Thursday, June 27, 2013

Column A and Column B



Can’t We “Housers” Just Get Along?
I Have a Plan for It, But “Shots” First


Lot of news about the Corker-Warner “do away with Fannie and Freddie” legislation, which will not move in the Congress this year. It will garner attention, lots of speculation, and media exposure because it represents a bipartisan effort to think “strategically” about how the nation finances home mortgage loans.

The scheme may look “strategic,” but it also may be a little vacuous, if not disingenuous (don’t forget they’re Senators and that goes with their turf!).

In introducing his legislation to kill Fannie and Freddie—as well as all of the systemic good they provide--and  create a new Federal Mortgage Insurance Corporation (FMIC) to provide back up mbs loss protection, after other investors, including the originating lenders and mortgage insurers pony up, Senator Bob Corker (R-Tenn.) claimed,

"It brings discipline back into the housing finance sector where you don't have private gains and public losses," Corker said on CNBC.

On that, I call “Bull Shit!”

Corker’s loses my goodwill when he hurls this faded distorting Right Wing  buzz bomb at Fannie and Freddie to further con a public that already little understands the two and how they operate now or before.

Corker obfuscates and tries to twist the reality that for almost 40 years Congress mandated that Fannie—and later Freddie—earn their own way, borrow their working capital in national and international debt markets, cover any business losses—and as a public company have shareholders and have their stocks traded on the New York Stock Exchange-- which they did until the Bush Admin put them into conservatorship in 2008. 

There never was one federal penny put into either until the 2008 wipeout. 

My memories of 2008 include Fannie Mae shareholders seeing their once $62 per share stock drop to less than a dollar and then see their company taken over by the Bush Administration under dubious circumstances, actions now the subject of a major lawsuit.
Where was Fannie Mae’s private gain in those moves?
Let me challenge Senator Corker and/or his top Financial Services staffer to explain and justify his “private gains and public losses” statement with facts, not political hyperbole?

Any time guys are ready, since I know there are a legion of very smart folks waiting to hear your answers and then obliterate them faster than you would put down F&F.

And, since the cerebral Senator is putting almost everything in his bill “on budget,” with the federal government, i.e. the taxpayer, as the ultimate guarantor, is there any chance that the “private firms” Corker claims will invest in the nation’s mortgage finance system will enjoy any “private gains” because of Uncle Sugar’s presence?

As I hope Johnny Depp says, “You betchum Kemo Sabe!”

I won’t say anything about the inherent hypocrisy in the Corker rhetoric but I prefer to think that Senator’s comments betray that he and many of his allies just don’t understand the mortgage finance system, its players, and how profits are made?


Two Big Winners

The proposed Corker-Warner mortgage structure is a big bank boon (new federal bond loss insurance) and heavenly manna for the mortgage insurance industry (MI’s). The latter group has seldom graced anyone’s “good guy” list and, historically, has been barely trusted by lower income borrowers or mortgage investors which often have to fight the MI's to repay legitimate losses on which MI products provided “loss protection.”

I wonder how quickly the inevitable MI industry and large bank political financial support will show up in the Senator’s campaign finance reports?

I am a bit dubious about Corker key stoning his plan with the MI industry. 

If this is such a solid industry, why—except for AIG through its United Guaranty sub and GE which no longer owns  GEMICO, an MI company now devolved  into Genworth --has it been “peopled” (the current SCOTUS believes corporations are people) by a handful of thinly capitalized companies? 

AIG’s woes still are front page news and the best that can be said for GE is that the Hudson River barely has survived their affiliate’s 20 year poisoning of that waterway, but millions and millions of fish haven’t.

Didn’t the Consumer Finance Protection Board (CFPB) just charge four of the largest MI companies--and is seeking $15 million in fines from them--for giving kickbacks to lenders who steered business to them? Of course four companies is about half the current industry.

Somehow, I am sure the clueless mortgagors, paying MI policy premiums on those kick backed loans, didn’t get the best insurance deal available. The industry perps have to generate that payoff cash somehow.

