, since he felt that he had to treat both companies the same and at the same time. (Son, yes you’re sick, but your sister has only a slight fever, so I am going to chop off both your heads. Goodbye.”)
His description of Fannie CEO Dan Mudd being upset and somewhat angry when he heard Paulson’s plans and a laconic somewhat relieved Freddie CEO Dick Syron, when he got the same news, comports with the differences that many of us saw at the two GSEs.
Simply stated, the Fannie board and management always was far more involved with what the company did and more dedicated to the company’s congressional housing mission. The Freddie counterparts were less so.
Before the public takeover announcement, Paulson writes of his surprise conversations with the Democratic presidential and vice-presidential candidates. First, Barack Obama called Paulson to discuss the GSE issues, and a day later when Paulson called Joe Biden. Paulson’s suggests that the two public officials were knowledgeable ,thoughtful, and incisive in their comments and questions, and offered support for what was a daunting financial and economic action.
Paulson seemed not to gain the same confidence in his conversations with Senator John McCain and Sarah Palin, who still were enjoying the positive buzz of the Palin VP announcement which on that day was barely 24 hours old.
Paulson, who very much establishes himself as the Administration’s “driver” on the takeover confirms how weak was the GSEs’ regulator, the Federal Housing Finance Agency (FHFA,) formerly the Office of Financial Housing Enterprise Oversight (OFHEO).
FHFA had just spend years, every three months, announcing how well capitalized each company was and Paulson was taking them over because—in his opinion—Fannie and Freddie lacked sufficient capital.
OFHEO/FHFA
OFHEO/FHFA was a basket case from Day 1 and never improved. Conservatives argued that the GSEs hamstrung the agencies and fought them over their budgets on the Hill. Nothing was further from the truth. I was there and I know, At Fannie, OFHEO’s budget and oversight specifically were “off limits” and we were told not to lobby the Congress on them, just to respond to congressional inquiries if asked.
IMO, the GSE regulator used its budget funds, poorly, never bringing in enough examiners and financial talent; instead they hired and kept on board a number of Fannie/Freddie foes who for years conducted a guerilla political campaign against the GSEs rather than overseeing them.
For every quality employee OFHEO/FHFA brought in, it seemed to me that they matched him or her with two slugs and a hack and it showed and still shows.
The best evidence I can offer to substantiate that the GSEs didn’t interfere with the regulatory budget (funds, BTW, which came from the companies themselves) is to note that, in every budget sent to the Hill by the Office of Management and Budget--under Democrat and Republican Administrations-- OFHEO/FHFA got exactly what the OMB sought for them, suggesting no lobbying the appropriations process and the staffing levels they supported.
We didn’t like OFHEO and their political agendas and were open about that, but we never challenged their spending requests.
The one thing Paulson mentions –beyond his personal certitude about doing in the GSEs—is how much he worried about Fannie’s (most notably) and Freddie’s political clout and their ability, at least outside the courts, to stop the Treasury action.
What a misread that was.
In 2008, by the time Paulson got the congressional authority to act (four years after I retired), Fannie--at the direction of its new CEO Dan Mudd, named in 2004—was into its third year cutting back substantially its entire external affairs team, dropping dozens of political consultants, cutting internal PR staff and in house lobbyists, and dumping major field staff who worked on grassroots efforts. Fannie long before Paulson moved was politically weaponless. Mudd wanted to change the muscular/pugnacious culture, which he felt preceded him.
The battering that the GSEs took from their business opponents, the Right, and the Bush Administration weakened the companies substantially and they could fight back if they chose to, except in court, which they never did.
That made it easy for Paulson to do what the GOP Right demanded, as well as what Russian investors wanted, the latter according to the book.
One major hole in the Paulson takeover drama—which for me raises questions about his motives--is the fact that the Obama Administration (as I suspect a McCain Administration would have found necessary) continues to utilize and rely on Fannie and Freddie.
Now that Chairman Barney Frank (D-Mass) has announced March hearings to produce a new national mortgage finance system, the public should get some insight as to why the GSEs still are required to be there, because it seems—even in their weakened and abused state—they remain the best secondary mortgage market option for the public as well as those institutions still making first mortgage loans.
