Monday, May 31, 2010

9 dead as Israeli forces storm Gaza aid convoy -

9 dead as Israeli forces storm Gaza aid convoy - "Post a comment"

Russia, Iran, Turkey etc are blaming Israel.


So, what else is new?

Good for Israel.

Obama needs some of their "chutzpah."

Tuesday, May 25, 2010

Restructuring Mortgages

We know the Senate—in rejecting a Republican effort to euthanize Fannie Mae and Freddie Mac--isn’t ready to deal with GSE issues, and now that it’s recently approved bipartisan regulatory reform bill has “solved” all of the nation’s financial regulatory issues (I’m being sarcastic), it can turn to some other knotty problems facing our nation. Class, Class?

Oh, oh, teacher, I have one.

Has any effort promised so much and produced so little as the federal government’s campaign to reverse the flow of defaulting mortgages and restructure or rewrite them so that deserving borrowers can stay in their homes and repay their financial obligations?

Just who and what has hindered the effort?

The major culprits, Pogo, have been the Treasury, the lender/servicing community, and even some of the very people the efforts hope to help.

Yes, high unemployment and prevailing recession conditions—turned what started as a subprime mortgage problem and into a prime mortgage matter--still are defying myriad federal, state, local and private efforts at amelioration.

But the question has to be asked, how could the Treasury, and other federal and state financial regulators have done so poorly trying to fix, replace, and restructure millions of underwater mortgages?

One almost would have to set out to purposely design a “failing remedial process” to achieve less. But, that wasn’t the case, although it has been the result.

Too Many Cooks, Making Lousy Soup

We have had too many cooks with their hands in the soup, which is why the fare has been lousy.

Massive mortgage defaults first were identified in 2007-2008 and every mortgage lender, every agency with any jurisdiction and, every Senator and Congressman had some approach, yet the net effect federally—almost exclusively undertaken by the Obama Administration--has not been fruitful, as measured by the small number of mortgagors who have gotten relief and the of mortgages which still are in default, rushing to foreclosure, or are “upside down.” Upside down loans mean the borrowers owe more than the properties are worth.

Inside Mortgage Finance, Guy Cecala’s excellent publication, reports that slightly more than 9.5% of all mortgage loans--tracked by major servicers--were “seriously delinquent,” meaning in foreclosure or missing more than three months worth of payments. That’s 4 million loans, which some believe is a conservative estimate.

Since 2009, the Obama Treasury, under Secretary Tim Geithner, has initiated a half dozen mortgage amelioration efforts, including changes to previous plans, according to the Congressional TARP Study Commission, headed by Elizabeth Warren, which has reported critically on the Treasury’s progress.

The Treasury’s signature effort, the Housing Affordable Modification Program (HAMP), has moved so slowly that, in 2009, for every family it helped 10 more lost their homes to foreclosure.

At their current pace, HAMP may help 250,000 mortgagors 2010. But with upwards of 20 times that number—or more--needing help in 2010, that success won’t staunch the bleeding.

The TARP Commission says that currently about 6 million mortgagors are “60 days or more delinquent,” meaning they are on the cusp of inflating that 9.5% figure noted above.

HAMP, recently itself has been restructured, and Treasury hopes for more production this year, but doubt remains.

The tragedy is that the incentive for families to walk away from mortgage debt and just “mail in the keys” seems greater than that needed to stay and work it out.

My one Fannie/Freddie complaint merely is that 15 months ago, I argued that the federal government—which had “federalized both companies” and owned and controlled them--should turn the a unified Fannie/Freddie 8000 employee work force loose and let them implement the most efficient ways to solve the problem, with compensation for their successes that go beyond just healing their own hemorrhaging loan portfolios.

Treasury, Lenders, and Consumers

Naturally, that was too simple and direct for Treasury, the Fed, FDIC, DOJ, HUD, etc.
Instead, despite their task forces and coordinating meetings, predictably the federal government put up a patchwork of programs--albeit with different standards, operating systems, different industry and agency departmental priorities, and importantly different incentives—which barely have helped families needing help.

