Wednesday, December 28, 2011

Heavyweight Combat!!

In the past two weeks, Joe Nocera and Peter Wallison have gone at one another over GSE history. Others, see below, have weighed in on this scrap. Enjoy the reading.

Happy 2012.

The Big Lie
The New York Times, Pg. 21
Dec 24, 2011

By Joe Nocera

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he's an ''expert''; out of thin air, he devises ''data.'' You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

You're chosen for an investigative panel related to your topic. When other panel members, after inspecting your evidence, reject your thesis, you claim that they did so for ideological reasons. This, too, is repeated by your allies. Soon, the echo chamber you created drowns out dissenting views; even presidential candidates begin repeating the Big Lie.

Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis. His partner in crime is another A.E.I. scholar, Edward Pinto, who a very long time ago was Fannie's chief credit officer. Pinto claims that as of June 2008, 27 million ''risky'' mortgages had been issued -- ''and a lion's share was on Fannie and Freddie's books,'' as Wallison wrote recently. Never mind that his definition of ''risky'' is so all-encompassing that it includes mortgages with extremely low default rates as well as those with default rates nearing 30 percent. These latter mortgages were the ones created by the unholy alliance between subprime lenders and Wall Street. Pinto's numbers are the Big Lie's primary data point.

Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie -- because, after all, they caused the crisis! Throw in The Wall Street Journal's editorial page, which, on Wednesday, published one of Wallison's many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

In Wallison's article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right. This is another favorite tactic: He takes a victory lap whenever events cast Fannie and Freddie in a bad light. Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.'s allegations show is that the Big Lie is, well, a lie.

Central to Wallison's argument is that the government's effort to encourage homeownership among low- and moderate-income Americans is what led to the crisis. Fannie and Freddie, which were required by law to meet certain ''affordable housing mandates,'' were the primary instruments of that government policy; their need to meet those mandates, says Wallison, is what caused them to dive so heavily into those ''risky'' mortgages. And because they were powerful forces in the housing market, their entry into subprime dragged along the rest of the mortgage industry.

But the S.E.C. complaint makes almost no mention of affordable housing mandates. Instead, it charges that the executives were motivated to begin buying subprime mortgages -- belatedly, contrary to the Big Lie -- because they were trying to reclaim lost market share, and thus maximize their bonuses.

As Karen Petrou, a well-regarded bank analyst, puts it: ''The S.E.C.'s facts paint a picture in which it wasn't high-minded government mandates that did [Fannie and Freddie] wrong, but rather the monomaniacal focus of top management on market share.'' As I wrote on Tuesday, Fannie and Freddie, rather than leading the housing industry astray, got into riskier mortgages only after the horse was out of the barn. They were becoming irrelevant in the most profitable segment of the market -- subprime. And that they couldn't abide.

(The S.E.C., I should note, had its own criticism of my column, saying that I conflated its allegations regarding the lack of disclosure of subprime mortgages, with an entirely different set of charges it has brought regarding disclosure of so-called Alt-A loans. I still maintain that the S.E.C.'s charges are weak, and that the agency brought the case in part for political reasons: how better to curry favor with House Republicans than to go after former Fannie and Freddie executives?)

Three years after the financial crisis, the country would be well served by a real debate about the role of government in housing. Should the government be helping low- and moderate-income Americans own their own homes? If so, is there an acceptable level of risk? If not, how do we recast the American dream?

To have that debate, though, we need a clear understanding of what role the government's affordable-housing goals did -- and did not -- play in the crisis. And that is impossible as long as the Big Lie holds sway.

Which, now that I think of it, may be the whole point of the exercise.

Paul Krugman

Joe Nocera Gets Mad
The New York Times
Dec 24, 2011

By Paul Krugman

And it's a beautiful thing to see.

Today Joe once again goes after the Big Lie the claim that Fannie and Freddie caused the crisis and drives home the point that the people advancing this story aren't just wrong but are acting with intent, engaged in deliberate deception:
In Wallison's article, he claimed that the charges brought by the Securities and Exchange Commission against six former Fannie and Freddie executives last week prove him right. This is another favorite tactic: He takes a victory lap whenever events cast Fannie and Freddie in a bad light.

Rarely, however, has his intellectual dishonesty been on such vivid display. In fact, what the S.E.C.'s allegations show is that the Big Lie is, well, a lie.Read the whole thing.

Basically, Joe is arriving where I've been since 2000: what's going on in the discussion of economic affairs (and other matters, like justifications for war) isn't just a case where different people look at the same facts but reach different conclusions. Instead, we're looking at a situation in which one side of the debate just isn't interested in the truth, in which alleged scholarship is actually just propaganda.

Saying this, of course, gets you declared "shrill", denounced as partisan; you're supposed to pretend that we're having a civilized discussion between people with good intentions. And you're supposed to match each attack on Republicans with an attack on Democrats, as if the mendacity were equal on both sides. Sorry, but it isn't. Democrats aren't angels; they're human and sometimes corrupt but they don't operate a lie machine 24/7 the way modern Republicans do.

Welcome to my world, Joe.

Rep. Barney Frank

Who Is Really Responsible for the Housing Crisis?
The Atlantic

Dec 26, 2011

By Barney Frank

Peter Wallison's recent article in The Atlantic, "Hey, Barney Frank: The Government Did Cause the Housing Crisis," is part of his ongoing attempt to show that the private financial industry was the victim, not the cause, of the financial crisis.

Mr. Wallison protests my characterization of him in a recent interview in The
Atlantic as "a real extremist." Yet his article again proves his extremism which is marked by his denial that a failure of regulation of reckless or imprudent practices in the private financial services industry played any significant role in the crisis, and his complete rejection of the regulatory reforms in the 2010 Wall Street Reform and Consumer Protection Act.

It is important to remember that Wallison's unique interpretation of the financial crisis has been rejected by every other member of the Financial Services Inquiry Commission, including the three Republican commissioners on the panel. Wallison's disagreement with the other members was so strong that he refused to sign their dissent and instead wrote his own dissent to the majority opinion. In subsequent Congressional testimony Wallison referred to them disparagingly as the "The Group" because he found them woefully inadequate because in his mind they did not place sufficient blame on the government for the housing crisis. A report on the FCIC by Democratic members of the House Oversight Committee revealed the degree to which other commissioners struggled to deal with Wallison's extreme position.

