Fannie and Freddie Need an Ally,
Or Need to Be Treated Like One!
How can Ally Financial (GM’s
former financing arm) buy itself out of federal "jail", but F&F's
hefty repayments don't produce the same “turn them loose” treatment?
Ally Financial helped
consumers buy some cars while Fannie Mae and Freddie Mac bolstered up the $
multi trillion US conventional mortgage market for over 5 years since being
"bailed out."
As I asked several
friends and former colleagues, “What am I missing?”
Wikipedia and Hank Paulson
Speaking of missing some
things, regular blog reader and commenter, Robert Mae sent me a “comment” to
the last blog (actually sent several), but the significant one dealt with a
“Wikipedia” description of some of former Treasury Secretary’s actions—and possible
motives—when he “Bushwhacked” Fannie Mae and Freddie Mac.
Robert Mae sent this in response to
me observing that “the victors write the history” and I want to be there—at the
end—to make sure that future discussion of F&F is accurate.
This is interesting. I have read Wiki's 'Fannie Mae' topic page many times in full, but this morning is the first time I noticed the following edit:
"The Administration PR effort was not enough, by itself, to save the GSEs. Their government directive to purchase bad loans from private banks, in order to prevent these banks from failing, as well as the 20 top banks falsely classifying loans as AAA, caused instability. Paulson knew that Lehman Brothers and other banks were in trouble and would soon require Fannie Mae and Freddie Mac to purchase their toxic debt; this meant that he would need a fast method to bailout the banks, so he devised a method to use Fannie and Freddie as a backstop. Paulson's plan was to go in swiftly and seize the two GSEs, rather than provide loans as he did for AIG and the major banks; he told president Bush that "the first sound they hear will be their heads hitting the floor", in a reference to the French revolution, and the taking (fifth amendment) of their assets -- without compensation:.[39] The major banks have since been sued by the Feds for a sum of $200,000,000, and some of the major banks have already settled: http://www.nytimes.com/2011/09/03/business/bank-suits-over-mortgages-are-filed.html?_r=0 . In addition, a lawsuit has been filed against the federal government by the shareholders of Fannie Mae and Freddie Mac, for a) creating an environment by which Fannie and Freddie would be unable to meet their financial obligations b) forcing the executive management to sign over the companies to the conservator by (a), and c) the gross violation of the (fifth amendment) taking clause"
History being written....
From the Mouths of Babes
Spent a few minutes explaining to my very precocious
granddaughter, five year old Daryn Kelly Maloni, about my blog and why I write
it.
This produced the following exchange.
Daryn: "Grandpa?"
Me: "Yes Daryn?'
Daryn: "If you ever write a movie, don't put any naked people
in it."
Me: "Why not, sweetheart?"
Daryn: “Because that is so 'inappropriate.' "
Return of the “Hebrew Hammer”
The slightly odd but
heavily reported story about the Federal Housing Finance Agency IG’s report
(twice in the “we’ll go with anything
anti-Fannie Mae” Washington Post) produced several clones, but then some
sharp rebuttals.
One
sharp rejection was written by my friend and former Fannie colleague, Tom Lawler, writing in his own
daily newsletter
“Calculated Risk” picked up Tom’s
angry rejection of the Washington Post’s FHFA IG story, a slight variation of
the same story appeared today in their Sunday edition, too.
http://www.calculatedriskblog.com/2013/08/lawler-washington-post-and-reuters-get.html
Another most comprehensive
rebuttal was written by our friend, David Fiderer, aka “THH” (see headline
above).
Anyone—obviously few of
the professional reporters—who read the IG’s letter and report could see that
IG Linick, was upset at FHFA for giving F&F more time than he felt
desirable to implement a new FHFA dictated loss accounting rule.
IG Steve Linick—writing with or without his gun--didn’t suggest
either company was misrepresenting quarterly numbers, hiding losses, or were
not GAAP compliant. He was bitching at his FHFA colleagues for giving F&F too
much time to operate under the new proposal.
That fact didn’t stop
lots of headline writers and some journalists from jumping to predictable
anti-F&F conclusions.
Here’s a link to
Fiderer’s smashing rebuttal.
One more wrinkle in this
matter.
I exchanged emails with
one writer whom I suggested had gotten the story wrong.
In doing so, I challenged
him by saying (paraphrasing): “Do you really think that their outside auditors,
FHFA, the SEC, OMB and also Treasury are complicit to blessing Fannie and
Freddie for falsely reporting their earnings?”
The WH Behind the IG’s Report?
Try and solve this one.
(I wouldn’t make this up and I have the email exchange to prove his statement.)
When challenged, the
person claimed that the “White House” was supporting the IG’s report.
