Monday, September 28, 2015

Boehner, the (@#$%#@&) SEC, and Lund

John Boehner—It’s a Crying Shame;
Is Jeb Hensarling in the Speaker’s mix?

Even though we seldom agreed, I always liked John Boehner, found him easy to work with him when it was necessary (years ago before he was Speaker), and always considered him a decent man, a good guy.
As Speaker, he was stuck in a rotten position with the House GOP crazies gnawing at him dedicated to sociopolitical, religious, and rightwing Kant issues that, IMO, never should rise to the noise level they did in congressional leadership politics.

I think President Obama’s public comments about Boehner were honest and heartfelt, “a good man.” The Washington Post, while acknowledging some Boehner good points, took a cheap shot at him in the editorial linked below.

Months ago, as the House wolves even then were circling, I asked a long time GOP friend and a Boehner insider —who once was a Fannie consultant-- if the Tea Party types would take Boehner down. Again, six months ago, his answer warily was, “Not yet.”

For what it's worth, I always thought the D's liked JB more than they would admit and it was reciprocal. He was, in some ways, a throwback to when Members crossed party lines and spoke to one another outside of the office.

I know in 2008, Boehner--reading from the Wallison distorted history sheet--blamed F&F for the financial meltdown. But he knew little about the two and was spouting the GOP “blame the government” line. That also positioned him not to listen to the AEI sirens and not push the dramatic market changes for which they whistled.

But, as I told two of my pro-GSE friends, both R’s, I think the House GOP crazies will rue the day they stabbed Boehner in the back, with their effort to roll back House Republican policy and political clocks to the “Father Knows Best” and “Leave it to Beaver” era.
It’s just a matter of time no matter who the House GOP caucus elects--(likely Majority Leader Kevin McCarthy (R-Cal.)—that the same crowd will try and infect the Senate, going after Majority Leader Mitchel McConnell (R-Ky.) and the GOP presidential race. (See gnarly comments already from candidates Senators Rubio (R-Fla.) and Cruz (R-Tex.).

Watch how quickly some of those announced Lilliputian politicos run to suck up to the House Tea Party types.

The congressional GOP—for many of the reasons Boehner stepped down—have failed to show their ability to govern. That reality won’t go unnoticed when America elects a new president next year.

(Oddlot: The Majority party in the House can elect as Speaker anyone it wants. He or She doesn’t have to be a sitting Member! Hello Sarah Palin? It has never happened before but there’s always a firs time. I wonder if the House R’s know Palin can see Russia from her Alaskan home’s front porch? Boehner couldn’t claim that!)

BTW, here’s what the Washington Post says could happen before Boehner leaves office in a month. (Sadly, much of which could have happened before.)

Speaker Hensarling???

Last week, my friend Trey Garrison, editor of Housingwire, suggested that HBC Chairman Jeb Hensarling (R-Tex.) should be the next Speaker. Hensarling certainly wants it but I believe his ascendancy would be GSE-bad.

Hensarling may (or may not) know a little bit more about financial services and housing finance matters, but he has a certain anti-GSE agenda—that you don’t want in a Speaker--spelled out in Hensarling’s “Housing Path Act,” legislation which barely got out of his House Banking Committee last session and then died aborning.

Jeb H’s solution is simple, get rid of F&F and turn the entire mortgage market over to the big banks.

The Chairman clearly hasn’t learned anything beyond the AEI rants and understands little about what major damages his big banks visited on the mortgage markets, this nation, and other countries when they issued $2.7 Trillion of poorly underwritten, falsely rated, and toxic bunches of their own institution-named mortgage backed securities, created and guaranteed going outside the Fannie and Freddie systems.

Bank mortgage bonds produced three times the losses the GSE MBS did and—seven years later--the banking sector still hasn’t gotten back into mortgage lending, except for loans bring to Fannie or Freddie. In part because MBS investors don’t trust the bank guarantees behind those securities. The markets, however, do trust GSE warranties.

Sorry, I have to turn thumbs down on Jeb Hensarling’s proposed Speaker candidacy.
I wish John Boehner lots of (natural) sun, good golf, and—after a few months off—a speedy return to Washington as a lobbyist, a natural career for his approach and skills and charm.
Shh, don’t tell the crazies, but Boehner also gets along with Democrats and has.

SEC “Settles” With 2 of 3 Fannie Execs

What a joke of the Securities and Exchange Commission’s (SEC) most recent GSE investigation. It took five years for the agency to realize the “Emperor in its legal case” wasn’t wearing any clothes.
Nonetheless the case disrupted lives, damaged reputations, professional opportunities, and had negative personal and familial impacts—and for at least one target, it continues to run.

But, now it’s over for two of the three when the SEC dropped charges.

No, I’m not talking about Frank Raines, Tim Howard, and LeAnne Spencer Garmon, but Tom Lund and Enrico Dallavechhia who, in 2011, the SEC claimed signed off on documents which might have misled Fannie investors.