So, Hank gassed them, but Fannie and Freddie still remain necessary.
The large commercial banks and other financial services behemoths, which many think can replace Fannie and Freddie, haven’t bothered to fill the void or even hint at their interest.
When a pair of institutions, being poorly run by government overseers, still cuts the mustard better than all of the faux private sector lenders (which non-Fannie and Freddie financial institutions have no tap on Uncle Sam?), those who aspire to be smart policy makers should take note.
Congress, careful what you discard with the bath water after you bathe this baby.
Maloni, 2-8-2010
(For those of you not living in the DC area, let me assure that this past weekend’s snow was the absolute heaviest/worst I’ve seen in the 40 years we’ve lived here. School closings, event cancellations, and digging out will go on for days. And we may get more snow on Tuesday and Wednesday.)
The inevitable “Why now, why us, what’s the problem?” crowd comes out and opposes it. Retiring Senate Banking Chair Chris Dodd (D-Conn) has some doubts about the idea and, naturally, Sen. Dick Shelby (R-Ala) has concerns, and the big banks have their constant doubts about codifying in law what Volcker wants.
They tweet and twitter, “Maybe give the regulators that authority, but don’t put it in statute.”
In 1992, Fannie Mae and Freddie Mac insisted that the new GSE risk-based-capital rule—which had no precedent in US financial laws--be put in statute and made very explicitly. We did not want our inexperienced regulator interpreting vague legislative directives, making a tough new law even tougher. We wanted the law clear for all to read and see, including the regulator, so if the regulator decided to take out some anger in an extreme implementing reg, the world would have easy access to the facts.
You seldom get that kind of certainty, if a statute is vague and represents just a general call to the regulator to put something in place.
Most business interests seldom want statute, seeking regulations instead, because while the risk is there for tougher regulatory treatment, regs are not laws and regulators often can be lied to, cajoled, or even threatened, out of their regulatory intent. (“If you issue that reg, we will lose our market for widgets and 10,000 Ohio workers will lose their jobs and benefits and go to bed hungry.”)
The two biggest untruths the financial regulators hear now from their regulated entities are, “We need to grow. If we can’t grow to be the biggest in the world, we won’t be able to compete with foreign financial services companies” and, “We need to pay our senior employees top dollar or we will lose them to other employers!”
Bull pucky! Haven’t we seen this show before?
Whether it is the “Volcker Rule” or any related reform, Congress should listen carefully to every commercial banker, investment banker, and financial spokesperson and then do exactly of the opposite of what they advocate.
It’s simple, no bank exec or trade association official ever will endorse anything that might limit their money making ability. Risk reduction is one of those things. Remember the Wall Street bylaw: “The greater the risk, the greater the reward.”
The path is clear, if Congress wants to do anything on the “Volcker Rule,” just head for where the banks—and their congressional apologists--say don’t go.
How much BS does it take before Congress understands that and then just does right thing?
Voters to the Congress: “Scott Brown, Scott Brown, boogah, boogah! The public is tired of you kowtowing to the banks.”
Hank Paulson, the GSEs and his book “On the Brink”
After reading Hank Paulson’s account of the takeover of Fannie and Freddie, in his new book, I didn’t come away with many insights. Maybe he’s saving them for a sequel.
At the time of the takeover, many of us thought the action re Fannie was premature and that the DC Company was in much better shape and better managed than Freddie Mac.
Paulson seems to share those views in his book, but that relative “financial strength” was meaningless, since he felt that he had to treat both companies the same and at the same time. (Son, yes you’re sick, but your sister has only a slight fever, so I am going to chop off both your heads. Goodbye.”)
His description of Fannie CEO Dan Mudd being upset and somewhat angry when he heard Paulson’s plans and a laconic somewhat relieved Freddie CEO Dick Syron, when he got the same news, comports with the differences that many of us saw at the two GSEs.
Simply stated, the Fannie board and management always was far more involved with what the company did and more dedicated to the company’s congressional housing mission. The Freddie counterparts were less so.
Before the public takeover announcement, Paulson writes of his surprise conversations with the Democratic presidential and vice-presidential candidates. First, Barack Obama called Paulson to discuss the GSE issues, and a day later when Paulson called Joe Biden. Paulson’s suggests that the two public officials were knowledgeable ,thoughtful, and incisive in their comments and questions, and offered support for what was a daunting financial and economic action.