I asked him
(once again, paraphrasing), “So, is the WH pissed because DeMarco won’t do their bidding
and they are going to back an IG report which suggests DeMarco and his team are
falling down on the job?”
The guy hasn’t answered me,
yet.
What Others Say
Maloni, 8-25-2013
30 comments:
Fiderer's piece just makes me mad. How can the FHFA on one hand be demanded to rework mortgages, and on the other be demanded to classify them as total losses?
Also. Ironically, the govt - specifically FHFA - is admitting the value of the GSE's and also what slobs the banks are. *We expect the GSE's to modify loans and otherwise decrease foreclosures, that's what their role is. We expect no such thing from the banks. You boys write that 180 stuff off pronto*
Fannie 10K:
Our single-family serious delinquency rate has decreased each quarter since the first quarter of 2010. The decrease in our serious delinquency rate is primarily the result of home retention solutions, foreclosure alternatives and completed foreclosures, as well as our acquisition of loans with stronger credit profiles since the beginning of 2009. Our new single-family book of business represented 72% of our single-family guaranty book of business as of June 30, 2013 .
Although our serious delinquency rate has decreased, this rate and the period of time that loans remain seriously delinquent continue to be negatively impacted by the length of time required to complete a foreclosure. High levels of foreclosures, changes in state foreclosure laws, new federal and state servicing requirements imposed by regulatory actions and legal settlements, and the need for servicers to adapt to these changes have lengthened the time it takes to foreclose on a mortgage loan in many states. Longer foreclosure timelines result in these loans remaining in our book of business for a longer time, which has caused our serious delinquency rate to decrease more slowly in the last few years than it would have if the pace of foreclosures had been faster. We believe the slow pace of foreclosures will continue to negatively affect our single-family serious delinquency rates, foreclosure timelines and credit-related income (expenses). Other factors such as the pace of loan modifications, changes in home prices, unemployment levels and other macroeconomic conditions also influence serious delinquency rates.
RM, don't look for logic and consistency in government generically and specifically with F&F.
Again, thanks for that Wikipedia find.
"history Being re-written"
I think this is the Reason Barney Frank is working to end the GSE behind the scenes- He does not want their survival to be a rebuttal of his failures. (feel a little sorry for Frank- He so wanted to be like Tip O'Neil)
"history Being re-written"
I think this is the Reason Barney Frank is working to end the GSE behind the scenes- He does not want their survival to be a rebuttal of his failures. (feel a little sorry for Frank- He so wanted to be like Tip O'Neil)
Barney was rumored to be doing that, but who would talk about iut if he is?
Duncan MacLeod seems to specialize in the hit-and-run smear, maligning Barney Frank , for "working behind the scenes," to preempt a "rebuttal of hs failures."
MacLeod never says in plain English WTF he is talking about because, either he has no idea what he's talking about, or he is, to use a polite word, disingenuous.
Barney Frank had nothing to do with the Bush Adminstration's refusal to enforce laws against mortgage fraud, or the fraudulent AAA credit ratings assigned to private label RMBS, which incurred the vast majority of the credit losses.
I hope he is not deluded by the AEI Big Lie that the GSEs were central to the mortgage crisis.
Anon--Don't know Duncan or what are his priorities or objectives.
But, my "Barney Frank" commentary to Duncan's post is fresh. Specifically,it was reliably reported that Barney in recent months had been approaching his former colleagues and friends, asking them not to support any sort of F&F resurrection.
I took that seriously enough to reach out to Barney through a mutual friend (a former Member), but Frank did not respond to my overture, which merely asked if the rumor was true and, if so, why was he doing it???
In the unanswered tome, I reminded Barney that the only winners from a major F&F demise were the TBTF banks, who never have stopped going after him and his bill, which they successfully watered doing the legislative process and more so during the reg writing process (which still is going on).
Got no answers from the former Chairman.
To know how Barney used FnF to further his misguided agendas is to know why so many want us dead.
That's very likely, since we were a favorite of his and then became his pond scum.
That was another question I asked which he ignored, too.
Forgot to note that a fifth lawsuit was filed yesterday.
Anyone want a list of the lawsuits, email me at:
billmaloni@aol.com
Support from a surprising direction:
http://www.forbes.com/sites/moneybuilder/2013/08/28/replacing-fannie-mae-and-freddie-mac-is-a-fix-that-has-nothing-to-do-with-the-problem/
"It was the sub-standard quality of the loans originated and underwritten by the banks and mortgage lenders that resulted in widespread defaults and caused the catastrophic losses at Fannie Mae and Freddie Mac."
Thanks, QO.
The same article has this wonderful quote in it, too.