Lenders share in this blame in a couple of ways. When the government started throwing all of the TARP money around, smart bankers figured they would hold off really helping until the government sweetened the pot; sure that it was just a matter of time.

And despite the fact that the bankers were carrying bad loans which were performing poorly in greater numbers, they still were reluctant to take the full financial hits and write off their losses, hoping instead for congressional, accounting or regulatory relief miracles which haven’t yet come.

When you get down to the interstices of some of the problem, you realize that for a variety of reason delinquent home owners are reluctant to deal with their lender/servicer or the government, even when offered money, as in, “We can lower your monthly mortgage payments from x to y and allow you to stay in the house, paying off your debt at a much more affordable rate.”

Who ignores that offer? Who balks at that help if properly delivered and why?

Some lender personnel even slow walked this relief because their compensation incentives still are with new loans and new families, not re-structured mortgages.
This dilemma shows no signs of solving itself and every signal is that worse news lies ahead. The Obama Administration needed and needs to do better.

Until it does then homeowners requiring relief easily can turn sour as they see a steady flow of cash going to financial institutions but bypassing them.

Only the federal government can try to minimize the problems and introduce simple, easier to implement, financial relief efforts—minimizing the number of chiefs and employing more Indians—to really get at helping borrowers. Reducing principle owed as well as mortgage payments is a major part of the answer.

Needed: A Real Czar

The nation needs a presidentially appointed “Mortgage Restructuring Czar,” who can cut through the agency and industry BS and start handing our fines for institutional foot dragging, as well as kick a lot of bureaucratic butt and embarrass slackers. (Sorry, Herb Allison, you’re not doing the job.)

And, the President could do a lot worse than asking Fannie and Freddie to unleash their work forces—who largely continue to do little real business under their new government overseers—to create a sustained effort to restructure the millions of loans which need fixing and using common underwriting, back offices, and restructuring methodologies.

The combined GSEs could do better than the guys running it now.

The WSJ and “Nessie?”

Recently I asked if anyone else, but me, thought the Russians could have been culpable in a plane crash several weeks ago which took the lives of Polish President Lech Kaczynski and much of their government leadership. Now the Wall Street Journal has weighed in, kind of.

I wonder if the paper agrees with me, too, on the existence of UFO’s and the Loch Ness monster.

Andrew for Governor!!

I’ve often written, teasingly, about Andrew Cuomo, whom I got to know when he was in Washington working at HUD in the Clinton Administration and later running the agency as Secretary.

Now—to the surprise of few—the super ambitious Andrew has announced his candidacy for Governor of the Empire State and hopes to succeed his father, Mario Cuomo, who was New York’s highly regarded chief executive, from 1983 through 1994.
It appears, unless some sort of scandal arises, that Andrew should have an easy run to run to win the state’s highest job and “clean up Albany,” which is his stated highest priority.

It will be easy for him to take aim at Republicans but he better have a sharp eye for Democrats, too. If Albany is a cesspool, it’s been made so by both political parties contributing.

Fumigating and sterilizing Albany will be lonely work. Andrew will need a bulldozer to clean out those “Aegean Stables.”

Maloni, 5-26-2010

Wednesday, May 19, 2010

More Stuff!

Sorry, Blanche….

In my last blog, I suggested that anyone with a major interest in the Chris Dodd (D-Conn.) financial regulatory reform bill should keep a close eye on developments or risk losing your provision.

Poor Sen. Blanche Lincoln (D-Ark) had the temerity to be away from DC, running in her state’s Democratic primary—and running for her political life--when Dodd decided to gut her major derivatives regulatory provision, with language introduced minutes before the midnight deadline for filing amendments to the reform legislation. He quietly—and some might suggest sneakily--put his Chairman’s stamp on a provision that turns her aggressive reform language into a two year study by government officials who don’t like what Ms. Lincoln proposed. Wonder how they'll handle that review??

