Lots of F&F stuff and Politics this week...

 

Clap your hands, take a deep breath, exhale..

 

 

Are F&F Investors Worried??

 

If I monetized my current Fannie holdings, the proceeds might allow me to buy an old used car or a new big screen TV, meaning my Fannie interest is not very financial, so my comments have no self-enrichment sentiments attached.

But, as reflected in recent Fannie and Freddie common and preferred shares price weakness, it appears  investors seem to think something bad is brewing for the two and maybe soon. 

Why?

 

Face it, the GSE securities trade on political and judicial news, whims, and rumors.

 

Congress ain’t doing much, with numerous conflicting outcomes and new principals driven by which party controls the Senate after the November elections, while the courts have their own unrelated schedule. 

Unlike most every other stock, earnings, market share, overhead reduction, etc. don’t seem to stoke F&F buyers. It’s all about investors trying to anticipate what the courts will do and/or what damage Congress and the Obama Administration might perpetrate. 

For a moment (it doesn’t require much more), look at what a rookie member of the House Banking Committee speaking to a DC meeting said about the timing and substance of possible Fannie and Freddie legislation and the difficulty in passing same.

At a conference sponsored by the American Banker, Rep John Delaney (D-MD), naturally made a case for his alternative approach to the distinctly different Chairman’s bills which passed each Banking Committee but never made it to the floor in either the House or Senate. (See story linked below.)

 

More important than the substance of his legislation--which isn’t going anywhere--Delaney’s observations are a reminder of the difficulty Congress faces in soon replacing F&F.

Delaney—who with two other junior Democrats has sponsored a competing proposal--highlighted his concerns with House Banking Committee Chairman Jeb Hensarling (R-Tex.) bill, which takes the GSEs and the federal government totally out of the mortgage market and calls on private lenders (mainly the banks) to make the rules and carryout whatever business they deem appropriate.

"I think that the proposals that on their face remove any government engagement from the market in a short period of time are very short-sighted, because right now it's a very imbalanced market. It would take years, if not decades to get it back to equilibrium," said Delaney.

He added that while the idea of a fully private housing market is "intellectually interesting," it remains politically impossible.

"You're never going to get that and for as long as you have that position, you will never change the system. And you'll sit here in 10 years and you will have the system exactly as it is today," the freshman lawmaker said.

http://www.americanbanker.com/issues/179_184/maryland-congressman-hopeful-for-gse-reform-resurgence-1070166-1.html?utm_campaign=daily%20briefing-sep%2024%202014&utm_medium=email&utm_source=newsletter&ET=americanbanker%3Ae3104789%3A520359a%3A&st=email

 

The Senate Banking Committee CWJC bill, sponsored by Chairman Tim Johnson (R-SD) and ranking R Mike Crapo (R-Idaho)—based largely on legislation championed by Sen. Bob Corker (R-Tenn.) and Mark Warner (D-Va.)--also abolishes F&F and creates a new federal mortgage insurance agency to guarantee MBS issuer losses, but it puts everything—including the F&F remnants on the federal budget or some $5 Trillion dollars’ worth.

That ain’t happening quickly, either, since whether the Senate goes R or stays D after November, congressional conservative voices and their budget conscious votes only will increase in 2015.

 

So, for the worriers and fearful, let me offer my sobering perspective of what Delaney said, since he was spinning and pitching a little for his bill which won’t move anywhere in a GOP dominated House. 

It’s going to be a long while before Congress moves any F&F legislation and, in the interim, the two likely will enjoy black ink for the next several quarters. 

GSE fans (whether you are investors or not) just should take a deep breath and watch what may be a raucous sound and light show, but little else. 

Nobody is slipping anything weighty through a post-election session.

 

Zimmer and Gabriel on GSEs

 

Old friends and colleagues, Rob Zimmer, a former Fannie and then Freddie lobbyist, who now represents a group of small mortgage lenders, and Washington financial analyst Chuck Gabriel, President of Capital Alpha Partners LLC, collaborated last week on document expressing their view of Hill developments in the Fannie-Freddie and mortgage finance worlds, including the regulatory spheres. 