Paulson seemed not to gain the same confidence in his conversations with Senator John McCain and Sarah Palin, who still were enjoying the positive buzz of the Palin VP announcement which on that day was barely 24 hours old.
Paulson, who very much establishes himself as the Administration’s “driver” on the takeover confirms how weak was the GSEs’ regulator, the Federal Housing Finance Agency (FHFA,) formerly the Office of Financial Housing Enterprise Oversight (OFHEO).
FHFA had just spend years, every three months, announcing how well capitalized each company was and Paulson was taking them over because—in his opinion—Fannie and Freddie lacked sufficient capital.
OFHEO/FHFA
OFHEO/FHFA was a basket case from Day 1 and never improved. Conservatives argued that the GSEs hamstrung the agencies and fought them over their budgets on the Hill. Nothing was further from the truth. I was there and I know, At Fannie, OFHEO’s budget and oversight specifically were “off limits” and we were told not to lobby the Congress on them, just to respond to congressional inquiries if asked.
IMO, the GSE regulator used its budget funds, poorly, never bringing in enough examiners and financial talent; instead they hired and kept on board a number of Fannie/Freddie foes who for years conducted a guerilla political campaign against the GSEs rather than overseeing them.
For every quality employee OFHEO/FHFA brought in, it seemed to me that they matched him or her with two slugs and a hack and it showed and still shows.
The best evidence I can offer to substantiate that the GSEs didn’t interfere with the regulatory budget (funds, BTW, which came from the companies themselves) is to note that, in every budget sent to the Hill by the Office of Management and Budget--under Democrat and Republican Administrations-- OFHEO/FHFA got exactly what the OMB sought for them, suggesting no lobbying the appropriations process and the staffing levels they supported.
We didn’t like OFHEO and their political agendas and were open about that, but we never challenged their spending requests.
The one thing Paulson mentions –beyond his personal certitude about doing in the GSEs—is how much he worried about Fannie’s (most notably) and Freddie’s political clout and their ability, at least outside the courts, to stop the Treasury action.
What a misread that was.
In 2008, by the time Paulson got the congressional authority to act (four years after I retired), Fannie--at the direction of its new CEO Dan Mudd, named in 2004—was into its third year cutting back substantially its entire external affairs team, dropping dozens of political consultants, cutting internal PR staff and in house lobbyists, and dumping major field staff who worked on grassroots efforts. Fannie long before Paulson moved was politically weaponless. Mudd wanted to change the muscular/pugnacious culture, which he felt preceded him.
The battering that the GSEs took from their business opponents, the Right, and the Bush Administration weakened the companies substantially and they could fight back if they chose to, except in court, which they never did.
That made it easy for Paulson to do what the GOP Right demanded, as well as what Russian investors wanted, the latter according to the book.
One major hole in the Paulson takeover drama—which for me raises questions about his motives--is the fact that the Obama Administration (as I suspect a McCain Administration would have found necessary) continues to utilize and rely on Fannie and Freddie.
Now that Chairman Barney Frank (D-Mass) has announced March hearings to produce a new national mortgage finance system, the public should get some insight as to why the GSEs still are required to be there, because it seems—even in their weakened and abused state—they remain the best secondary mortgage market option for the public as well as those institutions still making first mortgage loans.
So, Hank gassed them, but Fannie and Freddie still remain necessary.
The large commercial banks and other financial services behemoths, which many think can replace Fannie and Freddie, haven’t bothered to fill the void or even hint at their interest.
When a pair of institutions, being poorly run by government overseers, still cuts the mustard better than all of the faux private sector lenders (which non-Fannie and Freddie financial institutions have no tap on Uncle Sam?), those who aspire to be smart policy makers should take note.
Congress, careful what you discard with the bath water after you bathe this baby.
Maloni, 2-8-2010
(For those of you not living in the DC area, let me assure that this past weekend’s snow was the absolute heaviest/worst I’ve seen in the 40 years we’ve lived here. School closings, event cancellations, and digging out will go on for days. And we may get more snow on Tuesday and Wednesday.)