It took 8 years, from 2004 to 2012, for a federal judge to find Raines, Howard, and Spencer innocent of securities fraud (SEC had weighed in, wrongly, there as well). With the most recent release, SEC took only 5 years to smell the coffee.

Former Fannie CEO Dan Mudd, who also was cited by the SEC five years ago, still faces SEC scrutiny and did not settle last week.

The SEC finding produced an absolutely lame and silly sanction. Dallavechhia and Lund and must pay $35,000 combined ($25K for Dallavechhia and $10K for Lund) in a “gift” to the Treasury, not the SEC.
The money won’t even be personal but come from Fannie Mae.

But the core SEC allegation, which pivoted around the agency’s impractical definition of “subprime mortgages,” was squishier than a bucket of eels dipped in motor oil.
It couldn’t prove that anyone knew loans acquired years ago were “subprime,” since there was no common definition of same. That made the SEC’s case very weak and resulted in that bizarre settlement which looked more like an agency surrender sans white flag.

The bottom line for this sorry episode is “subprime” is/was in the eye of the beholder—see the Pied Piper, Peter Wallison--and the SEC couldn’t sustain its opinion.
At the time of the original indictment five years ago, two financial services savants, my friend David Fiderer and the NYT’s Joe Nocera, both wrote that the SEC’s charges were a tad ludicrous. (See below.)



I don’t know Enrico Dallavechhia, who came to Fannie after I retired, but I do know Tom—who was known in Fannie as a very conservative businessman--and I am extremely happy for him and his family that this current nightmare is over, with the result showing he did nothing wrong.

It’s important for me to note, Tom was the Fannie Mae author of an internal report advising senior management not to invest in private label securities (PLS), which unfortunately was ignored by his bosses.

(Below are links to Tom Lund’s Financial Crisis Inquiry Commission (FCIC) appearance and to news stories on last week’s SEC action.)


and this

Good luck to you Enrico and Tom. You’ve earned some.

What Others Are Saying
Presidential Corner
How does Speaker’s Departure
Impact GOP Presidential crew?


Was Carly Fiorina was a ‘secretary” and a successful Hewlett Packard CEO.
Fiorina’s record as posted in a letter to Politico.
“Carly Fiorina was the daughter of the dean of the law school at Duke University who later became a federal appeals court judge. Carly Fiorina graduated from Stanford and has an MBA from the University of Maryland and a master’s degree from MIT (she had a summer job somewhere in there as a secretary). Carly Fiorina is a charter member of the 1% in power and influence if not wealth. 
As for her tenure at HP. While she was running HP her company sold embargoed goods to our enemy Iran. They may have structured the deal through a third party and a third country but the reality is that the company that she headed traded with the enemy with her knowledge. There is a term for someone who does things like this, traitor.”

Is Fox Chortling (too soon?) because Trump polls show some softness?


Bush says Dems Offer Blacks “free stuff.”

Is HRC Stalking “Joe?”

Fannie/Freddie Corner

Josh Rosner Tweet re an October conference sponsored by the Bipartisan Policy Center which first produced the report that Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) later turned into their “GSE Reform” legislation, which died in the Senate. Both Senators are set to speak to the assemblage.

@JoshRosner Proper title: "Hey! We paid Corker & Warner to help us capture the mortgage market & all we got was this lousy conference"
More from Housingwire on why F&F didn’t need a Treasury bailout,

Bethany interviewed by Chicago TV
White House Dinner for Chinese President

Looking at the guest list for the President’s WH dinner for China President Xi Jinping, I noticed two of my former Fannie Mae colleagues attending, Tom Donilon and Wendy Sherman.
Has working at Fannie lost its pariah elements these days? Is that a sign BHO will support recap?
No and Hardly!!
Bank Corner

General Politics Corner
Government Shutdown? After Boehner’s act--probably not this month

Kim Davis and Her Family Dump Democrat Ties;
Family Research Council Gives her an Award

Rowan County Kentucky court clerk Kim Davis did not comment on the fact that she and her entire family changed their party registration from Democrat to Republican, when she was honored at the 10th annual Values Voter Summit last week, in Washington, D.C., but I am sure it didn’t hurt. The gathering of social conservatives is sponsored by the Family Research Council, an activist conservative group.

Let’s see this is the Kentucky Clerk who refused to issue marriage licenses to gay men and women, despite the Supreme Court’s rulings, has been married four times and has at least one child from an adulterous relationship with a married man.

She copped an old plea for her defiance of the law, she “found the Lord.” I guess her version of the Deity doesn’t get PO’d when adherents break various commandments or just ignore the civil laws of the United States.

“Hell, that ain’t nothin’, Bubba! Kim Davis claims none of the licenses issued by her staff are legal—since her name and stamp aren’t on them--which would mean none of those marriages are legal in Kentucky.”

If the judge agrees with her, it might be a quick trip back to the slammer for Kim and all of the visits from Mike Huckabee—who, IMO, soon will exit that candidate group—won’t matter in the least.

Politics makes for a strange set of social conservative values doesn’t it? I am so happy I never qualified for one of their awards.

