Wednesday, August 31, 2011
Listening to some of the campaign rhetoric, it’s very scary that the GOP race seems to be include a stirring debate over which candidate can argue most convincingly that he or she is closest to God and therefore better qualified to lead the Republican Party in the 2012 presidential election.
Nothing wrong with a strong personal religious faith, but whatever ever happened to people demanding leaders intellect, who comprehend market forces, sound judgment, a world view compatible with the people you want to lead, and some compassion (“walk a mile…”) other than religious passion?
Texas Governor Rick Perry, the “Republican proselytizer in charge” and front running GOP presidential candidate, isn’t President, yet—nor has won his party’s nomination—but already he has convicted Fed Chairman Ben Bernanke of treasonous acts, or at least says BB is guilty of such.
“If you can’t understand it, throw rocks at it,” seems to be the new mantra as per Perry’s indictment of our central bank and its Chair. (Wait till Perry realizes that Bernanke isn’t a Christian.)
After suggesting that any new Fed stimulus would be treasonous--and Bernanke along with it--Governor Perry campaigning in Iowa said, “I don't know what you all would do to him (BB) in Iowa, but we would treat him pretty ugly down in Texas.”
I advise never uttering the name “Bilderberg” in front of Governor Perry!!
The Fed GSE Report
The Bernanke, Fed and GOP nexus is germane, since the Fed economists have just published a report debunking the GOP’s core rampart that Fannie Mae’s and Freddie Mac’s low income lending and the complementary federal affordable housing goals were responsible for the 2008 US/world financial collapse. (See American Banker story at the end of this blog.)
The Fed found quite the contrary. The GSE lending was far superior to the poorly underwritten private label subprime mortgage securities which Wall Street produced in the billions and then sold world wide infecting financial institutions in every modern country.
The Fed report supports those who have been arguing this point for some time but I doubt likely will have any major impact on the Right because the Fed shatters that which the conservatives stand on when they argue against any federal role in the nation’s mortgage finance system, i.e. “look at how bad Fannie and Freddie performed.”
So the Fed becomes the latest institution to take on all of the tree killing studies produced by the American Enterprise Institute and its gurus, Peter Wallison and Ed Pinto.
The central bank’s work is another in a series of assaults on Gretchen Morgenson’s poorly researched (note the number of factual errors) book, claiming Jim Johnson stewardship of Fannie Mae and the company’s affordable lending under Johnson led to the 2008 Armageddon.
And the Fed’s work also dumps a whole lot of cold water on the fiery anti-Fannie/Freddie rhetoric of many on the Right, including the Chairman of the Selection Deficit Committee and senior member of the House Financial Services Committee, Rep. Jed Hensarling (R-Tex).
But, will they care about facts?
The only personal comment I’ll add is to remind that the Federal Reserve Board never has been considered a Fannie/Freddie friend, quite the contrary when Alan Greenspan (he of the plummeting personal legacy) was Chairman.
Cheney and McCain
I won’t buy Dick Cheney’s new book or put a penny in his pocket, but I’ve enjoyed reading excerpts about what he says about well known political figures.
Thinking back to the 2008 presidential race, when a scrambling candidate John McCain tried clumsily to employ Fannie and Freddie as cudgels to beat Barack Obama politically about the head and body--ironically, using many of the arguments which the latest Fed report dismantled--McCain temporarily put on hold his (failing) campaign in the summer of 2008 to call for an emergency all hands “economic summit” in DC.
Cheney offers the following observation of the Arizona Senator at the summit meetings, which McCain hoped would make him appear statesmanlike and above the daily campaign political fray.
“Senator McCain added nothing of substance. It was entirely unclear why he'd returned to Washington and why he'd wanted the congressional leadership called together. I left the Cabinet Room when the meeting was over thinking the Republican presidential ticket was in trouble.”
Fed Economists: CRA, Housing Goals Not to Blame for Financial Crisis
By Joe Adler
August, 29, 2011
A new Federal Reserve Board report refutes the claim by some that the Community Reinvestment Act and affordable housing goals of Fannie Mae and Freddie Mac caused the mortgage crisis.
"We find little evidence that either the CRA or the" affordable housing "goals played a significant role in the subprime crisis," wrote senior Fed economists Robert B. Avery and Kenneth P. Brevoort in the report titled "The Subprime Crisis: Is Government Housing Policy to Blame?".