Tuesday, February 2, 2010
The Russians: Kourva and Goniff
My mother’s side of my family (the largest because she had 7 sisters and a brother, while my dad was sib less) constantly preached, “Don’t ever trust the Russians, because they all are kourva (e) and goniff,” which translates to “whores and thieves” for you whose Yiddish is rusty.
My many aunts and uncles also offered other ethnic advice, too, but Russia—unlike any other country--seems to have provided ample government and civilian evidence for their concerns.
Today Russia bans preaching and certain religious practices; displays great reluctance to support the US with Iran, and empowers the Iranian atomic program. The regime in Moscow continues to display Israeli antagonism, throwing gasoline on Middle Eastern fires; and its repeated actions in the UN Security Council frequently appear anti-American. Its military material seems to wind up in every international hotspot and that’s just the short list.
Ironically, my relatives were not religious bigots, applying their dicta only to non-Jewish Russians. They were an equal opportunity crew, expressing their same feelings when large numbers of Russian Jews arrived in the United States when Gorbachev opened the Soviet Union’s doors to easier emigration.
Following the destruction of the Berlin Wall and the atomization of parts of the Soviet Union, western sources accused the Russian government still of talking up democracy but maintaining most of the old central controls and spying on its citizens. Various Russian leaders propped up a weird economy and an even stranger justice system, which favored friends and imprisons its enemies.
Bang, Bang, You’re Dead
Russian domestic regime opponents seemed to die with great regularly, after several bullets were pumped into their bodies. The Russian government always seemed to position itself in opposition to US interests, save when they were given economic concessions. The Russian society seemed to grow more haves and have knots, with the former being millionaire/billionaires who took advantage of Russian’s mammoth supply of oil and natural gas.
The family warnings seemed aimed at a country and civilization which produced pogroms, widespread governmental and commercial espionage, lawlessness, corruption, alcoholism, sloth, infrequent use of deodorant, and all sorts of anti-social national behaviors.
Sure my relatives’ words were stereotypical and scapegoating, but the quick emergence Russian criminal gangs —shortly following the new Russian immigrants coming to the US in the late 80’s— underscored the warning, “Don’t ever trust the Russians”
So—bringing this little diatribe on home--what does former Bush Treasury Secretary Hank Paulson reveal in his new book, “On the Brink?” Hank tells us that the Russians tried, in 2008, to enlist the Chinese to join them in a scheme to dump Fannie and Freddie bonds and force a US government takeover of the GSEs.
Paulson (presumably horrified) says he learned of this plot when he visited China for the Olympics, in August of that year, and promptly informed President Bush.
But what did the party of Lincoln do just three months later, with tons of GOP supporters in the House and Senate and some D’s, exactly what Dmitry Medvedev and Vladimir Putin desired. The Bush Treasury took over Fannie and Freddie, putting them into federal conservatorship?
“So, what you are saying Mulder….?”
One way to look at this, whether they knew it or not, is to say that all of those Senators and Congressmen who supported Bush and Paulson were working hand-in-glove with the “Thug-Mafia, Pinko Russian government.”
Take those “(Commie) apples” Senator Shelby (R-Ala), Rep. Hensarling (R-Tex) and the rest of you southern Republicans and run on that record back home.
GSE policy served up in Moscow and the GOP dug in for extra helpings
(Memo Menedez/Van Hollen: Get those campaign signs ready!)
Where is J. Edgar when we need him? (Who said, “Likely trying on dresses in Hell?”)
My Fun’s Over
Alright, I am having a little fun at the expense of the Bush/Paulson supporters who loved what the Bush Administration did to Fannie and Freddie.
There is no evidence that Paulson actions had anything to do with the Russian machinations which he unveiled in his book. Reportedly, the Russians sold almost $70 Billion in GSE securities before Paulson moved on the GSEs.
The suggestion that the Bushies were manipulated by the Russians is as silly as some of the stuff circulated by the Fannie haters. Yet, we do have Paulson’s book to document my family's old admonitions!”
My 88 year old “Aunt Goldie,” the only surviving member of my Mom’s family, thinks the Russians hoodwinked Paulson and the US and got what they wanted and still hold GSE debt through surrogates.