Oh and wasn’t it the same MI industry that slow walked or even ignored the anniversaries when mortgagor home equity surpassed the 20’s threshold, requiring the cancellation of those monthly MI payments for borrowers? Sure was!

The nation might prepare for a lot more of that kind of action—and likely worse--if Corker-Warner ever sees the light of day unchanged.

Nobody tell Senator Corker he just opened a huge can of federal subsidy for the unworthy MI’s, it could ruin his reservoir of  one liners, essential to misleading people about legislative intent.

And, if any Senator pontificates, “Well, we want/expect new companies to enter the business!”

First, sell that Senator any underwater land in Florida you still own. Then tell him/her history suggests any new MI’s will be driven by the old MI ethics, which don’t run very deep in the industry which went bankrupt during the Great Depression and then was revived at the state level in the mid 1950’s.

Once Congress—as it affirms, again, in Corker-Warner--decided that borrowers didn’t have to put down a 20% cash to qualify for a mortgage but could substitute a mortgage insurance policy for the part of the down payment they didn’t have or couldn’t afford to borrow, the MI industry was super-sized from its former minor complementary insurance role.

Senator Bob, I can’t believe that a good old Tennessee country boy like you can fail to understand that whenever Uncle Sam is involved someone will try—and likely succeed—to pick his pocket.


Here’s A Maybe “Get Out of Jail Free” Card For Corker


For all of Corker-Warner’s marketing faults—the most significant of which is their need to abuse and then  destroy Fannie and Freddie before you can do anything positive--let me offer a thoughtful and constructive classic “Washington solution” or at least something that might make your deal more palatable. 

Senator Bob, it means looking across the aisle and the Hill to admire a cogent and concise idea being pushed by House Financial Services Committee Rep. Mike Capuano (D-Mass), which could be a perfect addition to your approach. 

Your legislation contemplates a 5 year transition for your FMIC to take over from Fannie and Freddie. Capuano suggests that F&F be allowed to “repay” the principal invested in them by the Treasury (which likely could occur by next year, if everyone agreed to the logic) and then be considered for future roles.

In the interest of “Houser comity,” let me take a little from Corker (his five year transition) and a little from Capuano (principal repayment) and suggest that with Capuano’s proposed return of Treasury’s investment,  Congress  could let F&F hold onto future earnings—net of Treasury repayment, capital, taxes and overhead--so that in  “five years” Fannie and Freddie can be free to participate in the FMIC mortgage market just like any other company once helped by the federal government. 

What’s the urge/need to destroy them first, along with all of that experience, mortgage securitization network, executive expertise, positive history (save the subprime debacle which struck every mortgage investor), and the F&F goodwill and desire to make the mortgage market work better?

In the 60 month Corker-Warner legislative time frame, Fannie and Freddie will have done “federal time,” paid back the government with a financial sweetener to extinguish all of their Treasury debts (plus extra cash which Treasury now would just sweep after $186 billion was returned), done yeoman work holding up the nation’s residential mortgage market for five solid years while in encased in figurative regulatory handcuffs, and have earned the right to the same treatment as GM, AIG and every other financial services company helped—but not destroyed--by the government!

Makes great policy and political sense to me—if you are going to try and rally folks to C-W. Just make it Corker-Warner-Capuano!

You might even get a Jim Millstein buy in.


Maloni, 6-27-2013























Sunday, June 23, 2013

A Lone Ranger!



I Knew It Was Just a Matter of Time
Before a Smart Congressman Got It!


“A fiery horse with the speed of light, a cloud of dust and a hearty Hi-Yo Silver! The Lone Ran-ger…With his faithful Indian companion Tonto, the daring and resourceful masked rider of the plains led the fight for law and order in the early western United States. Nowhere in the pages of history can one find a greater champion of justice. Return with us now to those thrilling days of yesteryear. From out of the past come the thundering hoofbeats of the great horse Silver. The Lone Ranger rides again!”


(No, I am not pimping the Johnny Depp Lone Ranger movie, but I can’t wait to see one of my favorite actors, play Tonto as Jack Sparrow.) 