Mr. Wallison is also far out of the mainstream in his recommendations for dealing with Fannie Mae and Freddie Mac. In 2009 and 2010, while Democrats were working to pass the financial reform law that Mr. Wallison believes to be wholly unnecessary, the Republican Members of the Financial Services Committee offered a bill drafted by Mr. Wallison which would abolish Fannie and Freddie without putting anything in their place to support the mortgage market. Senator Dodd, I and many other Democrats believed that a new system was needed, but we did not think that abolishing Fannie and Freddie without creating some kind of arrangement for the guarantee of securitizations of 30-year mortgages would adequately serve our nation's housing needs. The Republican members of the House-Senate Conference Committee were contemptuous of our position, and they pushed hard to get us to adopt the bill which Wallison had drafted.

This year, House Republicans abandoned Wallison's position. As the majority party in the House, Republicans have the power to advance Wallison's legislation to abolish Fannie and Freddie. But they are fully aware that groups concerned with housing - realtors, homebuilders, lenders, low-income housing advocates, etc. - believe that Mr. Wallison's approach would be a disaster. For this reason, Republicans did not even introduce the bill the until after we embarrassed them by noting its absence. The current posture of the Republican committee leadership, articulated by Congressman Scott Garrett, Chairman of the relevant subcommittee, is that they cannot move on the bill because they need guidance from Secretary Geithner; they cannot act on their own principles and views until the Obama administration tells them how to do it. The fact is that they cannot advance the bill because they know it is too extreme.

Wallison's positions are formulated on the basis of his extremely selective account of the financial crisis and steps taken to address its causes. For example, he omits mention of the passage in 1994 of the Homeowners Equity Protection Act (HOEPA), which directed the Federal Reserve to establish rules to prevent mortgages from being given to people who could not afford them. A decade later, as the housing bubble inflated, Federal Reserve Chairman Alan Greenspan refused to use the power given to him under this law to restrict predatory lending, arguing that free markets would naturally lead to the best results. In 2008, after the peak of the financial crisis, Greenspan appeared before the House Committee on Government Oversight and admitted that his assumptions had been wrong. "I found a flaw," he told Chairman Henry Waxman. "I don't know how significant or permanent it is, but I've been very distressed by that fact."

Wallison has apparently not yet discovered this flaw.

Wallison criticizes me for having said in 2003 that I was for "rolling the dice" on Fannie and Freddie. But his memory for the period between 2004 and 2008 becomes extremely selective to the point of being dishonest. In 2004, the administration of President George W. Bush began a conscious plan of trying to increase levels of homeownership as part of its "Ownership Society," raising affordable housing targets for Fannie and Freddie. I opposed this policy because I thought people could end up with mortgages they could not afford. Wallison also omits Democratic efforts to pass legislation to reduce predatory lending -- this was blocked on direct orders by House Majority Leader Tom DeLay. He also conveniently ignores the fact that my Democratic colleagues and I worked with moderate House Republicans to try to pass legislation to increase regulation of Fannie Mae and Freddie Mac -- this was killed by the Bush administration, which according to Republican Chairman Mike Oxley, "gave us the one-finger salute." Finally, he omits the fact that in 2007 House Democrats passed an even stronger Fannie and Freddie bill which later became law. The legislation allowed Bush Treasury Secretary Henry Paulson to put Fannie Mae and Freddie Mac into conservatorship, arresting behavior that could cause further losses. The law has won widespread praise.

To be fair, there is one aspect of Wallison's piece in the Atlantic which reveals a partial retreat from his extremist positions. Mr. Wallison has long contended that the 1977 Community Reinvestment Act was a significant cause of the financial crisis. In page 85 of his dissent to the Financial Crisis Inquiry Commission report, Wallison writes that "the most controversial element in the vast increase in NTMs (non-traditional mortgages) between 1993 and 2008 was the role of the CRA." But in his response to my characterization of him as an extremist, he now repudiates his earlier position, writing that "As far as I can tell, CRA was a relatively small contributor to the crisis, when compared to the GSEs and the affordable housing requirements."

This is small but significant retreat from Wallison's very extreme position on the financial crisis. But overall his views remain clearly on the furthest margin of opinion, rejected even by his three Republican colleagues on the Financial Crisis Inquiry Commission and by conservative members of the House Financial Services Committee.

Maloni, 12-28-2011

Thursday, December 22, 2011

Pimping the SEC Findings Could Get You Coal in Your Christmas Stockings

“You know Dasher and Dancer, Prancer and Vixen, Wallison, Pinto, the Journal, Donner and Blitzen, but do you recall their most infamous snow job of all…..….”

Before we all get buried by the holidays, I wanted to share some thoughts on last week’s SEC indictment of three Fannie and three Freddie senior officers for what the regulatory agency said was misrepresenting the nature of the subprime assets each company carried on its books.

The news brought forth the predictable hoots and hollers from Right side wing nuts, their think tank apologists, and a bundle of GOP Members of Congress and presidential candidates, everyone trying to claim that the SEC’s case description supports what they and other anti-GSE folks have been saying.

Joe Nocera--who joined Bethany McLean in writing an extremely readable and straight forward book about Fannie and Freddie and the financial crisis ("All the Devils Are Here")--challenged the SEC findings in a New York Times op-ed piece earlier this week. (See link below.)

I won’t repeat what Nocera said, other than to say, “Way to go, Joe No!”

The Nocera op-ed brought a response in the Wall Street Journal from AEI’s Peter Wallison and one widely disseminated critical email from his colleague Ed Pinto, a former Fannie Mae official, who keeps reminding people of that brief career stop.

Fannie SP Security Purchases a Major Mistake

I never have wavered in my criticism of the massive Fannie and Freddie subprime purchases. The officials responsible were wrong and the strategy sucked--especially when insiders were telling senior managemen, at least at Fannie—not to buy the crap. But, they did anyway and the nation bore the consequences (as did the individuals who lost their jobs and their reputations).

In my opinion, not one of the three previous Fannie chairmen, for whom I worked, David Maxwell, Jim Johnson, or Frank Raines, would have made those purchases.

If Fannie's Dan Mudd and Freddie’s Dick Syron, instead of okaying the subprime purchases, had gone in the opposite direction, the public still would be building heroic statues of the guys. Now, they face millions in federal fines.

But, until incompetence and greed are federal crimes—as dumb as the subprime purchases were—I am not sure the “Fannie-Freddie Six” are guilty of anything but really lame judgment.

The SEC’s actions are less about the former GSEs and more about it trying to enhance its not so shining image in Washington. Certainly before 2008 and intermitently since then, the SEC cops have produced little in the way of going after anyone on Wall Street who caused the massive subprime creation and their international sales.

The Fannie and Freddie folks, demonized individually and institutionally by many in the nation’s capital (including some responsible for the very problems they accuse the mortgage giants of causing), represent politically vulnerable, friendless,low hanging fruit. The SEC thinks they easily can be harvested and will produce a needed public relations boost to its sagging enforcement reputation.