To test the claim forwarded by several conservatives that the policies are culpable, the central bank essentially compared loans backed by the two policies with those that were not. In one analysis, Fed researchers compared mortgages between CRA-covered and non-CRA-covered institutions. In another, they compared certain geographic areas known to benefit from the CRA and the housing goals set by the government-sponsored enterprises with other areas. In both tests, no link between the two initiatives and higher proportions of troubled loans could be found.
"Using a variety of indirect tests, we find little evidence to support the view that either the CRA or the GSE goals caused excessive or less prudent lending than otherwise would have taken place," Avery and Brevoort wrote.
Rather than find higher delinquencies in areas served by the CRA, the economists wrote, "In fact, the evidence suggests that loan outcomes may have been marginally better in tracts that were served by more CRA-covered lenders than in similar tracts where CRA-covered institutions had less of a footprint.
"Loan purchases by CRA-covered lenders also do not appear to have been associated with riskier lending. Additionally, this analysis found no evidence that either the CRA or the GSE goals contributed to house prices appreciation during the 2001-2006 subprime buildup," they wrote.
Thursday, August 25, 2011
Last week, the Washington Post carried a front page story, by reporter Zach Goldfarb, suggesting that the Obama Administration was moving closer to prioritizing a role for the federal government in the nation’s mortgage finance system.
That development also could mean that Fannie Mae and Freddie Mac might be active future market players, likely with different names and/or business limitations, in a second Obama Administration.
There were no specific details about future GSE activity just the suggestion.
Here is how Bloomberg covered the same story.
“The Obama Administration is working on a proposal to maintain a large government role in mortgage finance, effectively preserving most of the functions of Fannie Mae and Freddie Mac, according to a person with direct knowledge of the effort.”
No sooner had the Post story circulated then the White House media spinners beat down speculation saying no such decision had been reached and the President was not ready yet to choose between previously announced policy options such as doing away with F&F, privatizing them, or something else.
Yet, the Goldfarb story rings true to me and the first reason has nothing to do with Fannie or Freddie, but merely the journalism world.
Over the years, I am sure that the Post has written hundreds of stories like this. Often when an internal working group produces a paper which represents some slight or even dramatic shift from an existing public position—in this case February GSE testimony by HUD/Treasury—and word slips out, accidentally, or is leaked by an advocate or opponent of the new twist.
IMO, if the Goldfarb’s story wasn’t based on good sources and other support, his article wouldn’t have made it to the Post’s front page.
The other more obvious reason is that the White House people working on this issue have concluded that without a federal market presence, the United States will not have a smooth, efficient, standardized, consumer friendly mortgage finance system, guaranteeing the existence of the 30 year fixed rate mortgage.
Many right wing think tanks, congressional Republicans, and lots of Tea Party denizens still believe this is disastrous public policy.
Whatever shortcomings that Fannie and Freddie may have, the conservatives have no proof that anything else will evolve (nor do they seem to care), since their friends the banks are not obliging them with aggressive creative mortgage lending designed to crush Fannie and Freddie with vigorous competition.
The mythical private sector, i.e. large banks, investment banks, others, just have not stepped and actively made mortgage loans except to the best of credits and on the most favorable bank terms.
Everyone knows that Fannie, Freddie and the Federal Housing Administration (FHA)—two years after the first two were taken over-- are conducting about 90% of all of the nation’s mortgage financing.
Big lenders are originating very few loans which they can’t turnaround and shift into Fannie and Freddie securities.
I assume the Goldfarb story is accurate, but it won’t change matters, politically. As most observers believe, no major mortgage market legislative structural changes will emerge until 2013.
However, the news does underscore the following scenario. The Admin polishes its mortgage plan, one which acknowledges the need for a pronounced federal mortgage role and some business future for F&F. If President Obama wins the 2012 election, he will promote it as his primary mortgage market policy option in the following year.
If the GOP wins the White House next November, then the economic problems, including how to manage our nation’s mortgage finance system and real estate markets, become a Republican and—likely—a Tea Party problem.
What Wonderful Irony!
I retired at the end of 2004, but when I was in charge of Fannie Mae’s congressional relations operations I seethed at the incompetence of the Fannie regulator, the Office of Financial Enterprise Oversight (OFHEO), a name since changed to the Federal Housing Finance Agency (FHFA).
Having worked at two different financial regulatory agencies, I knew what good oversight looked like and seldom did I see the same from OFHEO.