The three of us agree on much, as you can note from my shorthanded version of next year, which I spelled out above and which was completed before I read Rob’s and Chuck’s work. 

But, the two do a deeper dive than I and note that whomever wins the Senate, beyond the headlines, the focus will be on regulatory mortgage finance relief and not legislative, with FHFA and the FHA under the guns and with appointed officials, not Congress, having opportunities to make things easier for borrowers.

Here is a link to their work.

http://view.email.capalphadc.com/?j=fe9915707c65027f76&m=fe91157073610d7e73&ls=fe5b117677610d7f7315&l=ff67167477&s=fe7016707766057c7117&jb=ffcf14&ju=fe821c747d630c7474&r=0

 

Note: For the record, I think Pat Roberts (R-Kan.) doesn’t get re-elected. 

See the very interesting George Will column below on the election issues facing Kansans. (BTW, George Will lives four doors away from me and has not—in the 22 years we’ve lived here—acknowledged me or anyone I know when he walks his dog daily, head down with earbuds in. He even upset GG, the super conservative, who always thought that George would acknowledge and then engage her on their shared beliefs. Maybe it’s my deodorant of choice, Eau d’Pittsburgh?)

http://www.washingtonpost.com/opinions/george-will-staking-the-senate-on-kansas/2014/09/24/d0841d52-4344-11e4-b47c-f5889e061e5f_story.html

 

What Others Are Saying 

Can Jeb Hensarling Learn to Compromise? 

The National Journal did a lengthy article on problems that House Banking Committee Chairman Jeb Hensarling (R-Tex.) seems to be generating among his colleagues on both sides of the aisle with his dogmatic approach to committee issues. This single minded pursuit isn’t winning him many friends and won’t pass muster in the Senate, even among fellow Republicans. 

Jeb needs to remember that the earth isn’t flat and, like it or not, he’s chairing a congressional committee in 2014 not 1914, when some of his constituents carried six guns every day (wait, it’s Texas, they still…..).

http://www.nationaljournal.com/congress/can-jeb-hensarling-learn-to-compromise-20140922

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Syria, the UN and the Always Helpful

Russian and Chinese Diplomats 

From a CNN news report:

 

 “Russia's foreign minister warned "against any attempt to narrow down the problem" to select groups, urging the world not to have "double standards in dividing terrorists into good terrorists and bad terrorists."

rstr"China and Russia, both permanent members of the Security Council, have blocked a number of attempts to force Syrian President Bashar al-Assad to step down as a way to bring about an end to the civil war that has since seen the rise of ISIS and other terror groups.”

 

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Cold Hearted review of the US “Coalition”

Here’s is a somber but probably accurate review of who is doing what in the fight against ISIL and why, by John Batchelor writing in Al-Jazeera.

http://america.aljazeera.com/opinions/2014/9/obama-isil-strategyairstrikessyria.html

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SNAFU

War is hell and the word/acronym SNAFU (“situation normal all f____ up!”) evolved from our collective WWII experiences. Bad things happen in wartime and that includes casualties and fatal mistakes. 

The public needs to be prepared for the inevitable loss of US military lives in the latest battles with ISIS, bombs that kill innocent civilians, tactical errors, and combat setbacks. It can’t/won’t be any other way. 

Hopefully the public and President Obama’s political enemies understand that and they won’t undercut him and the nation’s efforts the moment the news on CNN isn’t daily bombing runs and ISIS targets hit, but a downed jet or the deaths of American air personnel  or Special Forces troops.

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Good for Pope Francis 

https://mail.aol.com/38771-216/aol-6/en-uhttp://religion.blogs.cnn.com/2014/09/23/vatican-envoy-placed-under-house-arrest/?hpt=hp_t2s/Suite.aspx

Your Holiness, there are plenty more like this guy. Root them out.

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Soft on Financial Criminals?