Im not a lawyer and haven't read all of the briefs in this case, but I am suggesting that the SEC has been slow in pursuing any financial services heavies. Its legal assault on the former GSE officials, represents kicking near dead horses.

That’s not to say the F&F guys are blameless, but their actions and statements no more caused the 2008 financial debacle than any other big time player.

Look carefully at what some of those who were indicted said about the SEC case.

Combining—and paraphrasing--at least three public comments, it comes out as: “Our regulator the Office of Financial Enterprise Oversight (OFHEO, now the Federal Housing Finance Agency or FHFA), knew everything that was on our books, knew the loan volume and risk profiles, but never said ‘boo’ at that time about our investor or other public comments. The SEC had the same information through our 10K filings. It, too, was silent.”

The indicted mortgage officials are suggesting that their regulators knew exactly what was on F&F's books and—at the time—received no regulatory guidance or commentary, negative or otherwise.

In the wake of the SEC findings, Peter Wallison, Ed Pinto and the Wall Street Journal haff-kaffed and harumphed that F&F were the root cause of the 2008 world financial debacle and that Fannie and Freddie had been purchasing subprime loans throughout the 1990’s.

Except all three, once again, have their “subprime” facts wrong, no matter how they try and piggyback on the SEC’s verbiage.

Wallison, Pinto and the Journal should know—especially since Ed for a time headed the Fannie business group which microscopically looked at every failed mortgage loan--if a lender poorly underwrites a mortgage applicant (which is what they and others allege Fannie did throughout the 1990’s), that loan most likely will default within three years of origination because of its shortcomings.

So, if the Righties and their friendly media were/are correct, the millions of low quality loans they claim Fannie bought--before the year 2000--should have suffered major problems and produced losses.

Except the loans didn’t.

In fact, most of that decade's books of business—all of the individual loans bought/acquired in those years—not only seldom defaulted but they continued to be healthy, quality performing mortgage assets well into the next decade. (All of the supporting data for this statement and similar ones have been published by the SEC and OFHEO/FHFA.)

Ed and Peter can’t accuse Fannie Mae of buying billions of subprime loans as far back as 20 years ago—using Ed’s very “liberal” (oops!) definition of subprime--and ignore that those 1990 loans just didn’t default in any significant manner, quite the contrary.

What did go bad, and in horrific numbers, were the F&F purchases of subprime mortgage backed securities which Wall Street created—outside the GSE underwriting systems—and sold world wide. That story has been well told and it’s a sorry mistake Fannie and Freddie share with a lot of other investors, who made equally bad business choices.

Messrs. W&P often reject federal agency studies and reports which don't agree with them. But now they think they and SEC lawyers are soul mates.

Wallison and Pinto have conflated the SEC’s finding with their GSE attacks and twisted that into an SEC endorsement of the hyperbolic views they’ve been flogging for years.

The town now is hearing lots of, “You see, we told you, didn’t we tell you?” from the AEI twins.

But—elsewhere in town--any number of recent federal reports (including a separate one from the SEC) not only have rejected W&P's primary premise, but the Fed and the President's Financial Crisis Commission rebuffed them in content and, in an unusual development, by name.

I would note and then ask, from a purely historical look, why should anyone believe Wallison and Pinto now, when they disassembled so much and misled people before? And please don’t tell me it is because their work appears in the Wall Street Journal’s editorial pages.

SEC Findings from a Legal Perspective?

I have a great deal of professional respect for Gwenn Hibbs, a former Fannie colleague, who I first met 30 years ago when we worked together at the federal Home Loan Bank Board. Gwenn has a first rate legal mind and multitudinous other talents, ranging from sketch, skit, and book writing, to playing musical instruments and training her canine pets (although not to play trombone).

In an email this week to me about the SEC indictments, Gwenn asked:

“… why none of the coverage in the '”NEWS” section re the F/F misrepresentation and fraud allegations by SEC discusses the dismissal by a federal district court of virtually the same charges (re inadequate subprime disclosure) in a shareholder derivative suit..”, as Nocera points out?

“That whole case can be found at: .

“Maybe the reporters could be inspired to even call the SEC and ask THEM why their suit won’t be tossed out on exactly the same reasoning. Or ask them (I presume Gwenn means the media) if they don’t care because by the time it gets to the dismissal stage, it’ll be after the 2012 election.”

Go get ‘em, Gwennie!

I can’t answer that question, maybe some of the lawyers out there reading this can.

Coming Year

Health, happiness, and good holiday wishes to you all—even the wing nuts who provide so much content for my blog. You might want to acquire a coal burning stove in anticipation of Santa's presents.

Maloni, 12-22-2011

Sunday, December 18, 2011

The Monsters Are Alive, Igor!!”

It’s fun being right and it’s easy to be right when making predictions about a House and Senate (both sides of the aisle) which has done little but shame themselves for the past few years.

In a blog last week, I noted that Congress—as a “pay for” for its end of session actions--was contemplating a new Fannie Mae/Freddie Mac user fee that would be charged to Fannie/Freddie customers (mortgage lenders), with new revenue bypassing conmpany coffers and flowing directly to the Treasury.

This bipartisan idea had been kicking around for months, since the “work” (ha, ha!) of the Select Deficit Committee. A responsible media practioner told me that the idea first came from House Majority Whip Eric Cantor (R-Va.), but I cannot independently confirm it.

Last Friday, the Senate approved that fee to pay for the two month extension of the lower payroll tax, an Obama Administration priority due to expire at the end of this month. The bill then was sent to the House, where it will be voted on it early this week.

Livid House conservatives are angered by the brief two month extension and the belief that it represents too big a political win for the Democrats. They may reject the plan—causing angst for their leaders and joy for the Tea Party--not because of the Fannie/Freddie “tax” (my word, but trust me, it is), but for political reasons.

I’ve said this before and I will repeat, bipartisan support on any revenue raiser is rare and, as such, this new fee—which mortgage lenders only will pass onto borrowers—will be utilized either now or shortly thereafter when Congress again seeks revenue for “deficit reduction purposes.”

The Fannie Freddie fee likely then slowly will become a national fact of life and work its way into mortgage rates for some time. That also suggests—unless Congress does something entirely unpredictable (which involves work and intelligent legislating)--Fannie Mae and Freddie Mac will stay in place.

Despite all of the gnashing of political teeth, the latter is a positive because, systemically, the two are needed to support a mortgage finance market still shaky and working out its post-2008 relationships.

(I love the irony that so many Senators and Congressmen, by using this approach as a “pay for,” likely have breathed life into two entities they have spent the past several years excoriating.)