Instead, I saw incompetence, lack of mortgage finance industry knowledge, and political shenanigans not befitting serious people but very much the behavior of fools and posers.
It never helped OFHEO/FHFA that the other Washington financial regulators never accorded marginal respect to its Director or senior staff.
One US Senator finally had enough of the “amateur hour” and sought a HUD Inspector General inquiry into charges that the agency was seeking to influence corporate behavior by knocking down Fannie and Freddie stocks prices, through an exercise of issuing negative stories on the eve of major corporate announcements.
The HUD IG’s finding, which never was pursued by the Bush Justice Department, suggested the questionable behavior ran up to the Director’s office.
The purpose of this brief history is to establish why I feel so good hearing that massive chickens now seem to be coming home to roost, with the work of Steve Linick, a career federal prosecutor, named as FHFA’s first Inspector General.
Word is that IG Linick’s work is creating great unhappiness and discomfort among senior FHFA staff as the agency’s top cop seems to be finding precisely the type of incompetence and agency (professional?) shortcomings which many of us lamented for years.
And he is sharing. Linick’s reviews are on the agency's website for all to see.
All that I can say, now, is, “Inspect away General Linick and with great vigor.”
If you have the time, sir, go back eight or so years and look carefully at the “accounting problems,” which OFHEO claimed it found in Fannie’s efforts to comply with, then, major changes instituted by the Financial Accounting Standards Boards (FASB) on how to “mark to market” a GSE securities portfolio.
(While I am not ready to claim I am “visually healthy,” my recovery from surgeries is going well and within the next two to three weeks, I hope to have the final surgery to Solve those problems. Thanks for all of the messages and inquiries.)
Tuesday, August 16, 2011
Thursday, August 11, 2011
Now we know that Rep. Jeb Hensarling (R-Tex) and Sen. Patty Murray (D-Wash) will be the co-chairmen and leaders of the Select Deficit Committee.
Are these really the best that Speaker John Boehner (R-Ohio) and Majority Leader Harry Reid (D-Nev) could produce?
Were Laurel and Hardy busy? How about the Captain and Tenille, Crosby and Stills, Crosby and Ovechkin, Chubby Checker and Fats Domino, Siegfried and Roy, or Chas and Cher Bono. Too smart, too colorful, too capable?
House Minority Leader Nancy Pelosi (D-Cal.) hasn’t named her three candidates yet, but will it matter?
Albert Einstein, Winston Churchill, and Mahatma Gandhi could help Pelosi balance some of the early personalities, but--from many reliable reports--those guys still are dead and are not coming to the Capitol.
It’s not that the chamber leaders didn’t name those whom I suggested (“The Gang of Six,” plus the House Budget Committee leaders), it’s that they named enough has beens, never was-es, and never will be’s to screw the pooch.
Maybe I’ll be shocked and pleasantly surprised, but there are no thoughtful personalities or profiles in courage among the nine. The numbers to give me any hope that $4 Trillion in federal spending cuts and tax changes could be produced in their machinations just don’t seem to be there.
Look at Reid’s appointees.
Max Baucus (D-Colo.) supported the Bush tax cuts and fought for big agriculture subsidies. John Kerry (D-Mass) speaks extemporaneously every time the light goes on in his kitchen refrigerator (Theresa: “C’mon John close the damn refrigerator.”) Patty Murray (D-Wash) is the official money raiser for Senate D’s and it’s debatable—on policy matters--whether she or Kerry would leave the shallowest tracks in wet mud.
Mitch McConnell (R-Ky.) only did a little better. At least Rob Portman (R-Ohio) has brains and some budget experience.
Jon Kyl (R-Ariz.) is not smart and--to be kind--is backward looking. Pat Toomey (R-Pa.), is a freshman Tea Party acolyte, who opposes daylight, oxygen, and electricity.
Speaker John Boehner named the ultra conservative Jeb Hensarling (R-Tex) as his top guy. Hensarling specializes in blaming Fannie Mae and Freddie Mac for all domestic problems, primarily the 2008 financial meltdown. Boehner did balance good old Jeb with Dave Camp (R-Mich.) and Fred Upton (R-Mich), two Michiganders who seem to have some grit and gray matter between them.
There are plenty of votes among these nine to cut federal spending but it doesn’t look to me like there are enough to generate tax savings, especially since all six Republicans oppose tax savings or new taxes.