William Black (Al-Jazeera) says AG Eric Holder was too easy on the bankers. 

http://america.aljazeera.com/opinions/2014/9/eric-holder-resignationjusticefinancialcrisisfraud.html 

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My Good Friend, Senator Dick Shelby 

As someone who—when I worked for Fannie—raised lots of campaign money for Dick Shelby (R-Ala.), a long time senior R on Senate Banking and possibly its next Chairman, I sometimes feared running into Dick, because he would loudly recognize me, “Bill,” and tell everyone in hearing distance, what a great job I was doing filling his coffers. That only got me/Fannie more $$$ attention and requests for similar help.

As the WSJ informed the world this week, a lot of people must have stepped up and replaced me helping Dick, since the Senator’s war chest now is more than $17 million fat with campaign cash and growing. 

http://online.wsj.com/articles/political-diary-stingy-republican-lawmakers-1411582646

Dick Shelby is a lot of things but slow on the “ask” he isn’t and never will be.

Suffice to say, in the past, he was a strong Fannie fan, although recently that’s changed.

(In case anyone is wondering: Federal law—approved in 1989--now prohibits retiring Senators and Members from keeping their excess campaign cash for any type of personal use. Before then, that’s exactly what departing federal office holders could do. Now, when a Member retires, the unused money must be contributed to a charity or to other political committees with specific guidelines covering those gifts. It can’t be sued as a financial sinecure.)

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Foxspeak: “When you are not intending to do something, you are intending to..” 

Steven Colbert incinerates Fox News for its “Coffee Salute” Obama coverage.

http://m.dailykos.com/stories/1332276

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Senator Warrens Wants Hearings on Fed Dealings With Goldman

Jonathan Spicer and Emily Stephenson, writing in Reuters, say Senator Elizabeth Warren (D-Mass.) is upset over “whistle blower” revelations about the Fed’s protection of Goldman and wants hearings to explore what happened.

http://www.reuters.com/article/2014/09/26/us-usa-fed-whistleblower-idUSKCN0HL2F320140926

 

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Barney Frank

For those of you wondering about what former Congressman Barney Frank has been doing and thinks (really?), the Washington Post answers your questions.

http://www.washingtonpost.com/lifestyle/style/story-time-with-professor-barney-frank/2014/09/24/3944a0ac-4041-11e4-b03f-de718edeb92f_story.html

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Walmart—Fannie was There First 

The news this week that WalMart was offering checking accounts in conjunction with an online bank reminded me about 15 years ago, Fannie was in deep discussion about approving Walmart as a “mortgage seller servicer,” putting mortgage applications and Fannie’s name within easy reach of all of Walmart's customers. 

Fannie backed off because some in the front office thought it was too aggressive (not me!).

http://www.theguardian.com/money/us-money-blog/2014/sep/25/walmart-banks-checking-accounts

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The Fed and Treasury Did What to AIG?

In her Sunday NYT column, Gretchen Morgenson reveals some not previously available information from Hank Greenberg’s suit against the federal government over its decisions and treatment of AIG and the insurance company’s clients.

As you read her concerns, keep in mind the same cast of characters abused F&F putting them into conservatorship and applying and then changing their oversight guidelines. Apply that to the 20 F*F cases pending.

http://www.nytimes.com/2014/09/28/business/court-casts-a-new-light-on-a-bailout.html?ref=business&_r=0

 

Maloni, 9-29-2014

Readers looking for commentary on the Lamberth decision and related issues, see the "comment" section. Also, I'll write much more in the next blog.

Of Funerals, Lawsuits, Senators, Wusses and Bombing ISIL

 

GG Would Have Enjoyed Her Funeral! 

 

The blog got delayed this week, when the whole family spent the past few days in Ohio, attending the funeral  of Audrea Hitz Wynn (my mother-in-law “GG,” for “great grandma,” who listened to Fox Network news 24-7, literally), highlighted by my wife’s eulogy to her gregarious, constantly volunteering, and politically conservative, WWII vet Mom. 