"Our political leadership is proposing that we abolish Fannie and Freddie for the sins of the banks and the mortgage lenders, and then hand over the keys to these same architects of the mortgage disaster that brought us to the brink of financial collapse. We are still healing and these are serious people proposing that we again legislate our way to mortgage prosperity, using no more common sense than that which got us into this mess."
MOney shot:
"Replacing Fannie Mae and Freddie Mac as a constructive consequence to the mortgage meltdown is akin to pulling over when the check engine light comes on and changing a tire, the fix has nothing to do with the problem"
Could it be that cooler heads will eventually prevail? There has been interesting trading in the FnF preferred issues recently, uncharacteristically large blocks exchanging hands with no obvious impact on price...
When are the Homebuilders going to launch a major effort to revive and reform F&F?
They seem to have been much to passive in representing their interests.
So what if they offend Henserling!
From my limited vantage point, there are no "cooler heads" anywhere in DC, yet, although Senate Banking Committee Chairman Tim Johnson (D-SD), always a good guy in my book, has the potential to produce something more reasonable than the others--and the forum to promote it.
Mike Capuano (D-Mass)--who earlier sponsored a "let them pay back the Treasury and get to work bill"-- has gone radio silent on the issue.
I have been impressed with the number of articles challenging the "destroy them" arguments, but I can't find a viable political alliance, right now, to support a thoughtful F&F revival campaign.
The Builders and the Realtors, once, formed strong allies, but--lately--only the NAR has stepped up.
The National Association of Homebuilders (NAHB) has lost some of its voice during the housing recession and seems to have taken a backward step re congressional influence.
If that trade group gets active and the Realtors don't get sidetracked over competing issues, they represent a foundation (no pun intended) for a solid "revive F&F" movement.
More good reading:
http://www.americanbanker.com/bankthink/the-real-reason-corker-warner-has-bipartisan-backing-1061681-1.html
QM's link may not open this excellent article to everyone (initially I had some trouble), so here is the article with a different link.
http://www.americanbanker.com/bankthink/the-real-reason-corker-warner-has-bipartisan-backing-1061681-1.html
Ackward
"Awkward"...you, me, or the link??
Hey, September brings a new F&F focus for the crazies and now we have Syria to worry over.
Be of good cheer, Robert, and enjoy the long weekend. Plus, pro-football almost is here.
I'll predict that if we go to war with Syria or, better said, just bomb them to kingdom com, FnF will finance it. Ha!
Not that i think it will come down to that. just more empty threats and promises by The Obama, herewith recognized as the worst president of my era, which is bad considering luminaries such as Johnson, Carter, and Bush II. Take a bow, Mr President. Thanks for your perverse interpretation of change.
Still has a way down to go before he rivals "W," but watch him hook the congressional GOP hawks into his plans or blame them for being wussies if the Congress balks!
(Essentially doing to them what the Republicans will do to him.)
But 'W' got things done, good and bad. The Obama... hell, all he has to do is reveal his position and he has bipartisan disapproval. He would have better success if he slyly rejected outright his own wants. Then shit would get done.
That's why he's the worst president of my generation.
Hey Bill so what's the bottom line on this thing? What are the various outcomes and how likely are they? I happen to have a few shares in your favorite GSE.
Honest, have no idea.
All the noise doesn't favor your investment, but nothing will happen on this matter this year. But noise doesn't mean unity and votes.
Next year is a congressional election year and with all of the bickering, I can't see anyone coalescing around any proposal where there are major opponents (most all of them have those).
Watch to see if Tim Johnson (D-SD_ and Mike Crapo (Idaho) senior D and R on Senate Banking, come up with some reasonable proposal this year, which might attract support.
Hensarling doesn't have enough R House votes behind his deal.
As I've told others, your stock will hit peaks and valleys while the discussion goes on.
Don't wait for Congress to reach agreement, you might have waited too long to make money on your investment.
Thank heaven for Bill Malone!
He really hit the nail on the head. Bank robber Paulson and the various agenda of the administration after Bush/Paulson, Obama admin forced help with housing, have treated a public company like a cash ATM.
I have contacted the top 7 lobbying firms in the country and given them a way they can use whatever influence they have to end the conservatorships. My suggestion to them was to take large stock positions in both companies and their lobby on their behalf. That lobbying also has a second potential benefit for them in the future if the companies decide to hire them after the coservatorships are ended.
Likely outcome is the court forces Congress' hand while also giving them a relief exit from this mess they can't win anyway.
Complaint/s to be addressed within month. Let the fireworks begin.
The fed is going to be forced to book trillions of gse debt if the fed takes more than $1 of what the GSE's owe on a company by company basis.
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