For the naïve who argue that raising the former GSEs prices will bring in fresh “private capital” (read banks, which because of all of their federal support mechanism, are hardly “private”) don’t bet on it.

When the legislative/political dust settles and the fees take hold, the higher Fannie/Freddie mortgage rates will be used by big bank lenders as a baseline to increase their pricing on conforming and non-conforming loans.

To those in Congress who still don’t get it, it’s not making the loan that is a bank problem (since most bank mortgage originations are sold to Fannie and Freddie), the problem is bank unwillingness to hold the mortgage risk on their books. That won’t change near term.

Happy holidays to all and please try and remember those less fortunate—especially the kids--and help them in whatever way you can.

Below are links to pieces discussing the congressional action reviewed above.

Maloni, 12-18-11

Tuesday, December 6, 2011

Fannie and Freddie Get Resurrected?

Go Long the Former GSEs?

Some of us have been predicting for three years that Congress—because it has no real mortgage finance alternatives—would keep Fannie Mae and Freddie Mac in place, despite all of the GOP anger, anguish, and verbal posturing to “get, destroy, or abolish” the two mortgage giants.

But this week our prediction got new legs—and lengthy ones at that—when word leaked about how a new extension of a lower payroll tax might be funded. (See Pennsylvania Democrat Senator Bob Casey’s payroll tax revenue explanation.)

Casey said because of lengthy bipartisan discussions on the utility a new Fannie and Freddie fee--going back to the failed Select Committee on the Deficit--both D’s and R’s want to stick Fannie and Freddie with mandated higher “guarantee fees” to cover lost Treasury revenue caused by extending the current low payroll tax.

Late political developments have the GOP opposing Casey’s plan—which was blessed by the White House and Majority leader Sen. Harry Reid (D-Nev), but not over the Fannie/Freddie fee but because the scheme still has a minuscule tax on those making over a million dollars a year.

But, IMO, any agreement will keep the new F&F fees.

The “G fee” is the price lenders pay F&F for their mortgage backed securities (bonds) guarantee of the “ timely payment of principal and interest” on bonds created from mortgage loans the lenders make) as part of providing revenue that will be lost by extending the much desired lower payroll tax.

The “F&F guarantee” is what allows the bonds to be easily traded in markets all over the world.

F and F Are Back

Why does this mean—in my view—that Fannie Mae and Freddie Mac have new life breathed into them? Two reasons, simply.

The Budget rules demand that all revenue proposals, whether this one or others, require a 10 year revenue projection, as well as a 10 stream of actual revenue. So, if the Congress is to pay for keeping the current lower payroll tax by having F&F charge their customers—the mortgage lenders—generating the required revenue, that device must be in place for 10 years, which means Fannie and Freddie must be in place for 10 years.

More important is the fact that if a bipartisan group of Senators and Members—as Casey has claimed--really supports utilizing this specific revenue option, it can employed to pay for whatever political wet dream any powerful Senator or Members wants covered by using this unique “tax”—and jacking it up in the future when additional revenue is needed, homeownership impact or not.

Once again, to me, this just means it’s a matter of time before the former GSEs get tapped to pick up some of the deficit slack.

Yes, friends and foes (especially you GOP taxphobes), this may be a “homeownership tax,” because it applies only to Fannie Mae and Freddie Mac, which must pass it on to their clients, mortgage lenders of all stripes, which then will pass it on to their customers, "Mr. and Mrs. would be homebuyer.”

Although many desperate-for-revenue advocates will argue that they just are forcing Fannie and Freddie, those evil twins responsible for _______ (fill in the blank), to pony up more cash to the Treasury, that revenue dog won’t hunt, except maybe in Tea Party land.

Business doesn’t work that way and—if approved for payroll tax purposes or something else--every player in the mortgage chain just will pass as much as possible onto to the next guy in queue, with the public ultimately picking up much/all of the tab for the "Fannie/Freddie fee."

What’s worse (or better depending on where you stand) is that applying this new fee just to Fannie and Freddie—not to the large banks which make “jumbo mortgage loans, those above the Fannie and Freddie ceilings—means the fees won’t be absorbed by those borrowers who need or can afford mortgages of $650,000 or above (which is a benefit to the big banks which make those loans).

But, when the “pay for” dust finally settles, any proposal successfully applied to Fannie and Freddie, surely will extend their lives for years to come.

I hope all of my buddies at AEI, CATO, and Heritage are watching this unfold.

Some investors might want to weigh “going long Fannie and Freddie” in hopes that a future Administration and Congress might just say, “The hell with it, let’s just free the bastards once and for all."

Not a bad call!!

Maloni, 12-7-2011

Sunday, December 4, 2011


It didn’t take a genius to see that the Dodd-Frank exercise took a lot out of the heady and feisty former House Banking Committee Chairman--and now ranking Democrat--Rep. Barney Frank. While Barney still might be able to get on his warhorse and do battle with the best of them, recently he has just began to look tired.

He worked hard and long most recently on the financial reform legislation, which ultimately bore retiring Senator Chris Dodd and Barney’s names, and—in my opinion--produced not much, after the bank lobbyists and the GOP got finished diluting all of the bill’s heavy hitting provisions.

What remained—yet to be fully implemented--got further watered down during the regulatory process, where the banks and their political allies worked their will on the Obama Administration and the federal financial regulators.

Before 2010, Barney may have made up his mind to call it quits in 2012, since his race was so very close.

Dodd-Frank Wasn’t Tough Enough

But in the wake of the 2008 global financial disaster, the fact that Barney Frank failed in leading the Congress to deal directly with the principle companies and issues which produced the world wide debacle, had to sap whatever interest he had left. (Of course, it might have gone differently had any Republicans of note tried to should some of the political burden with him.)

Besides, he’s seventy years old and likely can chose to teach professionally, pursue his vast set of humane priorities, or even just explore his poker playing skills and interests.

While I believe Barney Frank could win re-election, why should he go through all of that anguish just to be a minority Democrat on Financial Services, as he aged into his mid-70's?

As someone with first hand experience (and the scars to show for it), I laugh ruefully at those people who claim Barney was a foil for Fannie Mae.

Bar none, he was the toughest, most difficult person I ever had to lobby.

He was tough to schedule, never gave you the time for full explanations and political rationales—because he felt he knew them all, even the ones you weren’t pushing--and acted as if his next meeting was with God and that you were impinging on the few minutes he was willing to give the deity.

He seldom communicated what he was going to do until after he did it or say if he merely was going to vote for or against you or work his colleagues behind the scenes, which most lobbyists wanted the savvy legislator to do.