Excuse me for exploiting one of my all-time favorite “radio” show (yes kids, there was dramatic programming on radio, when Grandpa was your age!), but the emergence of a brief but vital “cut through the happy talk BS” letter from Rep. Mike Capuano (D-Mass), a member of the House Financial Services Committee), to  Treasury Secretary Jack Lew (he of the new signature fit for currency) shows that someone on the Hill is thinking and looking at the implication of the raw treatment of Fannie and Freddie. 

Capuano has drafted a bill to effect the issues he raises in his letter. 

Capuano’s letter—which unfortunately I possess only in a PDF form I can’t put in my blog--questions why Fannie and Freddie can’t repay the Treasury as did every other recipient of 2007-2008 federal financial assistance—(candid answer, which we never will hear from JL: “Um, because my Bush predecessor, Hank Paulson, wanted to kill the suckers, while pretending to save them, so he cast them into forever penury never able to repay the Treasury no matter how much money they send over”) and what are the regulatory and legal stumbling blocks for the two to do so, implying an interest to introduce legislation to allow. He goes onto to ask other pertinent and direct questions. 

I don’t want to over interpret his letter (much welcomed!) or imply intentions which may not be there. But, Capuano is the first of the  “smart MoC’s” I predicted who: would look critically at the current  Fannie and Freddie situation, see their success and more importantly the reasons for it; examine the alternatives being offered by increasing number of people who want to replace the two; coldly analyze the legislative environment and the possibility of anything super complex passing this or the next Congress because of the poisonous political animus between the parties; and suggest, “Maybe we already have something in place which works fine and could be made better with some small changes rather than a 10 year transition to something which nobody can guarantee will work or work as well?” 

“Ding,” we might have a winner! 

Speaking of Rumors? 

--Congressman Capuano better watch out, he may get one of those rumored communications--over which Cato Institute sources are chortling—to wit that retired Committee Chairman Barney Frank is rumored to be reaching out to his former colleagues in both chambers, reportedly, says the Cato source, asking them not to endorse a revitalization of Fannie and Freddie.

I’d love to hear the esteemed former Democratic Chairman of the Committee discuss why he may still be mad at F&F and—more importantly, again if those rumors are true—why he would want to endorse what amounts to a large commercial bank takeover of the nation’s primary and secondary mortgage markets, complete with new federal subsidies? 

Say it ain’t so, Barney! 

Likely, Fannie and Freddie broke Barney’s heart/spirit with their post 2004 Alt-A and PLS subprime extravaganzas, but the big banks made it personal and set out to bust his b*** and embarrass him--continuously—over the Dodd-Frank bill both on the Hill and later in reg formulation. Many observers think they succeeded, their big bank crocodile tears notwithstanding.

If the Cato Institute source  is fabricating, then I apologize to Mr. Frank for amplifying it. But if that’s an accurate account —even though he’s no longer a Member—knowing Barney’s views, and the rationale behind them, would be helpful.

--Mark Zandi, once a prominent name to become the next Director of the Federal Housing Finance Agency (FHFA)—and my friend and former Fannie colleague, Ellen Seidman—are among a group supporting a new “trash F&F” proposal. (The way things are going, there will be nobody left on my Christmas card list, after the congressional session.) 

But I wonder if Zandi’s emergence from near hibernation after his high flying (and well received) name crashed as a FHFA nominee could at all be related to the Senate hearing this week on Mel Watt to be the new FHFA Director. 

--Rumor is Watt’s chances seem to be slim and the Obama Admin may have to throw in the towel and make nice to Ed DeMarco—and whatever Ed’s priorities are, which turned off the Obama WH originally—or turn to a wholly new nominee.


I am not close to Admin machinations,  but it sure doesn’t appear from my “30,000 foot” vantage point that the Admin busted its hump to get Watt the votes he needs, a result—if Watt’s name goes down—that can’t make Mr. Watt or the Congressional Black Caucus very happy.