But now we know--as she knows--“Never trust the Russians, because they all are ‘kourva and goniff!’ ”
So, the next time you see a Senator or House Member—who serves on their chamber’s Banking Committee—and that person is wearing a red tie or dress, and their gait drifts a little to the left, think about Paulson’s disclosure!!
Some More GSE Stuff
Over the weekend, I read a Boston Globe article which suggested that House Banking Committee Chairman Barney Frank (D-Mass) had suddenly turned against Fannie and Freddie, after years of supporting them, and now wants to “abolish” the two as part of a grander plan to create a new mortgage finance system.
We all know about the “abolish” part, since the Chairman uttered that phrase more than a week ago, however I have no idea what may be his motives. I don’t know if he dislikes GSEs or not. I know he’s pragmatic and will try and do whatever makes sense politically.
In my last blog, I pointed out my opinion of why legislatively re-designing the nation’s mortgage finance system will be difficult for the Congress this year. The BG writer suggested a new model of banks and Wall Street firms doing the securitization of mortgages and providing the financial guarantees on same necessary for them to be bought and sold by investors.
Hey, great idea! But doesn’t that sound familiar?
It sure does, it was exactly the “main street to Wall Street, avoid the GSEs mortgage execution" which brought us the hundreds of billions of dollars in subprime slop that Wall Street, after having its mortgage broker work force generate the bad loans, securitized and sold throughout the world (probably to some of those Russian and Chinese mentioned up top).
That experience is less than five years old. Did we forget so quickly? I don’t think that plan will work nor should it.
All the GSEs critics, who the public again soon will encounter, should remember that Fannie and Freddie didn’t create their own charters; Fannie and Freddie didn’t build into the charters the profit motive deemed necessary to avoid having another HUD; and Fannie and Freddie didn’t cheer on when Congress and various Administration kept ratcheting up, ultimately to 55%, the amount of their overall business volumes which had to support low moderate and middle income families.
Maybe Chairman Frank can bring some light and logic to this mortgage system exercise, if can just stop these GOP Members of Congress—and a few on the D side of the aisle--from listening to the Russian mobsters masquerading as international business people or Russian public officials, because—as we know and as Aunt Goldie knows—“Never trust the Russians, they all are kourva and goniff!”
Maloni 2-2-2010
My many aunts and uncles also offered other ethnic advice, too, but Russia—unlike any other country--seems to have provided ample government and civilian evidence for their concerns.
Today Russia bans preaching and certain religious practices; displays great reluctance to support the US with Iran, and empowers the Iranian atomic program. The regime in Moscow continues to display Israeli antagonism, throwing gasoline on Middle Eastern fires; and its repeated actions in the UN Security Council frequently appear anti-American. Its military material seems to wind up in every international hotspot and that’s just the short list.
Ironically, my relatives were not religious bigots, applying their dicta only to non-Jewish Russians. They were an equal opportunity crew, expressing their same feelings when large numbers of Russian Jews arrived in the United States when Gorbachev opened the Soviet Union’s doors to easier emigration.
Following the destruction of the Berlin Wall and the atomization of parts of the Soviet Union, western sources accused the Russian government still of talking up democracy but maintaining most of the old central controls and spying on its citizens. Various Russian leaders propped up a weird economy and an even stranger justice system, which favored friends and imprisons its enemies.
Bang, Bang, You’re Dead
Russian domestic regime opponents seemed to die with great regularly, after several bullets were pumped into their bodies. The Russian government always seemed to position itself in opposition to US interests, save when they were given economic concessions. The Russian society seemed to grow more haves and have knots, with the former being millionaire/billionaires who took advantage of Russian’s mammoth supply of oil and natural gas.
The family warnings seemed aimed at a country and civilization which produced pogroms, widespread governmental and commercial espionage, lawlessness, corruption, alcoholism, sloth, infrequent use of deodorant, and all sorts of anti-social national behaviors.
Sure my relatives’ words were stereotypical and scapegoating, but the quick emergence Russian criminal gangs —shortly following the new Russian immigrants coming to the US in the late 80’s— underscored the warning, “Don’t ever trust the Russians”
So—bringing this little diatribe on home--what does former Bush Treasury Secretary Hank Paulson reveal in his new book, “On the Brink?” Hank tells us that the Russians tried, in 2008, to enlist the Chinese to join them in a scheme to dump Fannie and Freddie bonds and force a US government takeover of the GSEs.