To me, it was a shame that someone so brilliant, so capable, and with such a sharp satirical bent—often missing in other public officials--was so very off putting.

Those people who are catatonic about Rep. Maxine Waters (D-Cal)—with cause?--succeeding Barney and possibly becoming committee Chairperson, should relax because even if President Obama wins in 2012, he won’t have coattails long enough to sweep Speaker John Boehner (R-Ohio) and the House GOP out of power.

Ethanol Warms the Cockles of Your GOP Heart!!

The next time your friendly Republican Senator or Congressman discuss their legislative and political priorities, ask them where they stand on whether T. Boone Pickens or the infamous Koch brothers should be entitled to billions in federal ethanol subsidies.

The only problems as these stalwarts of the Right fight each other over federal dollars, which they nor their ethanol businesses need, is that one or both of Pickens or the Koch’s will win.

Of course, doing away with these wonderful ethanol tax benefits never will gain GOP support.

Read more—as Sebastian Blanco, writing in the smarmy situation as these rich guys square off against one another or more precisely,in my view, against the American public and our federal deficit.

FHFA’s IG, His Agency and Boss

Maybe healthy conflict is the natural role between an inspector general and the agency where the IG works.

The conflicts seems to exist at the Federal Housing Finance Agency (FHFA), the Fannie Mae and Freddie Mac federal regulator, where Inspector General (IG) Steve Linick has been chucking out report after report damning weaknesses or shortcomings in the FHFA oversight and regulatory process.

Recently, Linick scolded the agency for allowing Fannie and Freddie to spend some $640,000 to send a combined hundred employees to the national Mortgage Bankers Association annual conference in Chicago, earlier this year.

Long before the 2008 federal takeover, Fannie officials decided too many employees—who weren’t needed to interact with business partners—were attending this event. Management even then rigorously cut back on those attending.

So, there is a basis for Linick's conclusions.

However, today--as was the case when I worked at Fannie--MBA lenders are major F&F customers, which--despite the for GSE's federal leashes—continue to acquire or securitize billions of dollars in mortgage loans originated by the mortgage banks and their commercial bank parents. This fact establishes a legitimate business need for Fannie and Freddie to attend the conference in appropriate numbers.

But, here’s what I think may be occurring, especially when I see attention paid to piddling issues like employees attending a conference and the pennies that represents.

WH Saying Bye-Bye??

Linick, rightly or wrongly, has been issuing reports critical of the agency. Intended or not, those complaints are born by the agency’s Director, Ed DeMarco, a Republican appointee who has been “acting director" for some three years, after the Obama White House held him over.

In my evolving view, DeMarco has done a very good job at FHFA in very difficult circumstances. He is supposed to conserve the companies, as in “conservatorship,” but recognize that they still are the engine of the nation’s conventional mortgage market and, as such, need to run themselves in some semblance of commercial entities. And that’s before you consider all of the Hill crazies in both parties criticizing the mortgage finance giants.

DeMarco also has to insure that the two make enough money to pay back the federal government for Uncle Sam’s operational loans.

But, just recently the White House named two former Federal Reserve employees to senior posts at FHFA. Either one has the title status—stipulated in statute—to replace DeMarco either as “acting Director” or on a permanent basis, assuming either can get Senate approval.

In my opinion (no "inside" information), I think the White House is in the process of ushering Republican Ed DeMarco out of FHFA and the IG reports’ accumulated criticisms are meant to justify that action.

Sad, if it happens.

Maloni, 12-4-2011

Sunday, November 20, 2011

Deficits, Fannie and Freddie, and the Redskins

Who do we blame for the abject failure of the Select Deficit Committee to produce a viable budget plan for an up or down congressional vote?

The easiest target is the Senators and members themselves, not the sharpest knives in the drawer to begin with—as I pointed out when they first were named—and certainly not enough with a history of working successfully on a bi-partisan basis to achieve critical mass. Add to that, no “profiles in courage,” no guts to cross party lines to build a consensus product.

It would have taken only one Democrat or one Republican to cross over and join the other side to produce something on which the Congress could vote.

Now, let me quickly point out that those 12 individuals were responding to their respective congressional leaders and the rank and file caucuses, so some of the blame gets shared more broadly.

If anyone believes that the “Sword of Damocles”, i.e. $1.2 trillion of domestic and military spending, cuts will survive the legislative part of the next year’s presidential election, I have some land in Florida for you.

Kick it, kick it

“Kicking the can down the road” has been what this Congress does best—both sides of the Hill, both sides of the aisle—and it sucks.

Even if it isn’t 100 perfect, doing something always is better than doing nothing and letting delay worsen events.

If the domestic economy and international situation aren’t woeful enough to dictate some substantive steps, what do these selfish public officials require to convince them of the need to take deficit reduction action now?

Tom Edsall, writing in the New York Times, lays out the possible political strategies of each party in doing nothing, which may have been part of this charade from day one.

Fannie/Freddie Compensation

I suspect that Congress first will do something to limit the compensation (salary and bonuses) of top Fannie and Freddie execs, then do high fives over the money they saved the “tax payers” and gloat over the Hill extracted revenge for those poorly underwritten, red ink generating subprime loans.

Except for a few messy facts, which seldom stops an angry mob?

Most of those company “squeezees” weren’t responsible for those losses; they were given their assignments to “fix” what ultimately erupted in 2008.

None of the people being targeted produced the subprime securities which failed costing billions. That was Wall Street, using its own corps of mortgage brokers and avoiding the more restrictive Fannie/Freddie underwriting systems. The investment banks then managed to bamboozle the rating agencies into awarding AAA measures to corporate junk bonds, facilitating sales to institutional investors worldwide.

And, the Fannie and Freddie officials--who bought that mortgage poison five or more years ago, seeking yield and revenue and who, theoretically, have angered Congress--all were fired long ago.

My Advice

If I was advising Fannie and Freddie (and I am not), I would urge the top half dozen execs to resign if Congress puts through major compensation caps.

That would then force Treasury and Federal Housing Finance Agency (FHFA), F&F’s regulator, to more closely run the companies and scramble to put together top managements.

Wait and see what the civil servants—without securities, mortgage, or trading experience--can produce running two business with combined mortgage assets of about $1.5 TRILLION.

There was a reason, when Fannie Mae first was privatized in 1970 that the Congress wanted the company (and later Freddie) to not run by civil servants. It was the abysmal financial performance of HUD or the Department of Housing and Urban Development.

The Congress saw that government housing employees didn’t have the skill, experience, or creativity to produce what it wanted, without generating huge losses (see HUD’s history) and wisely ordered the new Fannie Mae to employ private sector employees, earning private sector wages, with private sector incentives. And, Fannie Mae, for the 35 years through 2005, showed the Congress to be correct.