But, in the unique political approach which this Administration takes, the Senate R’s DeMarco means the Obama White House soon will love him, too.

How Many Cheeks Does Barack Obama Have?


…and somehow has he acquired more?


His old friend Vlad Putin, he of the stolen Robert Kraft New England Patriots super bowl ring and the new semi-trophy bride, just smacked another Obama cheek conveniently turned to him by our President, when Putin’s government facilitated the travel from Russian-- a country of “courve and goniff” (Yiddish for thieves and whores)--for NSA-leaker Anthony Snowden to parts unknown. 

I don’t care about Snowden. I supported Bush’s use of NSA and Obama’s too. I don’t feel my civil liberties were/are at risk when terrorists operate with impunity. 

But I do care about some KGB thug-thief continually flashing his ass to the United States, while smiling and claiming he isn’t. 

Mr. President if you lack the means to make it painful for the Russians to keep defying you and your requests, then you are not looking deep enough into your tool chest and monthly changes in national security personnel won’t help!

The very “Obama legacy” which seems to concern you so is withering away as you dither, whether domestically or internationally.

In his fifth year as “leader of the free world,” President Obama still seems to be waiting for Putin do him one “solid” on Iran, North Korea, Syria, nukes, on and on and on, but nada!!

I hope our future presidents have only the traditional Biblical two cheeks, allowing for only one concessional turn!


Maloni, 6-24-2013

(6-25-2013 Addendum)

Here is the entire (and brief)  Capuano bill.

To provide for the repayment of amounts borrowed by Fannie Mae and Freddie Mac
from the Treasury of the United States, together with interest, over a 30-year
period, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,

This Act may be cited as the ‘‘Let the GSEs Pay Us Back Act of 2013’’.

The Secretary of the Treasury and each each enterprise (acting through the
conservator for the enterprise appointed pursuant to section 1367 of the Federal
Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617))
shall enter into an agreement with that modifies the Preferred Stock Purchase
Agreement for such enterprise to provide as follows:

(1) TERMINATION OF DIVIDENDS.—That after such modification, any Senior Preferred
Stock purchased under such Agreement by the Department of the Treasury shall not
accrue further dividends.

(2) TREATMENT OF ENTERPRISE DRAWS ON TREASURY.—That any amounts received, before
or after such modification, during a single year by the enterprise as a draw on
the commitment made by the Department of the Treasury under such an Agreement,
shall be treated as a loan made by the Treasury to the enterprise that—

(A) was originated on the date of the last such draw during such year;

(B) has an original principal obligation in an amount equal to the aggregate
amount of such draws;

(C) has a term to maturity of 30 years;

(D) has an annual interest rate of 5 percent for the entire term of the loan;

(E) has terms that provide for full amorti-zation of the loan over such term to
maturity; and

(F) shall be repaid by the enterprise in accordance with the amortization
schedule established for the loan pursuant to subparagraph (E) of this
paragraph, subject to paragraph (3).

(3) TREATMENT OF DIVIDENDS PAID.—That any dividends paid by the enterprise to
the Department of the Treasury under the Senior Preferred Stock Agreement before
such modification of such Agreement shall be treated as payments of principal
and interest due under the loan referred to in paragraph (2), and shall be
credited against payments due under the terms of such loan (in accordance with
the amortization schedule established for such loan pursuant to paragraph
(2)(E)), first to such loan have the earliest origination date that has not yet
been fully repaid until such loan is repaid, and then to the next such loan
having the next earliest origination date until such loan is repaid.

For purposes of this Act, the following definitions shall apply:

(1) ENTERPRISE.—The term ‘‘enterprise’’ has the meaning given such term in
section 1303 of the Federal Housing Enterprises Financial Safety and Soundness
Act of 1992 (12 U.S.C. 4502).

(2) PREFERRED STOCK PURCHASE AGREEMENT.—The term ‘‘Preferred Stock Purchase
Agree-ment’’ means, with respect to an enterprise, the Amended and Restated
Senior Preferred Stock Purchase Agreements, dated September 26, 2008, amended
May 6, 2009, further amended December24, 2009, and further amended December 24,
2009 (as such agreements may be further amended), between the United States
Department of the Treasury and such enterprise.