There will be a Senate vote on the language, but Dodd’s “substitute” has the watered down appeal that allows most supporting Senators to pretend they enacted something tough.

“Here Wall Street and big banks, take this. Sorry this platter isn’t shinier. And Blanche, sorry about the back of my hand. You take that!”

Yesterday, a challenged Lincoln was forced into a runoff with her Democrat opponent, so she comes back to DC weakened and understandably looking back at Arkansas. Hopefully, she also is angry!

Dodd, having already given the banks and their investment bank buddies a $50 Billon break by not requiring them to pre-fund a financial bailout component, merely looks forward to retirement and—I am quite sure—a lot of juicy ($$$$$) offers from the major institutions subject to his new legislation.

I hope that “Blanche the Harridan, Blanche the Avenger, “returns to town and kicks the crap out of everyone who wants to “deep six” her provision—including the Administration--and that she gains the support of Sen. Chuck Grassley (R-Iowa), who supported her in committee, with the goal that thoughtful R’s--who admire the common sense Grassley--pull their support from a bill that is seriously listing towards the big guys.

Lincoln’s original language needs to stay in the Dodd bill or in the conference report.

There is no such thing as regulating the big financial institutions “too much!”
Banks will find a way around the toughest laws and regulations. They always do. Don’t worry about “hurting” them. Congress should follow its instincts and add as many tough statutory provisions as possible and then worry about fitting it all together later.

Nobody in Congress should buy the bank ladled poop that US financial institutions won’t be competitive with overseas banks, if they are vigorously overseen by Washington. That’s the same BS that claims the large financial institutions need to pay top dollar squared to keep their talent. If every firm in New York, the financial capital of the world, is paying the about same thing, where will all of this talent go?

The Senate--and the poker playing Barney Frank (D-Mass) waiting in the wings--should not forget the reasons they are fighting for this legislation. Maybe a review of the big financial institutions gargantuan first quarter earnings will stiffen their spines, as well as alert them to who still seems to be holding the cards in this game?

Maloni 5-19-2010

Monday, May 17, 2010


Like most Americans, I haven’t seen the specific details of what’s in Sen. Chris Dodd’s (D-Conn) financial regulatory restructuring bill, currently being constructed in the Senate. I’ve read news accounts and talked with some of those on the periphery of the bi-partisan negotiations, which have been far more commodious than many assumed.

The one descriptive phase—in a variety of ways—which I’ve heard most often is that, so far, in these Senate discussions, “Wall Street and the big banks are getting their heads handed to them!”

“Danger Will Robinson, Danger”

Before anyone runs off and praises the Lord for “chickens coming home to roost,” the “Devil getting his due,” or the big financial players getting whacked, I would wait to see the specific language in the Senate bill and what inevitably will get added in the “managers amendment,” a package that Dodd and ranking Republican Dick Shelby (R-Ala) will offer to “fix up” small and large things discussed “off line.” That admonition applies also to the final package agreed on by House and Senate negotiators.

Don’t weep just yet for the big banks and investment bankers. They often don’t lose or lose easily and no matter what becomes law, they’ll likely still make lots of money because that’s what they do.

Whenever it’s voted on—possibly this week--the final Senate package will go to a “conference committee” of House and Senate Banking Committee members--with the legislation that Rep. Barney Frank (D-Mass.) wrestled through that chamber-- and the two “packages” then will be reconciled into a single “conference report” which both chambers will have to approve.

“Reconcile” is polite language for “ugly horse trading,” when issues and provisions get dumped or included, with few willing to answer the why and how of either situation.

Traditional legislation procedure argues that what is in each bill become the outside parameters for the provisions which get into the final conference report. But, the reality is clutch your wallets and your underwear in conference. Lots of details can get ignored or dropped, from the House or Senate bills—including by vengeful staff--if you don’t have a major political “horse” (advocate) in the room when the matter comes up, ideally among the sitting conferees.