This Congress would have more credibility if they took similar actions against the large commercial banks and Wall Street investment banks, which received tons of taxpayer’s dollars through TARP and zero obligations to invest that money.

Instead, Congress has gone for the low hanging former GSE fruit.

How About Comp Caps for the Big Banks and Wall Street?

Focusing merely on one or two Wall Street execs and limiting their compensation would generate far more savings than whacking to all of the people at Fannie and Freddie, who will see their incomes suffer.

But, hey the Congress—both D’s and R’s—in their rush to claim Fannie and Freddie coup will grab a cheap headline and then run like hell—blaming others—if executive departures produce worse financial results not better.

If the Fannie/Freddie leadership bails, the message will get to the rest of their employees, who will start looking elsewhere and jump at any opportunity to get away from possible salary freezes or more forced firings.

Courageous Ed DeMarco, FHFA’s Director, was absolutely right in his testimony on the Hill last week. He sees the talent departing and he knows it takes very smart and able individuals to run these large mortgage operations. You don’t find them growing on trees in Gaithersburg, Rock Creek Park, or Spring Valley. You have to recruit it and pay for good talent.

(Before this latest salary/bonus dust up occurred; already the top two Freddie execs announced their planned departures.)

Enjoy whatever you save in being penny wise and pound foolish Congress. Your actions, here, are self defeating.

Before voting their anger, Members of Congress might want to familiarize themselves with the facts not the “talking points issued by F&F’s ideological critics and business competitors.

Barry Ritholz’s column, writing in Sunday’s Post business section, would be a great place for them to start.

Of course, that same “get the facts” advice applies to the Wall Street Journal and Washington Post editorial sides, D’s and R’s on the Financial Services and Banking Committees, the Obama Administration and various right wing commentators at AEI, Cato, and the Heritage Foundation.

Cats and Dogs

-- IMO, the GOP presidential candidate with the most common sense, based on his debate pronouncements is Ron Paul. Hard to feel ill about a guy—who sometimes is whacky—but dispenses a ton of good advice.

--It looks to me that Mitt Romney has put his campaign on cruise control and expects to glide into the GOP nomination.

--Newt is what he is, a scintillating speaker and historian, but his hypocrisy during Bill Clinton’s infidelities, the details of Newt’s three marriages (and likely affairs?), his lavish spending/charging at Tiffany’s, and even his work for Freddie Mac (which I first found out about it when I read it last week in the paper) raises character questions and puts him at odds with many Republicans.

Regarding Freddie, you don’t take that much money from any client without endorsing their actions and positions.

--Redskins Coach Mike Shanahan’s facial contortions almost make him like he is going to cry during the games. Of course, with his team’s poor play and Mike’s poor coaching and leadership, his tears would match those of the loyal Skins fans.

--Will the GOP ever get tired of defending the rich and the haves, at the expense of the middle class and have nots? And given the fact that the latter would appear to have far more voting power, when will this majority turn on the aristocratic bent of the Republican Party?

Maloni, 11-20-11

Sunday, November 13, 2011


Will publish again, after brief surgical (eye) rehab.


Sunday, October 23, 2011

Cato Challenges 10 Year Old GSE Support

Stiglitz & Fannie Mae, continued…

Last week I expressed some disappointment that while Nobel prize winner Joseph Stiglitz now raises the issue of “privatized gains and socialized losses” in our financial system, he made very different claims about Fannie Mae some years ago. In a NPR piece back in July, Professor Stiglitz offers his response to this charge. You should read it and decide for yourself. To the Professor’s credit, he does admit that we have a problem with Fannie (and Freddie). Such an admission would have been more helpful a few years ago. But better late than never.

For the sake of brevity I will address one of the many claims now, and address the others later this week. Stiglitz argues that “our big banks get finance at lower rates of interest than do others, because of the belief, in part, that should they have a problem, they will be bailed out.” His implication is that had Fannie not existed the risk would have just flowed to the big banks, which had to be bailed out too. Now I’ve questioned elsewhere just how much of a problem “too big to fail” banks were before the crisis, but one critical point bears remembering, even the most higher leveraged and reckless of the big banks still had to hold multiples of the capital that Fannie and Freddie held. In the extreme the GSEs only were required to hold .45 percentage points of capital against their MBS guarantees. Had a bank held that same risk on portfolio, it would have been required to hold 4.0 percentage points. That’s correct, a bank would have held almost 9 times the capital for the same risk as did Fannie. Even if Fannie held that risk on balance sheet, banks would still be required to hold 160% more capital. The simple fact is that had Fannie/Freddie not existed and banks had instead held that risk, there would have been over a $100 billion more capital in our financial system.

Professor Stiglitz was far from alone, and far from the worst, in terms of academics writing work to provide cover for Fannie Mae. Current economic advisor to Mitt Romney and former Bush official Glenn Hubbard also produced work defending Fannie Mae. Fannie and Freddie were also some of the largest supporters of the various real estate finance academic organizations, like the American Real Estate and Urban Economics Association. This is less about picking on Stiglitz (or Hubbard) than exposing Fannie’s ability to corrupt academia for its own purposes.

Mark A. Calabria October 17, 2011 @ 1:49 pm
Filed under: Finance, Banking & Monetary Policy

Stiglitz and Hubbard are Innocent

By the time you read this, Cato Institute’s Mark Calabria, likely, will have turned to stone for his prevarications, just in the above article alone. He also might have a Pinocchio moment and find his nose several inches longer.

My teasing Calabria is based on something he wrote a week ago—which I’ve posted above--criticizing Fannie Mae, Nobel Prize in economics winner (2001) Joseph Stiglitz, and Glenn Hubbard, a Mitt Romney economic advisor.

About 10 years ago, both Stiglitz and Hubbard penned papers saying positive things about Fannie Mae, Freddie Mac, and the secondary mortgage market. The papers appeared in a Fannie compendium titled “Housing Matters.”

In attacking the two academics, now, Mr. Calabria uses standard right wing anti-GSE arguments to go after Stiglitz (and to a lesser extent Hubbard).

But what he really does—in using these tired themes—is to expose his own ignorance of how Fannie Mae truly operated and why “the pre-2004 Fannie Mae wasn’t the post-2004 Fannie Mae.”

(BTW, before writing this piece, I called Mr. Calabria—whom I didn’t know--to give him a heads up re my disagreements.)