Sunday, June 16, 2013



Unscientific Poll* Suggests Many Fools in US Capital,

Survey Says DC’s Fool-to-Wise Man Ratio is 724-1

(*Read more below.)


Let me restate something, which requires constant repeating, if anyone within hailing distance of this blog misunderstands me.

I believe if the Congress spends a little bit of legislative time looking dispassionately at the Fannie Mae’s and Freddie Mac’s successful operational structure and, understands the systemic values they produce, Congress will find it easier, less disruptive, more practical, more efficient,  to produce a worthy and fair national primary and secondary mortgage market—with no explicit federal financial ties-- than spending painful years trying to legislatively twist, turn, restructure, and prevaricate about new structural proposals, whether its Corker-Warner, the Bipartisan Commissions recommendation (which overlaps with C-W), or multiple other ideas.

Congress should take a deep breath, permit Fannie and Freddie to repay the government $200 Billion to cover the $186 Treasury/taxpayers invested in them, allow F&F to keep all of their future earnings for capital purposes, net of taxes and overhead, and free them to insure that the nation’s primary and secondary mortgage markets work smoothly, efficiently, fairly, and at reasonable prices.

I state this fully aware of all of the F&F criticism and biases.

Yes, they have sullied and excoriated--mostly without cause and with tracks and motives leading back to obvious perpetrators--but what the F&F have going for them is success in the past and success today.

The mortgage market is totally familiar with their procedures and indeed every participating lender, MI, Builder, Realtor, appraiser, title insurer, etc., knows them and how they operate, which means no flawed trial runs, no painful trial and error break-in periods, or no elaborate and expensive transitions, which the competing ideas would produce.

Market Never on Vacation and Hates Uncertainty 

Let me remind people that the nation’s gargantuan national mortgage market does not take breaks, even when Congress wants to go in a new direction; it functions every day and at all times and there is a huge multi layered “back office” of national and international players which complement it, a fact that most Americans don’t/can’t comprehend.


People underestimate the dysfunction of the Congress--certainly the present one so rive, but many former ones as well--trying to reshape something most of them don’t understand or about which they hold only negative thoughts. Many Senators and Members can’t resist the temptation to add unrealistic goals and objectives “for the folks back home” and cannot comprehend what I briefly described in my last blog, the bushel load of unintended consequences that arise from any major legislative rewrite.

One last word and then I’ll move on.

What surprises and upsets me is not Republican opposition to my idea. Most R’s were taught to hate F&F because of F&F’s political heritage, support for homeownership and minority homeownership at that, and the oinks of big banks complaining that F&F too much profit from lenders, money the banks squeezed from uninformed consumers.
It’s the silent Democrats who disappoint me the most.
Since all of the Fannie/Freddie destructive external assaults were piloted by GOP officials, Republican MoCs, and conservative think-tanks and media, I would hope that one or two thoughtful Democrats might see through this never ending campaign and make a contrary case.
It’s safe to come out guys and girls, see the F&F achievements (the latest as well as the earlier ones), smell the coffee and speak out.
Fannie’s and Freddie’s perfectly legitimate post-2008 regulation--taking away their “low income housing missions” and transferring that largely to the FHA plus the very strict limitations on what loans the two can securitize--explain their recent success and future promise.

Add to that the increasing number of fingers pointing to Bush political hijinks and skullduggery as the cause of F&F fall into political purgatory and I have to ask the standard bearers of John Kennedy, Lyndon Johnson, and President Bill Clinton, where are you hiding your Democrat cajones?

If you learned the facts, you could not possibly believe you F/F deserve their pariah status.

Fannie and Freddie did produce fabulously for the nation before 2005—before they slipped into their PLS subprime and ALT A follies--and have since 2008. Despite all of the BS explanations/excuses, no industry or set of institutions have stepped up to show they can replicate the systemic values of the F&F without Uncle Sam granting the F&F posers broad new subsidies. 