It looks like leaders in both houses just want the process to go forward and then fail (“But, we tried!”), because that then triggers an automatic across the board federal spending cut (half domestic and half military) which will have nobody’s political DNA on it.
That means nobody has to do any real heavy lifting, be creative or radical. They just can sit back blame the other side for intransigence then lament, but accept, the buzz saw results. “We tried.” (That’s assuming that the House Republicans don’t try and refute their debt limit budget deal and blackmail the nation with some other Tea Party creation.)
Again, the American public gets screwed by the political mini-minds, who masquerade as House and Senate party leaders.
What the hell were they thinking with this turkey smorgasbord?
Tuesday, August 9, 2011
Waving bye-bye to your 401 (k) or other nest egg, Junior’s college fund, next year’s beach vacation, the new-used car you planned to buy, Grammy’s rainy day cash, daughter Debbie’s braces, or next week’s groceries?
So, why are the Obama people chastising Standard and Poor’s for doing its job? Few think the rating agency screwed up in its assessment. S&P was hinting for weeks that the downgrade was coming, if Washington failed clean up its budget and spending act.
So, Congress kicked the can down the road and S&P acted.
The Congress, mainly the House GOP ignored the warning. Hundreds of billions of net worth now have been wiped out in a 10% stock market drop, which could go higher, and folks want to blame S&P for doing what it didn’t do in 2008 and got whipped for that failure?
The barn door is wide open, that horse is gone, and the wrong people are being pilloried.
The reverberations of the S&P write-down of the US long term debt rating--and the resulting rate increases and losses that already have surged through our national savings--are the work of the congressional Tea Party members and the their enabling colleagues in the House GOP.
Where is the sharp tongued and House Majority Leader Eric Cantor (R-Va.) defending those actions; how about the Teasies leaders, or presidential candidate Michele Bachmann (R-Minn.)?
Seven times Democrats gave George W. Bush debt limit increases without undue drama, embarrassing him, or hurting the nation. But the first time Barack Obama sought a debt limit increase, the newly elected congressional TP crazies—“our way or the highway”-- did him in, aided by their conservative, experienced Republican House brethren who should have known better.
Once again, the American people get screwed by backward looking zealots, who likely still don’t accept or understood the damage they caused us or how to fix it (which doesn’t get fixed easily).
Hopefully, Speaker John Boehner has learned a very humbling lesson--albeit a truly expensive one--which underscores that he cannot let his wing nuts drive GOP public policy.
And those non-TP members--who cowered from their new colleagues’ ranting and went along for the legislative ride--can’t escape blame.
It was fun when the gang joined to jack up the White House and get all of that local media time, but their now less-comfortable--off and poorer constituents should grill them about their actions and what their legislative plans are when they return to Congress after Labor Day.
“Do you plan to continue to hurt us economically and financially by following the Tea Party’s destructive ongoing agenda, since you contributed to the political dysfunction which gave S&P grounds for their actions?”
Opposing excessive or wasteful federal spending is one thing, but bringing down a structure’s financial walls in ignorance and frustration is totally another.
Last week, there was more worrying the markets before S&P’s actions, although their new rating was an unprecedented move—like southern Europe's economic problems, ongoing US deficit spending, two expensive American wars, and US political fratricide—but the TP’s added major pain of the downgrade didn’t need to happen. Not when, as noted Democrats never denied George W. Bush a debt increase notwithstanding that President Bush gave the Congress plenty of reasons to despise his deficit laden and wrong headed policy choices (see Iraq war).
Earlier this week, I wrote that maybe this crash and the unfortunately resulting damage may wake up voting Americans to the need for the Select Deficit Committee to quickly put together for congressional passage a $4 Trillion savings and taxes package that could right this big American economic ship.
How many people did you speak to on this weekend or on Monday and Tuesday who are pissed. I spoke to a heck of a lot, many of whom who are Republicans (I live in a bad neighborhood!) and they were livid.
I hope they direct their anger at those truly responsible and also help to neutralize the Tea Party elements both in the Congress and around the nation, because there's no telling what other damage the Teasies can produce if given the means as the House GOP gave them on the debt limit and budget talks.
Every political commentator with guts should expose the Tea Party cabal and their accomplices for their stupid actions and make it near impossible for them to do any additional damage to our nation.
They will have their advocates but I still think there are more rational people in the nation, who—combined with their general concern over ineffective national government—will “go medieval” on the Teasies when the latter begin again to act up.