The flip side applies as well. Just because a provision didn’t make it into either bill, it doesn't mean that a conferee can't seek its inclusion, possibly battering his support/opposition on other provisions about which he cares less. There are “squeaky wheels” in legislative conferences, too.

So, at this point, engaging in high fives, weeping, or gnashing of teeth, no matter what you read in the paper or on the Net, is premature.

In lobbying, it’s never over until it’s over and that process often includes what regulations get issued—months and months after the legislative fact--to implement or weaken the legislative language the President signs into law.

A Major Loss

The defeat of Sen. Bob Bennett (R-Utah), earlier this month, in the Utah Republican Convention, by right wing elements who felt that the conservative junior Senator wasn’t conservative enough, is a loss of a fine public servant to the entire nation.

Democrats and Republicans alike lamented Bennett’s defeat because they knew Bennett to be a principled individual who may not always agree with you but gave you a thoughtful hearing on your issues. He is a smart and capable public official who easily could find bi-partisan support among Democrats for of his positions and vice versa.

I don’t know if he would take it, but the Obama Administration could do a lot worse than to offer Bennett a slot where his keen business sense would come into play.

If Bennett’s rejection is a reflection of what kind of representation is the goal of the “Tea Baggers”--who filled the GOP convention crowd--then reason and intelligence may be foreign qualities to any Tea Bagger-supported candidates who get elected in November.

What Did the White House Know, When and What Did It Do?

“Bush Administration economist
Jason Thomas sends Steel an
email in which he attaches a
report identified as the source for
the March 10, 2008 Barron’s
article accusing Fannie Mae of
overstating its financial results
through accounting improprieties.”

The little snippet above comes from a Wall Street Journal “Washington Wire” blog, containing “timeline” information (five pages)-- provided to the WSJ by the Financial Crisis Financial Inquiry Commission--examining issues which caused the nation’s 2008 financial services system implosion, including disastrous events at Fannie Mae and Freddie Mac in 2007-2008.

One of the items which garnered my interest, as someone who continues to believe that the Bush Administration and its conservative allies helped to ambush Fannie and Freddie, was the fact that on March 8, 2008, the White House/Treasury seemed to have a damaging report given to the WSJ’s Barron’s publication—at least two days in advance of Barron’s publishing a story--suggesting that Fannie Mae engaged in accounting manipulations and was bankrupt. The article started a run on Fannie’s stock and a ton of subsequent short selling, exacerbating already bad financial and economic news.

If such a report fed the Barron’s article, it would seem at odds with some Administration ideas, as expressed in the same “timeline,” where Fannie and Freddie were variously seen as part of the solution to help the failing mortgage market or at least deserving of some type of capital relief, which the GSE regulator and other Admin officials seemed to be considering.

Who wrote the report? Was the White House or Treasury part of the production team or just the same old crowd of GSE haters? Did Barron’s contact the Bush Administration for comments about its accounting allegations? If the Administration didn’t join the story, did it try and dampen the suggestions? If the Admin knew that Fannie didn’t have accounting problems, why didn’t it say that to Barron’s writers?

It’s hardly a smoking gun, but it wouldn’t shock me to see Bush White House or Treasury DNA on the report attached to an email sent to “Steel,” whom I assume was Robert Steel, Bush undersecretary for domestic finance and one of the architects of the Bush Fannie/Freddie policies as well as actions to Wall Street’s private label subprime debacle.

Maloni, 5-17-2010

Friday, May 7, 2010

“Hot Air” McCain is Still Full of Hot Air

In arguing for his amendment to the Senate’s financial regulatory reform bill to end any federal relationship with Fannie Mae and Freddie Mac, Arizona Republican Senator John McCain claims that not ending government support for Fannie and Freddie is the equivalent of “declaring war on terrorism, without going after Al Queda.”