Paulson (presumably horrified) says he learned of this plot when he visited China for the Olympics, in August of that year, and promptly informed President Bush.
But what did the party of Lincoln do just three months later, with tons of GOP supporters in the House and Senate and some D’s, exactly what Dmitry Medvedev and Vladimir Putin desired. The Bush Treasury took over Fannie and Freddie, putting them into federal conservatorship?
“So, what you are saying Mulder….?”
One way to look at this, whether they knew it or not, is to say that all of those Senators and Congressmen who supported Bush and Paulson were working hand-in-glove with the “Thug-Mafia, Pinko Russian government.”
Take those “(Commie) apples” Senator Shelby (R-Ala), Rep. Hensarling (R-Tex) and the rest of you southern Republicans and run on that record back home.
GSE policy served up in Moscow and the GOP dug in for extra helpings
(Memo Menedez/Van Hollen: Get those campaign signs ready!)
Where is J. Edgar when we need him? (Who said, “Likely trying on dresses in Hell?”)
My Fun’s Over
Alright, I am having a little fun at the expense of the Bush/Paulson supporters who loved what the Bush Administration did to Fannie and Freddie.
There is no evidence that Paulson actions had anything to do with the Russian machinations which he unveiled in his book. Reportedly, the Russians sold almost $70 Billion in GSE securities before Paulson moved on the GSEs.
The suggestion that the Bushies were manipulated by the Russians is as silly as some of the stuff circulated by the Fannie haters. Yet, we do have Paulson’s book to document my family's old admonitions!”
My 88 year old “Aunt Goldie,” the only surviving member of my Mom’s family, thinks the Russians hoodwinked Paulson and the US and got what they wanted and still hold GSE debt through surrogates.
But now we know--as she knows--“Never trust the Russians, because they all are ‘kourva and goniff!’ ”
So, the next time you see a Senator or House Member—who serves on their chamber’s Banking Committee—and that person is wearing a red tie or dress, and their gait drifts a little to the left, think about Paulson’s disclosure!!
Some More GSE Stuff
Over the weekend, I read a Boston Globe article which suggested that House Banking Committee Chairman Barney Frank (D-Mass) had suddenly turned against Fannie and Freddie, after years of supporting them, and now wants to “abolish” the two as part of a grander plan to create a new mortgage finance system.
We all know about the “abolish” part, since the Chairman uttered that phrase more than a week ago, however I have no idea what may be his motives. I don’t know if he dislikes GSEs or not. I know he’s pragmatic and will try and do whatever makes sense politically.
In my last blog, I pointed out my opinion of why legislatively re-designing the nation’s mortgage finance system will be difficult for the Congress this year. The BG writer suggested a new model of banks and Wall Street firms doing the securitization of mortgages and providing the financial guarantees on same necessary for them to be bought and sold by investors.
Hey, great idea! But doesn’t that sound familiar?
It sure does, it was exactly the “main street to Wall Street, avoid the GSEs mortgage execution" which brought us the hundreds of billions of dollars in subprime slop that Wall Street, after having its mortgage broker work force generate the bad loans, securitized and sold throughout the world (probably to some of those Russian and Chinese mentioned up top).
That experience is less than five years old. Did we forget so quickly? I don’t think that plan will work nor should it.
All the GSEs critics, who the public again soon will encounter, should remember that Fannie and Freddie didn’t create their own charters; Fannie and Freddie didn’t build into the charters the profit motive deemed necessary to avoid having another HUD; and Fannie and Freddie didn’t cheer on when Congress and various Administration kept ratcheting up, ultimately to 55%, the amount of their overall business volumes which had to support low moderate and middle income families.
Maybe Chairman Frank can bring some light and logic to this mortgage system exercise, if can just stop these GOP Members of Congress—and a few on the D side of the aisle--from listening to the Russian mobsters masquerading as international business people or Russian public officials, because—as we know and as Aunt Goldie knows—“Never trust the Russians, they all are kourva and goniff!”
Maloni 2-2-2010
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