Sunday, August 7, 2011
The S&P downgrade is not surprising and was telegraphed a week ago or more. It will cost Americans more, as some lenders will use it to justify upping borrowing costs. But, maybe it also will shock the nation into a shared awareness that the job of cutting back needless federal spending (and jettisoning unneeded tax expenditures) is the paramount political problem for us all.
Despite the unhappy rating news (and the coming downgrades of Fannie and Freddie), if I was President Obama and the GOP controlled Congress, I still would invest in two ideas, one old school the other newer, which I think would produce multiple benefits ( assuming the feds could implement one or both, quickly).
Come on guys, roll the dice and go for it. (Now you’ll begin to understand why I am such a hit in the casinos I visit.)
As a down payment on the future savings implicit in the budget deal, I’d approve a massive public works program, with the money going to cities and municipalities which have “shovel ready” projects to remake their infrastructures (streets, roads, water and sewer project).
The goal of this federal economic stimulus is be to create new jobs as well as fix some pretty shoddy and worn public facilities on which our communities rely.
(The satirical publication, “The Onion,” last week ran a story about a fallacious Al Queda video declaring the terrorists now refuse to bomb United States infrastructure until we repair/upgrade our nation’s crumbled, antiquated highways and byways, making them more worthy targets.)
Distribute the stimulus funds in every state, based on the ready to go now principle, but withdraw the money—shifting it elsewhere—if construction work does not begin in 90 days from the original grant.
Before the screams of “profligate spender” rain upon me, I would mandate that the newly created “Joint Select Committee on Deficit Reduction” (JSCDR) must recapture at least the amount invested from existing federal spending, so that this job-generating public works effort does not increase the near term deficit.
I’ve said and written that the Tea Party and others are correct that we waste hundreds of billions of dollars in federal spending which must end, but federal spending per se need not dry up, since much of it drives “private spending.”
Where the Teasies are wrong is to suggest that you cannot create jobs with federal spending going through local governments and private contractors.
The Select Committee is a rare opportunity to set a bunch of things “right,” end wasteful spending and useless subsidies. Already competitive interests and their lobbyists are setting up shop to try and tilt the results to their clients’ benefit.
But invasion of the lobbyists” is a realization that any thoughtful group of 12 Americans could come up with $4 trillion in savings and revenue over the next 10 years, which now seems to be the minimum magic number.
My Select Committee Canidates
Who should sit on the new committee?
The best situation for the congressional leaders--charged with naming the powerful new dirty dozen--would pick six Democrats and six Republicans who are not seeking re-election, but that can’t happen.
Next best is to name the half dozen D and R Senators who worked well together on a similar exercise, the “Gang of Six”: Senators Tom Coburn (R-OK), Saxby Chambliss (R-GA), and Mike Crapo (R-Id), and Mark Warner (D-VA), Dick Durbin (D-Ill), and Kent Conrad (D-ND).
As for the six House appointees, I would go with Budget Committee Chairman Rep. Paul Ryan (R-Wisc.) and his ranking member Reps Chris Van Hollen (D-Md.). Speaker Boehner and Minority Leader Pelosi then should appoint their two Members with the greatest intelligence, integrity and harmonic skills.
Needless to say, the above never will happen because it makes too much sense. The House likely will get into a “one from Column A, one from Coolum B” approach and bend out of shape a lot of the faithful ebcasue there just aren’t’ enough slots. While the GOP already claims it won’t name anyone willing to raise revenues, which means no Republican brave hearts like Tom Coburn.
Make the Banks Work, as per Wm. Sutton, “That’s Where the Money Is”
The second initiative I would undertake is to figure out a way to mandate the nation’s large banks—which are sitting on just a ton of money (most of it originally taxpayer-provided)—to lend in the context of the above public works projects or in a complementary manner.
As 1950’s bank robber Willie Sutton answered, when asked why he robbed banks, “Because that’s where the money is!”
Come on big guys, give back to the nation. Help your country, earn major kudos and make money doing it. How’s that for a winning Trifecta?
If conservatives and the GOP are correct that the key to economic recovery is small business growth and investment, let the big banks wade in—big time—lend to small and medium size businesses or entrepreneurs and help make a recovery happen.
What could have a higher priority than the United States’ economic welfare and why do the big financial institutions even need to be asked or begged?
It’s the least the banks can do given what the taxpayers gave them, with no strings attached.