As the oldest of four, Heidi Wynn Maloni created a 23 page, 30 minute farewell memory, made better after she and two sibs spent a night polishing the prose and consuming five bottles of wine. 

Unfortunately, my wife gave an advanced copy to the local priest, the one St. Michael’s parish official that GG didn’t like and who she didn’t want at her funeral, but who—unfortunately--was the only available priest at St. Michael’s that weekend. 

Not knowing GG’s seminal role 40 years earlier in founding the church and its school and fundraising to make the two reality—not to mention her work for the Canton, Ohio Catholic Charities, United Way, Girl Scouts, Avondale Neighborhood Association, Friends of the Library,  the Garden Club, Walsh College, the Hospital Gift Shop (from whence years’ worth of family Christmas presents emanated), etc. etc.--Fr. “BuzzKill” warned my wife that her eulogy was much too long, laden with too much small talk, and she was better off “deferring” to him to remember her mother (what BS, but all true!).

Chauvinism in the Catholic Church?

Ha!

Heidi isn’t her tenacious mother’s first daughter and a life force herself for nothing!

So she barreled forward. Thirty two minutes and lots of laughs and verbal connections with the elderly audience later (“That was Audrea”), Father “Buzz Kill” couldn’t stand it, rising in his seat and appearing to search for a shepherd’s crook to deny Heidi uttering her final paragraph (enumerating the six grandchildren by name and age who gave GG her chosen title, just after mentioning the eight grandchildren similarly), he realized he was beaten and just collapsed into a chair-bound slump, realizing he had failed  just like he had on his original mission to silence her remarks. 

Afterwards, the daughter earned much praise from her mother’s friends and neighbors, while her own children proudly congratulated her and offered to video tape a reprise so it could be sent to the number of church goers who asked for a copy.

Father “BuzzKill” was not one of them.

 

Lawsuit Updates 

Not surprisingly,  Fairholme Capital’s lawyers, Cooper and Kirk, quickly responded to the government’s effort to deny Tim Howard’s appointment as a consultant to the firm, jumping all over the Department of Justice’s contention that Howard—because he was a former Fannie official who had written a book claiming he was the subject of government slander and political manipulation-- could not be trusted to view “discovered” documents without employing the information for personal financial or ideological use. 

Judge Margaret Sweeney’s current “gag order” prohibiting misuse of the government’s records applies to any Fairholme official or attorney likely to review the government files, including Howard. But the government sought only to target Tim and claim he was not trustworthy. (Shame on you Uncle Sam!) 

In rebutting the government’s claim, the C&K lawyers pointed out that Howard’s personal legal matters occurred in 2004 with the Bush Administration in power and that he was long gone from Fannie, when the 2012 issues in the current lawsuit, were implemented by the Obama Treasury and the F&F regulator. 

They further introduced records from Howard’s own successful hearing, which resulted in Federal Judge Richard Leon’s decision, two years ago, dismissing law suits against Tim and others based on the bogus “securities fraud” charges initially leveled in 2004 by the Office of Financial Enterprise Oversight (OFHEO), the predecessor to the current F&F regulator, the Federal Housing Finance Agency (FHFA). 

Cooper and Kirk included statements by Federal Judge Leon’s, who dumped the case against Howard et al, attesting to Howard’s veracity and factually strong testimony. That was when Tim was directly involved and had with access to 67 million pages of hearing records, including innumerable government documents and didn’t misuse the federal information then. 

(Tim reported last night that because of scheduling conflicts, the defendants waived oral arguments to his hiring, to which Fairholme’s lawyers agreed, and the Judge will decide the matter on her own.) 

I am not adept at turning these legal docs into a link—since they were sent to me in an unlikable form--but if someone wants to see what C&K produced supporting Fairholme retaining Howard, send me a request and I’ll see what I can do. 