Funny/Curious Inquiry 

Last week I got a call from an enterprising and successful journalist (who stays nameless because he was serious and driven by some evidence) asking me if I was aware of certain Fannie officials acting (my phrase) “too entrepreneurial?”
When I finally stopped laughing (not at him but the concept), I told him that I hoped his rumors were true since I believed that FHFA (and Treasury) had squeezed all of the  business swashbuckling out of the two companies and—again, as I have written—F&F are being run by employee automatons not entrepreneurs.

I further suggested, more importantly, that anything of significance--which either company or their officials do--is blessed in advance by their regulator, the Federal Housing Finance Agency or the Treasury through FHFA, denying  much room for F/F freelancing. I reiterated that I hoped I was wrong because I would like to think someone is sharpening his/her business skills.

My conclusion: calling Fannie Mae officials “excessive entrepreneurs” is the equivalent of calling Baltimore City female jail guards “harsh jailers. (I was going to say “tough screws,” but I was afraid that would be misinterpreted.)

As an example, if people are concerned about F&F g-fee (guaranty fee) increases, most of those have been spelled out by FHFA in its annual report to Congress and are aimed at either increasing revenue for the Treasury or making commercial bank PLS MBS (mortgage backed securities) more competitive. 

Time to Hunt up another “Enemy”

What’s Austan Goolsbee doing these days, let me at him?

Austan Goolsbee, a former Obama Admin economist and CEA chair-- (Maloni humor: economists often resort to caviling, “on the one hand, but on the other,” which is why we need three armed economists)—decided to tweet a particular nasty message (see below) about the recent law suit filed by a variety of very respectable interests. The lawsuit argues that Hank Paulson broke the law in pushing Fannie and Freddie into conservatorship and forced shareholders to lose billions.


Austan Goolsbee (@Austan_Goolsbee)
Dear Fannie and/or Freddie shareholders suing U.S. govt for not being more gentle when saving your dying asses. SHOVE IT. Sincerely, America

Maloni’s response: 
Austin, don't you have it backwards? The government gave Fannie and Freddie shareholders nothing, but took a hell of a lot from them. 

In return, Fannie and Freddie provided the federal government with a sound and necessary secondary mortgage market operation—which they continue to operate today for the nation--and in less than five years will return the $186 billion Treasury invested in them. 

C’mon Austan, given the  possibilities, you have to agree that this has been a sweet deal for the government and the nation. 

Austan, how about those improved Treasury credit ratings and the political benefits of the larger than expected Fannie and Freddie payments, not to mention the deadline easing aspect of those payments re debt ceiling negotiations with the GOP? 

There is little doubt in my mind that Paulson manipulated/twisted, if not violated the law, in his little takeover kabuki which was more about getting a "two fer," i.e. shackling and, in his view, blowing up F&F, while maintaining the market PRESENCE and stability that the two represented, an action which failed since the two soon will return all of the money Treasury invested in them.

I don’t “tweet,” but please consider this response just “144 characters.” 

For Mr. Goolsbee and other F&F critics who fail to see the benefits Uncle Sam has enjoyed from the Fannie and Freddie experience..


Does Your Government Lie??
Do bears go potty in the woods?  

Check out this description of Fannie and Freddie from the federal government’s FY2014 official budget document. 

“They are not included in the Federal Budget because they are private companies, and their securities are not backed by the full faith and credit of the Federal Government.” 

Maloni says that was accurate pre-2008 but not now. If this was true, can you imagine what would happen to Treasury auctions??

The Nonscientific Poll Source Mentioned Earlier? 

I made up that poll, but I’ll bet most of you believed it was true based on your personal experience and observations. 

Recognition: Father’s Day congratulations to my late father, Carl Maloni, and my late brother, Louis Maloni, both of whom were excellent Dads.
And thanks to my wife, Heidi, and my sons Jason, Scott, Billy, Jr., and Carl Arthur (”Cam”) for allowing me to celebrate this day. 

