Bill Maloni's GSE Blog

Government Shutdown….Not!

Why the federal government didn’t shut down on Friday night is buried in the miasma of why two kids fight or don’t fight, i.e. they have their reasons.

Talk about overly dramatic and anticlimactic. The world would not have ended if the deal came one or two days later, as has happened in the past.
Where you sit is where you stand and most people already have picked their heroes and villains

In my view, the “winner” (Washington and America, with our sports laced society needs a “winner”) was John Boehner.

He represented his side, well, made his social case against Planned Parenthood or whatever the Tea Party was PO’d about last week n(it will change to something new), secured needed budget savings that he didn’t expect and positioned himself for the next partisan squabble which will involve a more emboldened GOP Right and far larger stakes and dollars.

Honestly, part of me wants some elements of the GOP/Tea Party agenda to prevail because I don’t think the Democrats are ready for the amount of federal sopending cuts necessary to make a dent in our national deficit.

The GOP is. I disagree with most of their spending priorities, although could live with many. But, if the Republicans ever put “on the table” serious defense cuts, diminution of agriculture and other federal subsidies to their core constituencies, then their credibility quickly increases.

President Obama did his job and still positioned himself for 2012, including making his formal re-election announcement, but actions speak louder than words and more cuts must be the guiding principle when the sides start major debate on the FY2012 budget, the President’s formal version of which is nowhere near adequate or up to the reduced sopending necessities.

Shame on all of those who have ignored the hard work and deficit “road map” that the President’s won Bowles-Simpson Commission offered the White House, Congress, and the public.

You want bi-partisan, that was bi-partisan. This degree of reduced won’t become manifested until you have a ton of new Representatives and Senators for whom an additional term is not their primary objective.

That means it probably won’t happen in “God’s lifetime!”

“Banks Are Off the Hook, Again”

So said the lead editorial in yesterday’s (Sunday’s) New York Times about the bank’s streaky, at best, record in solving mortgage foreclosure issues, deftly and with common sense.

Let’s keep it simple, forget the histrionics, and just try and be pragmatic defaulted mortgage problem solvers in the best interest of the nation.

Looking back three or four years, some unrealistic expectations of homeownership by people who could not afford it yet were manipulated into debt by mortgage broker con men, well documented financial services legerdemain, and bad economic times millions of Americans have defaulted on their mortgages. Those financially bleeding, failed and failing loans now are on various bank and other investor balance sheets.

The federal government in a clumsy way tried to incent invertors, mortgage servicers and mortgagors to address the problem and while some did, most didn’t. Months and months ago, I wrote that the banks only would amelioratively act once the federal government made them, either through very heavy subsidies or sanctions.

The government never did either and the problem still is with us or as the Times pointed out yesterday.

"Americans know that banks have mistreated borrowers in many ways in foreclosure cases. Among other things, they habitually filed false court documents. There were investigations. We’ve been waiting for federal and state regulators to crack down."

But, the government before and since has ladled out billions of taxpayers dollars to the banks—with no reciprocal behavior demanded—and we are left with the question.

Going forward, who is in a better position to eat the foreclosure costs, the borrowers or the banks and investors?

Faster than you can say “Tim Geithner,” the Administration’s answer is most borrowers should.

Simply stated, unless overwhelmingly forced the banks will do nothing that is not in the best interests of the banks. Anybody expecting otherwise is naïve or foolish.

I’ll leave Gretchen Morgenson out of this week’s blog but will point to her employers’ top editorial, in which the banks and the too-bank-friendly Obama Administration come in for a deserved calling out over another weak deal between the federal financial regulators and the commercial banks to remedy the problem.

(Here’s a link to the Times' editorial.)

http://www.nytimes.com/2011/04/10/opinion/10sun1.html?_r=1&ref=todayspaper


Do You Think…?

--That the House Republicans understand that if they force F&F to rapidly shrink their loan portfolios—irrespective of market demand—the companies will have to shed the high quality loans—acquired over the past two years—on which they now rely upon to generate income to pay the Treasury’s ridiculous mandated 10% “tithe?”

--That Rep Randy Neugebauer (R-Tex), who also rants about getting the federal government out of the mortgage market, especially the securities side (but I’ll bet he means the portfolio business), yet wants to give the large commercial banks more and more federal subsidies, number bone of which is a new “federal” reinsurance for bank securitization activities?

“Federal reinsurance” hardly sounds private sector or private to me, but I am not a Texan.

--That the House Republicans and others who for years complained and bemoaned Fannie’s and Freddie’s mortgage portfolio realize that most of the GSE woes and red ink—which are forcing bills to be introduced and hearings held—came from the companies’ securities or credit investments?

I’ll bet not!



Maloni, 4-11-11