Lawsuits Update Redux 

Plaintiff Perry Capital’s Ted Olson—the other famous lawyer, along with David Boies for Fairholme, in on these “Third amendment/ takings cases--last week also filed a crucial motion to expand access to additional Treasury and FHFA administrative records, which Perry believes are germane and necessary for them to proceed. 

Michael Kim, our friend at CRT Capital, did his usual superb analytical review of the recent court developments, which he will share with whomever contacts him.

MKim@crtllc.com,

 

WH/Lender Confab Produces Little

The Bipartisan Commission, that helped produce the original Corker/Warner bill which then morphed into the Senate’s CorkerWarnerJohnsonCrapo legislation, brought multiple housing interests to  town last week to discuss current housing and mortgage finance developments. 

This permitted a number lenders to meet with White House officials to look at mortgage finance problems facing low income families. 

Predictably, nothing of substance emerged, with the lenders blaming fears about Fannie and Freddie “buyback” worries as the excuse d’jour for them not doing what the Administration wants and the nation needs. 

One media report claimed, “Lenders are running scared” because of regs and buybacks. 

Well maybe those lenders should look in the mirror to see at whom they should be angry or, better yet, make whatever loans you can under the rules as they exist rather than holding back, hoping the WH’s carries your water or provides you with more federal subsidies or benefits to do what you should do.

 

CWJC and Congress Leaves

 

The Congress has run out of town, tail between its legs, to go home and campaign for reelection; every House member and about a third of the Senate are up. They won’t return until after the November 4 contests, which could produce GOP control in both the House and Senate, although the Republicans needs victories in six additional seats to control the Senate. 

The House will stay with the Republicans and likely see additional R’s elected to the lower chamber.  

Last week, in a near meaningless gesture, the Senate Banking Committee filed the report to accompany the Johnson-Crapo bill to the Senate floor. 

It is extremely unlikely that this legislation gets a floor vote when the Senate returns in a lame duck session. Then the entire issue will get carried over until 2015, when a new bill and new hearings need occur in both chambers. 

Kansas Senate Race 

Here is a Senate seat which could slip away from the R’s.

(From Politico).

“The Kansas Supreme Court on Thursday sided with Democrats attempting to remove their candidate from the ballot in Kansas' razor-tight Senate, a blow to incumbent Kansas Sen. Pat Roberts' reelection prospects.”

“The withdrawal of the Democratic nominee in the race, Chad Taylor, clears a path for independent Greg Orman to challenge Roberts one-on-one. Polls show Orman leading in the contest in a head-to-head matchup.”

“Although Taylor announced earlier this month that he was ending his campaign, Republican Secretary of State Kris Kobach had ruled that Taylor's name must remain on the ballot because his withdrawal failed to meet the precise requirements of Kansas' election law. But the court dismissed Kobach's argument, agreeing that Taylor satisfied the law when he announced his decision to drop out. The court refused to address Kobach's additional claim that Kansas Democrats are required to name a new candidate to replace Taylor.”  

 

Their Words Worth a Thousand of Mine 

(We are powerless sheep, hear us bleat)

 

Conservatorship (verbatim segment from a Freddie Mac investor’s Primer)…

 

§We continue to operate under the conservatorship that commenced on September 6, 2008, under the direction of Federal Housing Finance Agency (FHFA) our Conservator.

§FHFA as our Conservator:  

»FHFA assumed all powers of the Boards, management and shareholders

»FHFA has directed and will continue to direct certain of our business activities and strategies

»FHFA delegated certain authority to our Board of Directors to oversee, and to management to conduct, day-to-day operations  

§Our ability to access funds from the Treasury under the Purchase Agreement is critical to keeping us solvent.

§There is significant uncertainty as to whether or when we will emerge from conservatorship, as it has no specified termination date.

§Our future structure and role will be determined by the Administration and Congress, and there will likely be significant changes beyond the near term.

Gag!! 

My stomach churns and my brain screams “No,” when I read the material above. I am not picking on the Freddie’s, since I assume Fannie has similar material (hopefully not as cringing and kowtowing), but it cries utter and complete capitulation to government agencies that are not as adept at running a major business as a real board and management would be. 