This Mae Ain’t That Mae

The Right refuses to look at pre-2004 Fannie Mae in its pre-subprime role and compare/contrast it with the post-2004 company which made foolish purchases of Alt-A mortgages and subprime securities originated, marketed, and sold by Wall Street firms (a huge Fannie mistake, but one also committed by financial service firms all over the globe).

The pre-2004 Fannie Mae, before Dan Mudd was named Chairman and CEO in 2005, never engaged in that risky type of mortgage investing, as has been attested to in recent months by the SEC, Federal Reserve, Fannie’s regulator—the Federal Housing Finance Agency (FHFA), the President’s Financial Inquiry Commission and any number of economists and financial writers.

The original paper that Mr. Calabria uses to assail Mr. Stiglitz (ditto Hubbard)—where JS offered his opinions of Fannie Mae’s operations and capital—was produced in late 2001, when Fannie Mae was quite successful meeting its charter and producing solid earnings. It was written long before a future Fannie heavily buy private label subprime loans, chasing lost market share and profits.

There was no way, 10 years ago, for Messrs. Stiglitz and Hubbard to see subprime coming or understand how it would rock most of the world’s major financial serice companies and systems.

Privatized Gains and Socialized Losses

I also challenge Mr. Calabria to put some meat (and proof) on the phony—but cute sounding--allegation he parrots that Fannie “privatized its losses and socialized its losses.”

This is an attack line that some congressional know-nothings employ to disparage Fannie and Freddie, because it makes good sound bites but few of them can define or defend.

I worked at Fannie from 1983 through 2004 and every year the company had losses of one type or another, but fortunately, had far greater gains. The losses were deducted from profits and the net number was reported to the company’s investors and later the SEC. Nobody tried to stick the federal government with the company's losses.

It wasn’t until 2008—following the Hank Paulson/GOP takeover of Fannie and Freddie-- that the federal government put its first dime into Fannie Mae (and Freddie), which is another fact that the Right likes to forget.

The Pre-2004 Fannie Wasn’t a Major Risk Taker

The traditional and, indeed, conventional way Fannie operated before Mr. Mudd took control is evidence that huge risk taking wasn’t the GSE leadership MO of previous chairmen David Maxwell, Jim Johnson, and Frank Raines, who preceded Mudd.

During those eras, the “franchise” and “housing mission” were Fannie’s most valuable corporate possessions. None of my colleagues was willing to risk them. I remember telling any variety of outside groups and Congress that as long as the company responsibly met its congressionally mandated housing mission (goals), Fannie should enjoy congressional support.

I believe history proved me right.

Starting in 2004-2005, as soon as acquiring subprime securities--and aggressively seeking market share temporarily lost to the private-label security issuers--became the corporate priority, Fannie’s wheels fell off.

By 2008, Fannie (and Freddie) became wards of the Treasury; their shareholders got wiped out, most of their senior officers left voluntarily or were asked to leave, and their surviving workers lost years of savings they had in company stock.

(Let me note at this point, Fannie Mae’s dalliance with subprime investing should have been caught and stopped by its regulator. Instead the aberrant purchase activity was virtually regulator-blessed.)

GSE Versus Bank Capital

Calabria makes some generic comments about the GSEs smaller capital vis-à-vis commercial bank capital.

The Cato official conveniently forgets to mention two things about commercial bank capital requirements.

Banks had higher capital requirement than the GSEs because the banks could invest in any asset their management chose, including domestic loans of all kinds, foreign commercial and sovereign debt securities (think Greek bonds), while Fannie and Freddie were lower risk mono-line companies, with only mortgage loans and securities as permissible investments.

The GSE’s statutory “minimum” 45 basis points capital (.45%) against credit business was more than enough to protect that entire book of business in all of the years the risk based capital standard was in place--from 1992 on--before the failed subprime acquisitions produced the Paulson/Bush takeover.

Federal Regulators “Turtled” for the Big Banks

In offering the banks his protective journalistic shield, Calabria ignores the favored regulatory treatment big banks enjoyed.

Unlike the mortgage giants, bank executives and shareholders were protected from the consequences of their excessive risk-taking. The Fed lowered interest rates to "reliquify" them and then “lent” to them to prevent deposit runs, while the Treasury gave them capital (TARP funds).

First the Bush White House and then the Obama Administration did this—as I’ve noted ruefully—without demanding from the banks any sort of reciprocal lending (for small and large business or for mortgage borrowers), which could have ameliorated some of the nation’s unemployment problems.

How the Cato (and AEI) crowds can continue to use the "private gain public loss" label with Fannie/Freddie, but not, at a minimum, to apply the same to the banks—for which they toady--is beyond me.

I’d also ask Mr. Calabria to detail his charge that Fannie and Freddie borrowed at lower costs than the commercial banks.

FDIC Deposits Are Cheaper than GSE Debt Costs

The primary source of bank working capital (money they lend to customers, back in the day when banks did lend and not just arbitrage) is federally insured deposits.

There are about $3 Trillion of insured deposits in America’s depository institutions.

The cost of that is simple for the reader to figure, because it is what the banks pay you on your checking and savings accounts, roughly 1% give or take 25 basis points.

I can almost guarantee you that Fannie pays two or three times that amount for its working capital, slightly more than the US Treasury but slightly less than other large investors, when the latter borrow in the international debt markets.

I think Mr. Calabria perpetuates a myth when he continues to claim that Fannie pays/paid less for working capital than the banks and that banks are rugged private institutions.

Da Dum De Dum

(And finally, Congrats to DG and FDR, you two irrepressible and crazy kids!!)

Maloni, 10-23-2011

Sunday, October 16, 2011

Cats and Dogs

The GSEs, also Wishes and Hopes

Other issues with higher political priorities have bumped Fannie and Freddie to the back burner, making those of us who predicted no legislation on these companies until 2013 look prescient.

Still there were two GSE items this week worth highlighting.

First the American Enterprise Institute’s (AEI) Peter Wallison was back on the Wall Street Journal perch, beating up Fannie and Freddie, using Ed Pinto’s ragged research (EP also is with AEI and once toiled at Fannie) which wrongly suggests that Fannie and Freddie bought subprime loans in the 1990’s bringing about the 2008 international financial meltdown.

Give it a break, Peter. You lost this one…overwhelmingly.

Fannie’s regulator, the Federal Housing Finance Agency, the Federal Reserve Board, the Securities and Exchange Commission, and the President’s Financial Crisis Inquiry Commission, plus any number of columnists and prominent economists have shown how wrong Wallison’s and Pinto’s meanderings are. That view is heavily weighted by the fact that Ed conjured a unique and exclusive definition of “subprime,” which nobody else recognizes or employs.