Condolences to the family of Carl A.S. Coan, Jr, a longtime acquaintance and Washington lawyer and housing lobbyist who passed away this weekend.
Carl was a knowledgeable and indefatigable fighter for housing and homeownership and one of the more irascible individuals all who knew him encountered. I knew I had arrived as an influential Hill staffer, when Carl—working for the National Association of Homebuilders, before he founded his own law firm—gifted me with the then perfectly legal NAHB Christmas bottles of scotch and bourbon.
I am positive that gnashing of teeth we heard on Saturday was Carl Coan in dispute with St Peter over how much of the 1968 Housing Act Carl actually wrote, with the options in Carl’s mind being “all” or “most!”

RIP friend. 

Maloni 6-16-2013






Wednesday, June 12, 2013

Part 2 Mostly for You Senator/Congressman



Nitty Gritty Issues for the Congress

Part 1 of this two part blog was a general message about the Corker-Warner proposal to kill and replace Fannie Mae and Freddie Mac. I challenged the Senators and their allies to stop using bogus arguments to derogate and insult Fannie and Freddie, as a way to rally their troops and build support for their expected legislation.

In Part 2, I offer some specific suggestions to MoC’s (and the media which duly reports their daily utterings) hearing the siren call (seeing campaign contributions and political success) in lending their name to legislation. 

---Walk before you run to sign up for Corker-Warner or anything else you don’t fully comprehend. Before you sign onto any proposal as a sponsor or co-sponsor, totally understand that plan’s consequences. A public official hoping to get re-elected in 2014 or 2016 better truly understand “the Devil you don’t know for the Devil you do.”

As someone who’s closely watched the Congress perform for 45 years (not the same as achieving anything), my experience is that every major legislative “solution” has dozens of unintended consequences which you have to justify because you are supporting the scheme.

Can you see what will happen to this bill (or any complex or multifaceted legislation) after the disparate Senate interests get done applying their wisdom, which will occur before the less than thoughtful House gets in its licks, if the latter deigns to do so at all. (I suggest you look at the new Senate immigration or agriculture bills as guides.) 

---Your F&F replacement mortgage finance system must be more efficient, better, cheaper, more understandable, offer more readily available mortgage products to consumers (your constituents), as well as be a better deal for the taxpayers (also your constituents) than the F&F system now in place—or else why destroy the current working pair? Remember, the F&F subsystem has systemically produced in the past and only a few legislative tweaks can make it better.
--Understand that one percentage point equals “100 basis points” (BP). So when you are told that some new mortgage execution only/may/could/will add 50 basis points (my example not the Senators’) to the cost of a mortgage, remember that’s ½% added to the interest rate over the life of the loan.
I realize that few MoC’s have a strategic horizon, or one which extends to their next election, but cost estimates generally only go one way in Washington—up!!

After the five or more years it takes to bring about and implement these major structural changes (and that doesn’t count the lengthy, contentious .torturous debate and mind numbing. eye glazing hearings which most “busy” Senators and Members will duck), the new plans  likely will generate higher cost mortgages than lower.

--Do yourself a favor and learn or have one of your staffers learn the role and significance of the “TBA market” and how/if these “to be announced” mortgage backed securities can work in any new plan you develop and how that will impact mortgage prices. This is the very efficient process where mortgage loan packages are priced before they even exist, and impact the mortgage rates your constituents/consumers pay.

Also, realize that a few dollars more per month in mortgage payments knock some people out of the affordability game. So monthly cost is important to the people who send you to Washington. 


How Much Help Are F&F Providing in Your District or State?

Ask F&F officials how many of your constituents rely on them for their mortgage loan. They will have that information by zip code, so you’ll be able to see what now is happening in your own congressional district because of F&F mortgage support. You will be surprised at how much primary lenders and F&F—their only viable secondary market partner--have invested in your favored communities, town, cities, and counties.

The large banks—who get a fresh new federal subsidy to cover any PLS losses are the primary beneficiaries of the C-W plan.  

Banker business acumen and creative investment executions are leagues ahead of the regulators who oversee them—think tortoise and hare, but with the rabbit always winning--and most federal regulators never catch up, except to respond after something bad has happened.