However, the major takeaway for blog readers and others is that all major decisions and a crap load of minor ones are not made by anyone working at Fannie and Freddie but by their regulator the Federal Housing Finance Agency (FHFA) or by US Treasury officials, with an occasional boost/jab from the White House. 

So, when you hear some overpaid trade exec, Senate or House staffer, or even their principals (they have few of the other variety) berating “Fannie and Freddie,” someone remind them that it’s the Treasury and FHFA which they should harangue and criticize. 

What Others are Saying 

Bloomberg reports on first US airstrikes in Syria against ISIL.

http://www.bloomberg.com/news/2014-09-22/u-s-conducts-first-airstrikes-in-syria-on-islamic-state.html

Maloni, 9-23-2014

 

DOJ Abuse, Law Suits, and Bank Low Income Lending

 

US Government Slanders

 

Fairholme Capital Management--of Bruce Berkowitz and “third amendment” law suit fame-- announced last week that it has hired Tim Howard, former Fannie CFO, as a consultant to assist their law firm, Coopers and Kirk, to help analyze the thousands of documents which the firm has gathered and will gather during “discovery,” a process approved by the Court (Judge Margaret Sweeney).

 

Most people know that Tim—who before joining Fannie cut his financial services teeth at a major west coast bank--for 20 years held a series of upwardly responsible senior management positions for Fannie, eventually overseeing the company’s debt, credit, and securities operations.

While with Fannie, Tim traveled the world discussing the company and its debt and mortgage backed securities operations with foreign central banks, financial analysts, media, etc. Fannie often employed him to go to the Hill to meet with congressional staff and he was the primary creator of Fannie’s first risk based capital model working with Paul Volcker--following Volcker’s Fed stint when he joined Jim Wolfenson’s NYC firm--who studied it, tore it apart, made some acceptable changes, and then blessed it.

Howard also was the primary lead with all company dealings with the US Treasury during its many challenges to Fannie (and Freddie). 

Bottom line, Tim is very, very financial matters smart.   

They Got You Then and Now We Want to Jump on You, Too…….

 

In 2004, the Bush Administration operatives drove from office Tim, Fannie’s CEO Frank Raines, and Treasurer Leanne Spencer  using spurious charges of “securities violations,” which later got rejected by a federal court, but not before the Bush ideologues succeeded and the Fannie execs were forced to resign. 

Tim wrote a book about that episode, called, “The Mortgage Wars, which was well received and contained a lot of revelations about regulatory incompetence and sleazy political behavior. 

Latest insult, because Tim protested his innocence, wrote a book, and blamed regulators, the Department of Justice last week, formally opposed Howard’s retention to scan the “discovery” files which Coopers and Kirk will generate, because DoJ doesn't trust his integrity and claims he might use whatever information he reviews to trade in GSE securities or blab to somebody about the FHFA’s and Treasury’s tawdry recorded dirty laundry. 

By extension, Howard is subject to Judge Sweeney's  same prohibitive disclosure rules as everyone else from Fairholme or their lawyers who see discovered documents.

Shame on you Uncle Sam, go ahead and balk because Howard is tall and lanky, born in California, likes classical music, is a lousy dancer, or drives a fast car, but don’t spin and perpetuate lies, sully his character, honesty and reputation by suggesting he—alone of the dozens of plaintiffs officials, lawyers and others looking at government materials—can’t be trusted and would use what he reviews for personal or narrow ideological gain.

The institutional antecedent of the Federal Housing Finance Agency, which is the subject of many of the current legal challenges, is the group which started the Howard and Fannie colleagues witch hunt in 2004 (although none of that is part of the Fairholme suit).

This level of government BS and legal obfuscating was predictable but—IMO--not for the reason that you might think or the explanation to which many will leap. 

Come Let’s Stroll…

Today it is Tim Howard, tomorrow it will be something else.