Wallison and more recently Pinto have run with this bogus claim for years but their numbers still lack integrity, unless you are the WSJ.

Moving on, but not too far…

The recent book by Josh Rosner and the New York Times Gretchen Morgenson employed the AEI fables and added their own negatives about former Fannie Mae Chairman Jim Johnson. But their business attacks were rebutted too, by many of the same folks who threw cold water on the Wallison-Pinto work.

Jeff Madrick and Frank Partnoy, writing in the New York Review of Books, penned the most recent Rosner-Morgenson smack down. (Link below.)

One more article which deserves sharing came from an old line GOP economist of some renown, Martin Feldstein, Chairman of President Reagan’s Council of Economic Advisers, from 1982 to 1984, who last week wrote in the New York Times about making existing mortgages more affordable and holding down future defaults.

Feldstein’s proposed creative use of Fannie Mae and Freddie Mac, to reduce the outstanding principal on their mortgages, could meet bank opposition. This, despite how quickly the banks could make it work, how many consumer/customers could benefit, and how alternatives might be less efficient and more bank costly.

The Treasury and Fed should meet with bank reps and offer Feldstein’s plan for implementation. If the banks reject it, federal financial regulators should propose that banks “mark to market” their mortgage portfolios. That won’t immediately help consumers, but it will bring greater reality to bank accounting. (Link to Feldstein’s article follows.)

My Bucket List

One of the beauties of writing a blog is that you don’t have to check with anybody before spilling your thoughts on the issue of your choosing.

Here are a few things—some serious, some silly, some fanciful, others doable--which I would like to see happen before I kick or succumb to Alzheimer’s.

--A ton of “country club” Republicans run and win congressional seats, displacing some of the Tea Party cranks who won in 2010, and bring some sanity to the GOP.

--“Solyndra” notwithstanding, for the Congress to foster and stimulate green business development because the world payoff is so grand.

--To be alive when the Congress and whoever is in the White House realize that Fannie and Freddie really did work, except for the subprime crap, an aberration unlikely ever to happen again.

--The return of bipartisan friendships/relationships. When I worked on the Hill in the 1970’s, most D’s and R’s did like and respect one another, got along, compromised and displayed comity.

--For colleges and universities to share some of the revenue with “student athletes” and end the amateur status charade.

--For the National Basketball Association (NBA) to stay “struck and locked out” through next year and maybe 2013.” (Fat chance; too much money involved on both sides.)

--For Roger Goodell to resign or be forced out as head of the National Football League.

---I want the Congress to pass and the President to sign legislation capping malpractice health care awards and then track to see if the “docs” pass onto their patients some of their medical insurance savings.

--For the GOP to admit—even to itself--that lower taxes for corporations, the wealthy, and smaller companies have been around since “W’s” first term and haven’t dramatically increased industrial production or new hiring. The R’s want the poor to get by with less federal help. They would earn greater credibility if they apply the same principle to the well off.

--For a future Supreme Court—this one won’t reconsider--to establish spending limits on all federal elections, low enough so incumbents face plenty of competition, meaning the most appealing candidate--not the richest--has a chance to win.

--For some bright young American kid to figure how to run internal combustion vehicles on salt water or something equally far-fetched and improbable.

--For newspapers to make a comeback.

--Never having to pay more than $1 for a two liter bottle of diet soda, no matter the brand.

--John Boehner to tell the House Tea Party contingent (and their back stabbing leader from Virginia, who covets Boehner’s job) to “stuff themselves,” which hopefully will allow Boehner to resume his previous decent guy persona.

--For the American people to wake up to the reality of the giant financial services companies. They exist to make money; they are not charities; they squeeze you for every dollar they can; they covet their competitor’s revenue; and most couldn’t exist without the federal government’s largesse, which –for me—puts the stake in the heart of the bank claim of being “the private sector.”

--For Maryland and Virginia to truly clean up the Chesapeake Bay and also significantly curtail crabbing and fishing—both commercial and private--for a year or two to let the species thrive and multiply. (Too radical?)

--To spend quality time with Angelina Jolie, when she isn’t wearing make up, to see if I love her as much as I think I do.

--To have fresh recordings of all of the 1950’s R&B hits by groups whose first name always started with “The……” (as in, Platters, Arabians, Drifters, Del Vikings, Aladdins, Five Satins, Crows, Dominos, Limelights, Passions, Angels, Imperials, Bel-Aires, Argyles, etc. etc.)

--To have a local store with all the penny candy and five cent candy bars I used to buy when I was a kid (and pay today what I paid for them 60 years ago).

--For the state of Maryland (or DC) to approve a full service casino nearer my house, so I don’t have to drive 63 miles (one way) to Charles Town, West Virginia to gamble.

--To be able to play touch football, basketball, and soft ball as well as I did when I was 20.

--To learn how to mechanically repair and refurbish old cars and then to buy two 1970 GM “Muscle Cars” (Pontiac GTO and Olds Cutlass convertibles) and restore them.

--Force the UN move its headquarters to Europe.

--The Russian armed forces to mutiny, revolt against Putin, the Russian mob and the oligarchs who control that country and lead the Russian people in demanding a true representative government.

--Sidney Crosby and Evgeny Malkin stay health for the entire 2011-2012 hockey season, almost guaranteeing that the Pittsburgh Penguins will be Stanley Cup contenders.

--Ben Roethlisberger, James Harrison, and Troy Polamalu to stay healthy for the balance of the 2011 National Football League season, allowing the Pittsburgh Steelers to be Super Bowl contenders.

--To have Bob Nutting, the Pittsburgh Pirates’ owner—whose team now has produced 19 consecutive losing seasons--sell the Pirates to a person/corporation willing to spend the money necessary to compete in major league baseball.

--To have The Angel of Death visit every nation and annihilate all their citizens who practice violence and repression of others or who foster those vile acts. (Gawler’s funeral home in the District of Columbia would do a land office business, just from Capitol Hill alone!)

--For President Obama to approve dropping several nukes on parts of Iran to show the Ayatollah not to screw with the US.

--Ditto the nukes in about 20 valleys between Afghanistan and Pakistan (and maybe just a few in each country) to see if we can add to the US drone successes.

--Have the world turn Africa into a continent where every country is bountiful and produces enough food for their citizens and to export, so that there are no more famines and no more pictures of sickly and dying children.

--The Congress to approve an automatic death penalty for all child molesters, with this current Supreme Court rejecting the inevitable challenge.

--For every country to legalize marijuana and release from prison anyone jailed for trafficking solely in that drug.

—To see every American second grader get instruction in foreign language and computer classes, with the most able taught Asian and Middle Eastern tongues.

Maloni, 8-16-2011