The last time the big banks controlled the mortgage finance spigot—which only was a few years ago--the world reaped a trillion dollars in subprime grief. And nothing in the C-W proposed bill changes any of the regulatory landscape which missed all of that subprime creation and sales. 

---You owe it to yourself and your voters to learn all about Fannie and Freddie; don’t automatically think everything you’re read and heard is true (even my stuff); take time and ask the questions; don’t hide behind your colleagues who say, “Trust me, hang with me on this; we are going to kill them.”

It’s your ass that will be voted out of office if you screw up and poison the mortgage well, making inefficient, costly and not transparent, important family financial matters which now are largely open and available. (Remember buying that house is the largest financial transaction most of your voters ever will undertake.)
---As I’ve written in my blog before, when told that “We need to get rid of F&F,” ask why?  

--“Won’t we have similar or greater problems with what you want as replacements, if Uncle Sam still is behind them?”

---“Aren’t F&F working now and very efficiently?”

---“Isn’t it conceivable that once Fannie and Freddie ”repay” and reorganize—and with the same strong regulation--they, could work better with large amounts of capital available to them, not lost in some federal accounting time warp, cloaked by Hank Paulson’s desire to penalize the Democrats, reward the Right, and do away with Fannie Mae and Freddie Mac?”

I think that some of those seeking to end Fannie and Freddie, using the misguided but remaining public anger for the two, hope nobody pushes them to answer the questions, “Why should the Congress do away with them” and “Why is your mousetrap better.” 
If the only answer offered is some vague rant about “history” or “getting the federal government out of the housing finance market then you are being lied to, major league! 

I understand the political need to demonize F&F as bad guys, but that’s been done before with sad results. 

Mortgage McCarthyism?

If our straw men creating Batman and Robin require a Fannie/Freddie to abuse, do their distortions make them the equivalent of US officials who forcibly collected thousands of US citizens of Japanese descent at the outbreak of WWII and put them in California internment camps (and did nothing similar to east coast families of German heritage) fearing collaboration with the “enemy?” 

Japanese Americans—with little evidence to justify it--were those unfortunate politically cast bogeymen.

It was a desperate Midwestern US Senator, claiming that he had a list with the names of “206 Communist sympathizers who worked in the US State Department,” who tried to whip up the nation to fight global Communism by demeaning men and women who were hired at State, following their education at elite eastern colleges or universities. State Department employees, many of whom were Ivy League educated, were those pilloried bogeymen.

Is the current hectoring the same when the same US Senator, manipulating conservative Americans’ anger/jealousy over Hollywood life styles, declared many in the motion picture industry were “Communist sympathizers” and more than 300 actors, writers and directors were fired and “black listed,” making future work almost non-existent—except when they change their names and or gutted it out for years with the “Red” label. Hollywood professionals, a good number of whom were Jewish, were that ugly chapter’s bogeymen. 

How about when a certain GOP presidential candidate spoke of his politically transparent  annoyance, using the phrase “Welfare Queen?” 

“She has eighty names, thirty addresses,” Ronald Reagan warned during his 1976 run for President about the nameless, Cadillac-driving woman who’s conning the social safety net. He added: “She’s got Medicaid, getting food stamps, and she is collecting welfare under each of her names.” In total, Reagan said, “Her tax-free cash income is over $150,000.”

Except that nobody ever could find this elusive member of royalty—she was a creation, a totally made up personality--but that didn’t stop Reagan supporters and those on the Right from applying the term pejoratively to welfare recipients, black women, and other poor people and perpetuating distortions which still persist more than 35 years after the fact.

Let me be clear,  I am not suggesting that either Senators Corker or Warner are racists or culture-baiters, but I am drawing an historical analogy to their political tactics, which have as its beacon abolishing Fannie and Freddie for reasons they have not articulated nor justified. Yet they have opted to excoriate and vilify them before doing the latter. 

Big lies are toxic no matter who floats them and why. 


Maloni, June-12-2013