I think this Administration is slow walking all of the procedures, throwing up obstacles, trying to play a four corners defense to run the clock and hope that any decision forthcoming favoring the plaintiffs—which I think is likely—occurs after the Obama Administration is out of Washington.

Yes, that’s two years from now plus a few months, but a lower court’s decision which gets appealed could linger before SCOTUS for years, unless this SCOTUS wants to make a statement on behalf of the investors.

I’ve repeatedly said that I have no idea how broad a decision Judge Sweeney might render, but it is possible that her decision could affect the structure and ownership of the companies and not merely be a large cash award.

I assume Howard’s fate is in the hands of Judge Sweeney. I hope she will see through this transparent government assault. 

Related Thoughts 

A friend and blog reader wrote to me about the above issues, discovery, and the fact that FHFA produced very small independent paper trail, suggesting it did little on its own during the early conservatorship years between 2008 and 2012, but acted merely as a Treasury puppet. 

He observed, “Ten years ago, there was zero evidence to establish any accounting violation by Fannie, which is why OFHEO (FHFA’s predecessor the Office of Financial Enterprise Oversight) persisted in concealing records that showed how the accusers lied.  Today, there is zero evidence to show how FHFA (Federal Housing Finance Agency) acted on behalf of the GSEs, independent of Treasury’s agenda, which is why they desperately want to avoid handing over the documents that they have. And why they (the government) persists in maligning Tim.”

As this same longtime observer noted, “The FHFA –which is very exposed--should be very, very afraid of Tim Howard.”

For a discussion of the Fairholme and related cases, see the article below by Law professor Richard Epstein, who works for the plaintiffs and has written extensively about the “Third Amendment” or “takings” cases. 

http://www.forbes.com/sites/richardepstein/2014/09/10/what-happens-if-the-government-loses-on-the-third-amendment-the-senior-preferred-stock-certificates-spell-nothing-but-trouble-for-the-government/

 

WH/Bank Lenders Meet Next Week
 

Writing in the Wall Street Journal (see link below), John Carney opined that the big banks—fearing federal  requests to take back or compensate for faulty loans-- will be loath to produce loans that met less stringent but still applicable FHFA-imposed F&F housing goals.

Carney, relying on bank sources, said the financial institutions won’t originate loans they which may not meet their internal credit/risk objectives, and which they otherwise wouldn’t hold on their books, but could be securitized with F&F and sold to investors. 

http://online.wsj.com/articles/heard-on-the-street-burned-banks-unlikely-to-embrace-mortgage-fix-1410452397?mod=WSJ_LatestHeadlines
 

A flip retort might be, “If you don’t want your naked pictures showing up on the Internet, don’t pose for them...”  

Ooops, wrong subject.

Mortgage buybacks. “If you don’t want Fannie and Freddie—and their regulator—to ask you to buyback bad loans,  underwrite the loans properly in the first place and don’t place ourselves at risk, after signing a contract not to scam, and then try passing off garbage loans for inclusion in F&F mortgage backed securities (MBS).”

That’s the only time lenders run afoul of the F&F (and FHFA) rules.

Next Wednesday, unless it gets cancelled, the White House (likely not Mr. Obama) will meet with represents of the nation largest banks to discuss how they might expand their lending to lower income American families who have not been well service in recent environment, which seems to serve only superior credits (high FICO scores, plenty of cash for down payments, as well no character or legal “dings”).

Now what will do at this meeting to incent the banks, except to ask the banks to step up and while offering them continued Administration support for CorkerWarnerJohnsonCrapo and whatever legislative iterations come from same? 

What will the bank lenders seek from the Obama Admin? 

Ooh, Ooh, We Have a List 

A few weeks ago the Financial Services Roundtable had a list of 16 pages worth of things on the regulatory and legislative fronts it wanted. The Mortgage Bankers Association, a few days ago, had a similar inventory which, surprise, surprise, was the MBA’s legislative wish list.

But, tell me why do the banks need more incentives and bribes to do what they are supposed to do, by virtue of our laws and their existing charters?