When the Bush Administration said the banks were hurting, hundreds of billions flowed into big bank coffers and nothing, literally nothing, was demanded of them regarding reciprocal investments in their communities.
The Congress should reverse that!
Fannie and Freddie
A Maloni blog without an F&F reference is like a “fish without a bicycle.”
So, let me share a few germane items, via links with you.
The first is from Phil Angelides, who chaired the President’s Financial Crisis Inquiry Commission (FCIC), and wrote this week in Bloomberg.
Angelides takes on the critics and GOP public officials who absolve Wall Street still try and blame Fannie and Freddie for entire crisis, while often relying on specious information supplied by the "AEI twins," Ed Pinto and Peter Wallison.
It is noteworthy that even Federal Reserve economists—in a confidential memo to the Angelides Commission—dumped on the AEI proposition which the acolytes still sell to sell the right wing (see Gretchen Morgenson’s book).
The next is a critical review of the Morgenson book. Bill Berliner, a former mortgage banker, originally reviewed the Morgenson and Josh Rosner tome in the Asset Communication Report (August). The review then was picked up by Mortgage News Daily.
Berliner--as several previous book critics also suggest—notes Morgenson’s and Rosner’s poor writing quality, shaky fact base, and erroneous descriptions of how the nation’s mortgage market works.
“The authors are clearly trying to stoke anger and outrage at the various players that they view as being responsible for the financial crisis. However, their arguments and credibility are undermined by a large number of errors and misconceptions that betray a limited grasp of the mortgage market and securitization practices…”
The large banks keep hammering away at the existing secondary mortgage market structure—which alone should make Congress leery—and Security Industry and Financial Market’s Association had Barclay’s Tom Hamilton tell the Senate that the nation needed to turn to “covered bonds” as the answer.
Hold your wallet and gird your loins, Congress, anytime someone tell you how to solve a problem by utilizing his/its idea.
Covered bonds are used in Europe and have never been successful here (ask former WAMU officials) are a product in search of an investor.
Of course, Hamilton suggests ways to tighten down what’s left of the conventional mortgage market to tilt it even more toward large banks. No surprise there.
One last item. If the Federal Housing Finance Agency, F&F’s regulator, has its way, the two companies/agencies/entities/things—whatever they are today--will be charging up to 25 basis points (.25%) on large loans they might process, if their mortgage ceilings do not fall, as now is planned.
Higher costs to the consumers in high cost mortgage areas, more money for the Treasury, and maybe a faster return to black ink for F&F, but bad public policy.
Go see “Cowboys and Aliens.” It’s a fun watch. Daniel Craig, Harrison Ford and other familiar faces are great!
Tuesday, August 2, 2011
My early thoughts on the “debt/budget big deal” are a little ho-hum and a lot of trepidation.
I believe the Tea Party in Congress and their ilk were the major winners in this dispute and that bodes ill for the United States in coming months/years.
Most of this exercise—with the real fight down the road—was a colossal waste of time and energy, reminding folks, how often the Democrats gave President Bush the necessary debt limit increase to avoid embarrassment and problems.
A strong case can be made for getting rid of this requirement.
At least we didn't default on our financial obligations…this time. But, given the TP’s leverage, you can’t guarantee that Party members won’t extort some other chilling set of demands the next time.
The Teasies came out of top because their objective--to cut the deficit by limiting “excessive federal spending” (defining that is the rub)—is not unreasonable. (It's something I think is necessary after closely watching the federal government for the past 40 years).
However, the Party’s tactics suck and run from the immature to the diabolically dangerous.
In terms of individual political winners, Sen. Mitch McConnell seemed to arrive at the right moment and can claim “victory.” Speaker John Boehner might try but a closer look shows that the TPers turned him upside down and shook violently, which is a shame because he deserved much better. Boehner’s backstabber in waiting, er, House Majority Leader Eric Cantor (R-Va.), will try and take victory laps.
Harry Reid and Nancy Pelosi (who?) were bit players.
President Obama looked weak and non-presidential. Nobody fears him and while he can salvage some credit for being the only “adult” present, that alone may not help him in 2012.
But something—often Obama himself—gets in the way of the President getting acknowledged for responsible achievement.
As a good and very politically sophisticated friend told me, “President Obama is a fixer, not a fighter, and he found himself trying to negotiate with people who only wanted to fight.”
IMO, one way Obama could reclaim his legacy next year, is by not running in 2012.