One might suggest that McCain’s true agenda—turning over the nation’s mortgage finance system to the large commercial banks—is as specious as running for President with Sarah Palin as your Vice-President.

During his failed presidential campaign against Barack Obama, Senator John McCain (R-Ari) tried to make a campaign issue of Fannie Mae and Freddie Mac. There was little doubt that the mortgage giants invested heavily in Wall Street created private mortgage backed securities and lost billions leading to a federal Takeover, but McCain’s early record on this matter—when he was Chairman of a Senate subcommittee and the Republicans controlling the Senate—was limited to a single floor statement, no legislation introduced, nor any hearings held.

In seeking to link Obama to something to which he had no connection, McCain claimed a record of Fannie and Freddie opposition which existed only in his own mind, as I pointed out in my blog and to national audiences when—surrounded on his campaign staff by a half dozen ex-Fannie and Freddie lobbyists—McCain hypocritically and falsely hypothesized a non-existent Obama-GSE relationship, claiming it was evidence of the future President’s bad judgment.

Just as Emperor McCain had no clothes on then, he’s covered by a bare fig leaf now.

McCain’s amendment, while discussing viability of the GSEs, puts in place new rules which insure the demise of the two institutions which even in their current hobbled status are providing 75% of all US mortgage finance.

The McCain proposal is a giveaway of the nation’s mortgage finance system to the large commercial banks and their allies that would occur from the business death of Fannie and Freddie.

The Administration and House Democrats want to work on producing a successor mortgage finance system before restructuring what now is in place. But McCain and his friends are going for a kill shot now.

National mortgage finance requires constancy and is not well served by a McCain mortgage finance system controlled by unreliable large commercial banks and their subsidiaries (which right now refuse to much lending for mortgages or small business).

McCain’s legisative explanation refers to the tired rhetoric that his bank beneficiaries are “private sector,” conveniently ignoring that all receive federally subsidized deposit insurance and a boat load of federal TARP funds, initiated by the Bush Administration and continued under President Obama.

McCain’s amendment should be defeated and the Congress’ necessary work on federal financial regulatory reform should not be held hostage to “Senator McBank.”

Maloni, 5-7-2010

Monday, May 3, 2010

Still Time To Get It Right

The GOP and Financial Reform

I’ve noted that I would prefer better financial regulators to additional financial regulation. But, that is a mug’s game.

Nothing, short of a constant dynamic leadership at every single agency, a major upgrade in talent, and an unending green light for their actions from the President, the Congress, and the Justice Department, will suddenly make a ton of career bureaucrats and professional regulators much better than they have been, whether I/we like it or not.

With that as an obvious backdrop, therefore, I come down on more regulation, covering new and different areas, in hope that even these blind agency squirrels can find a nut once in a while.

So, “yes” to better consumer regulation on mortgage products, originators, and financial institutions; “yes” to more transparency in the wonderful world of derivatives, and complex deals which can have the same investment banking houses on both sides of a trade, and “yes” to greater regulation of “too Big to Fail” financial institutions and large banks. And. definitely “yes” to those same institutions paying for future bailouts, up front, GOP objections or not.

How can the Republicans hide behind the flimsy argument that they don’t want Washington to regulate the very people and very instruments which caused the financial excesses of the big guys to bankrupt so many other institutions and people? The surviving financial services behemoths still came out of it with record 2010 first quarter earnings because their “Uncle” bailed them out and required so very little of them in return.

Those are our tax dollars earning rave reviews when first quarter financial earnings were announced by Street firms and large banks.

Tea Party, Tea Baggers, Teetotalers, who the hell cares? The abuse the gargantuan financial institutions carried out early in this decade and what they have done since they did it should leave them very few political protectors. But no, the kneejerk GOP reaction is to oppose meaningful reform and to protect the banks and investment banks, as if they were blameless had no hand in bringing on a worldwide financial calamity and an international Depression.