Today, the banks are financially fat, reasonably happy, and still enjoy record profits, possibly with less money than they’ve made in the past from mortgage lending with F&F (although it varies with institution), but still doing quite well with their total revenue pursuits.

Instead of mortgaging the ranch (pun intended), the White House should lean on the banks just to do more.

“Fear” of Buybacks?

 

Banks claim they are worried about F&F forcing them to “buy back” too many loans and the costs of that GSE option.

But those buyback demands, which have shrunk rapidly over the past several months, were for loans the banks underwrote improperly and on which the lenders made mistakes.

So, once again, I expect the banks will respond with non-reciprocal “asks” and seek additional federal guarantees, new federal “bennies,” regulatory “look the other ways,” and then, maybe, just maybe, consider some non-substantive loosening of their internal credit and income standards a bit.

I heard this same story in 1992 when F&F first were given housing goals because the bank, mortgage bank, and S&L lenders—then, far more numerous and far less concentrated—didn’t want or like to do business with poor people, minorities color, or those with flawed credit histories. 

The government was impotent in forcing banks to do the right thing and used Fannie Mae and Freddie Mac to do Uncle’s job.

What goes around comes around.

The banks haven’t changed, just their excuses.

Knowing the banks true agenda--give us Mo, Mo--I’m surprised, for next week’s meeting, the banks aren’t arguing over the shape of the table (for those of you old enough to remember the Vietnam “Paris peace negotiations.”)

One last thought—for this week—on the WH meeting and its goals.

Do you think anyone downtown ever makes the connection between the WH’s ongoing campaign against Fannie and Freddie and the issues over which you are ringing your hands, crawling to the banks, and asking to parlay?

“You betchum, Red Ryder!” (Sorry another historical allusion, meaning “Yes Sir.”)

If the Obama White House just could “Come to Jesus” on the GSE issues and quit poking F&F, insisting on their demise, maybe the housing social, political, and financial concerns--over which some in the Admin fondle their worry beads and hold meetings with avaricious bankers--could ameliorate sooner than otherwise.

 

Mike Stegman and Senator Corker (R-Tenn.)

Both the WH (Stegman) and Sen. Bob Corker, this past week, cited the CBO study, which I mentioned in the last blog, as justifying passage of the CWJC legislation.

Let me repeat, it was a crap study, which relied on disparate accounting standard applied to the GSEs and then separately to the new FMIC, the proposed insurance corporation created in the legislation.

CBO had no real analysis of possible (and likely) dramatic market changes, cost increases—which most everyone predicts— further lender concentration, implementation delays, and unanswered question about what if the needed private capital ($500 Billion) doesn’t show up. Those reviews likely would foul up their cute analysis and news story.

It was a cheap headline for the CWJ advocates and nothing more. 
 

Syria and IS/ISIL/ISIS? 

Mr. President, pinpoint is nice. But, shouldn’t it at least be a bit easier to carpet bomb those former Syrian Air Force bases—possibly blowing up some valuable assets still on them, thereby denying them to the ISIS--now that you’ve decided to destroy those terrorists?

Thank you for following this blog's “Middle East Game Plan,” speaking and acting tough and rounding up regional sovereign support to pursue your military objectives.

But, can you expedite things a bit?  What do your and your commanders think ISIS is doing while you are holding press conferences to announce your intentions?

You still have time to polish your legacy. (Just don’t trust the Russians.)

 

What Others Are Saying?

 

Were Sarah Palin and husband Todd at the party, with Todd getting his nose bloodied in a punchout, as some sources have reported? Those gosh darn GOP VP candidates!

“No” you say and stop treating them like trailer trash. OK, but if they don’t want their naked pictures on the Internet……

“Do you know who I am?” (Sarah supposedly screamed at party goers.)

http://www.cnn.com/video/data/2.0/video/bestoftv/2014/09/12/exp-malveaux-palin-reported-to-be-involved-in-brawl.cnn.html

 

Maloni, 9-15-2014