He then can eschew partisan politics and try to do the “right thing” for the next 12 months, paving the way for Hillary Clinton to seek the Democratic nomination next year and run against Mitt Romney. I’m not betting that way, but I wouldn’t rule it out.
The Tea Party Wins
The Tea Party won because they got most of their priorities handed to them in the deal. They have positioned themselves to “hold their breath and turn blue”—taking their 60 plus House swing votes and leveraging them for more--the next time the GOP or the country needs them.
Re public policy, the Teasies are an ill-educated and uninformed group, if one believes the statements made by their membership. I still don’t think that many of them think that sacraficing the nation’s credit rating meant a hill of beans.
But, they are zealous, single minded, apparently uncaring about the consequences of their quests, in other words formidable.
Senator Tom Coburn (R-Okla) might have come out of this debacle smelling more like a rose than anyone else and deservedly so.
An original member of the informal and bipartisan Senate “Gang of Six,” the very conservative Coburn showed insight and courage in speaking out against some of the GOP’s major scared policy cows, primarily hidden—or not so hidden—in the nation’s tax code.
If he gets named to the new 12 member congressional deficit group (6 D’s, six R’s, even split between the House and Senate)—created in the budget deal statute--Coburn could be major voice in shaping the serious round of deficit reductions and revenue raisers. I am rooting for him.
Politics Not Up to National Needs?
The saddest realization of all has been the generally agreed upon observation that it is our political system which is dysfunctional more so than our economic or financial system.
We do spend too much of the taxpayers’ money on wasteful things, but too many disparate groups—well represented in Congress and also by paid lobbyists—make it tough to wean the nation from Uncle Sam’s teat.
That doesn’t mean it shouldn’t happen.
There are no near term revenues in the proposal which will go to President Obama for his signature, but just the prospect of defense spending cuts generated opposition from some House conservatives.
Who blinks first or will the November recommendations get politically rolled, too?
Many interests in the nation’s capital adopt the sage observation of the late Senator Russell Long (D-La.), who claimed the prevailing opinion when searching for revenues, was, “Don’t tax you, don’t tax me, let’s get the guy behind the tree.”
Totally lost in the budget sturm and drang—and someone whose success deserves acknowledgement--is the last OMB director who produced two consecutive balanced federal budgets. His name is Franklin Delano Raines and, after leading OMB for Bill Clinton from 1996-1998, he returned to Fannie Mae in 1999 to become its Chairman.
That was right before President George W. Bush pitched the nation and its taxpayers into the deficit vortex, running up huge deficits and advocating major tax cuts while trying to fight two expensive wars.
Remembering Raines’ solid efforts are a nice segue into comments about Fannie Mae and Freddie Mac, the former GSEs.
Fannie and Freddie
Thank you to the National Association of Realtors for inviting me to speak a week ago to 150 of its state and local lobbyists in Memphis.
I won’t blame the famous Rendezvous barbecue restaurant for my subsequent stomach distress (those ribs, coleslaw, and beans were real good). Suffice to say, I was six pounds lighter when I returned to DC two days later.
The Realtors have become the single strongest voice in the nation’s capital for homeownership and have tried to bring together significant elements into the same campaign, realizing that opponents—again ill informed but zealous—would wreck the nation’s mortgage fiancé system, if given a chance.
I told the assemblage that I doubted if anything would change structurally for Fannie Mae and Freddie Mac, as the Congress lumbered into next year and the presidential and congressional elections, but 2013 and beyond were up for grabs requiring their diligence.
The large banks, still declaring that they are the “private sector” continue to seek additional federal support, read "subsidies,” to originate mortgages which they won’t hold on their books but continue to sell to Fannie Mae and Freddie Mac (about 75% this year have gone to the two entities which is a major case for not abolishing the companies now in federal conservatorship).
Look around, we have a feckless mortgage finance system, limited investors for loans and securities not backed by F&F (or the Treasury), other national economic problems (see above), economic lassitude, unemployment staying in the 9% plus range, and large international uncertainties including winding down two very costly wars.
No, I see very little happening legislatively to Fannie and Freddie, except their return to some financial equilibrium as their newer books of business produce black ink.
One slightly cheering thing is the number of places recently where writers acknowledge that Fannie and Freddie under wring wasn’t’ the cause of the 2008 meltdown, with most of that coming from unregulated mortgage brokers working for Wall Street and others.
The frequency of this view won’t stop the AEI berserkers and others from peddling their view of history, but it’s a start.