So, arm the current financial regulators with new tools, do away with one or two extraneous ones, and let’s get on with curbing some of the excesses that the GOP claims foolishly are necessary for effective modern commerce.

Strengthen the negotiating hands of Barney Frank, Chris Dodd, Tim Geithner and I urge them to show the same quarter to Wall Street as the financial firms displayed responsibility and caution in 2006 through 2008—meaning very little.

The banks have fistfuls of money, no real demands on their lending activities, and still are whining about a “consumer regulatory agency.” What’s that all about, besides same-o, same-o?

No matter what the Congress ultimately does regarding financial regulatory reform, the big institutions will survive and find a way to continue to make money. It’s what they do.

(Historical footnote. Where to put a new consumer protection agency seems to be a major issue facing Congress? I worked at the Fed in the early 1980’s, when Paul Volcker was the Chairman. The central bank had a major “consumer affairs” department, but it did not feature the top agency talent (they were posted on monetary policy or supervision and regulations matters) and while everyone paid lip service to consumer matters, it wasn’t a unit or cause that moved mountains. I can’t imagine much has changed at 20th and C Streets in that regard.)

Bombs in Manhattan

Just a feeling. By the time this blog is out, likely on Tuesday, I expect that the New York police and federal authorities will have a strong lead on the identity of the man who left the explosive devices in a car in Times Square or he will have done away with himself, with an appropriate scolding suicide note.

Evil, yes, but I suspect not Al Qaeda.


Speaking of bombs in Manhattan, how about calling in Mitch Rupp or Gabriel Allon, if not their novelist-creators?

I love the irony of Iran’s Jew-hating President speaking to many like-minded bigots at the UN-- in the city with the largest Jewish population in the world--and being able to spew his lies because his speech is protected by our laws.


Calling David Axelrod a “center fold pinup for the Krispy Krème Donut Magazine” may have been President Obama’s funniest line at the White House Correspondents Dinner last weekend.

The D's on Deficits

I’ll share the gist of a message I sent to certain Democrat leaders on Capitol Hill last week. The deficit is a real issue and can’t be ignored substantively or politically. It also is something that can't be fixed by, in the words of the legendary Sen. Russell Long (D-La.), “not getting you or not getting me, but just getting the guy behind the tree.”

The Democrats not only have to talk the talk but they have to walk the walk and start cutting federal spending which their party favors. They could do worse than starting with farm subsidies and then go down the list.

They don’t have to let the original tax rates—scaled back dramatically by the Bush White House—return, but the D’s can pick a number between what they are and what they would be and generate additional revenue.

Not necessarily a huge revenue raiser, I still like putting limits on medical damages, which would cause healthcare costs to drop, medical malpractice insurance to go down and help as much as anything else to put more money into family pockets.

Social security payments reduced for better off senior citizens. Raising the SS retirement age by five years, to accommodate the fact that we are all living longer. (Did you hear that God?)

Contemporize the marijuana laws, so our state and federal prisons aren’t filled with marginal criminals, who waste tax dollars.

The list is very long and the President Commission on Fiscal Responsibility, headed by Democrat Erskine Bowles and Republican Alan Simpson, won’t lack for options.

What will be needed is to the political will to make the Commission’s recommendations law.

I hope the Democratic congressional leadership doesn’t wait for that report and, instead, picks off some low hanging fruit between now and before they break to run home to run for re-election. Doing the right thing, now, can make that task easier for incumbents.

One quick line about former Wyoming Senator Simpson, a very sharp individual known for his biting wit.

The joke he probably has told to more audiences than any other is about “one of his former constituents,” an elderly man who married a much younger woman. One night the phone rings in the farmer’s house. He answers and his wife hears him say, “How in the hell should I know, it’s a thousand miles away.”

When his young bride asks him who called, he said, “Some idiot asking me if the coast was clear!”

Maloni, 5-3-2010