Foreign Policy Issues

Putin, Ukraine and Syria

President Obama and “Vlad the Disruptor/Destroyer” are supposed to meet in New York this week to discuss common interests. My advice, don’t take John Kerry with you BHO, take instead old hands Zbig Brzezinski or Kissinger.

Remember my advice Mr. President, never to trust the Russians and always carry a big threatening stick with you. It’s a better message to Putin than any velvet glove you are inclined to offer. He and his regime are treacherous and interested only in making you and our country look bad.

Now, they want us to cooperate with them in Syria.
Putin’s backyard is hurting under your economic sanctions, don’t take your foot off the accelerator pending some major Russia concessions in the Ukraine and elsewhere. Be a wolf not a sheep. Yes, they both get eaten by bears, but wolves can inflict damage.
Don’t give him any more chances; maybe some of our now better armed Kurdish friends might want to take out a few of those Russian airplanes, accidentally, Putin sent to protect Assad? Or let a few ground to air missiles fall into ISIS hands, they seem to get all of our other martial supplies.
Bibi Netanyahu will mean with Putin, too, I wonder what he tells Vlad??

Russian, Iran, and Iraq—Maybe Iraq will give us some intel crumbs, the ungrateful SOBs?


Maloni, 9-28-2015

Monday, September 21, 2015

The Pope, Fannie, McLean, and a Little Fiderer

Pope Francis, Fannie, Freddie, and Hope;
Could he Condemn a Mongolian Mormon?

During his two day visit to Washington DC this week, Vatican sources—whose identities I cannot reveal because of my adherence to the International Blog Source Secrecy Guidelines (IBSSG) —implied Pope Francis expects to warn congressional and Administration policy makers, “Hands off the GSEs.”  It was hinted His Holiness may also suggest that banks not be given early access to the CSP.

My source says this GSE communication will occur when the President and the Pope play their round of golf at Andrews Air Force base, since the Pope hurt his wrist and can’t dribble a basketball, as he smoothly once did. BHO has offered the Pope three strokes--because the Pope wears his white cassock when he plays--which Francis immediately took, betting $10 a hole.

I wonder if these talks will get attention from this town’s jaded media and federally appointed and elected public officials.

Administration sources madly are racing to find someone who—by Thursday--can explain to President Obama what Fannie and Freddie do and why they are so important to low and moderate income families whom the Pope adores, especially minorities whose home ownership rates significantly trail whites.

Also scurrying around were clerks to Judge Margaret Sweeney, who snagged one of the gilt-edged invitations to see the Pope. Judge Sweeney’s assistants are hoping to secure the proper Latin pronunciations of “DTAs, lying under oath, depositionUgoletti, and redaction,” should Pope Francis raise those matters with “somebody.” 

(Apparently out-of-town Popes are not covered by Judge Sweeney’s gag order. After all, how/why would you gag the Pontiff?)

In a related development, Mario Ugoletti, former Treasury and FHFA employee (see impotence above), reportedly has moved to UlaanbatorMongolia, shortly after joining the Church of Jesus Christ of the Latter Day Saints. Before leaving, MU muttered something about, “Francis can’t excommunicate an ex-Catholic Mongolian Mormon novitiate can he?”

We’ll know by week’s end, if the papal GSE intervention took place.

Bethany McLean’s Book Tour 

Bethany McLean started her book tour last week for her GSE volume, “On Shaky Ground: The Strange Saga of the U.S. Mortgage Giants.”
I managed to see one of her four Washington DC events.

Unfortunately there was no video of that one at the Politics and Prose book store, but I did get a chance to speak with her before, after getting two books autographed (one for the very helpful Mr. Fidlsticks) and one for myself.

Mine replaced my original galley proof copy, that the author provided to me weeks ago, which disappeared after I lent to a well-known GSE personality, an author in his own right, whose name I won’t mention.

(Psst.  OK, I confess, it was “the real” Tim Howard, who joined us at P&P with his lovely wife Debbie. They also bought books.)

Bethany’s efficient synopsis and P&P presentation were excellent, with the history and current limbo perils to Fannie and Freddie floating in conservatorship surrounded by a WH and Congress uncertain of how to proceed enamored with their love of F&F’s revenue generating capacity but knowing the present design leaves the GSEs each year with less and less capital to protect against losses.

That’s even before you mix in the GOP hate and disdain of anything tied to the Roosevelt Administration or federal support for conventionally financed home ownership. But, as Bethany told the P&P assemblage, loosely applying Winston Churchill’s logic and words, “Fannie and Freddie may be bad, but they are better than whatever is next.”

Ms. McLean recounted a revealing vignette, unfortunately one shared by too many people “inside the Beltway,” and which, quickly, got incarnated within another P&P book buyer.

Bethany described, twice, seeing old pals months ago, on a visit to New England and, separately, when she was in a friend’s wedding. Two acquaintances, after asking what the four time author and mother of two daughters was working on and being told “researching a Fannie and Freddie issue,” both responded with a variation of the line. “Well, I can tell you all you need to know about them. Their pursuit of bad low income loans caused the 2008 financial meltdown.”

After her friendly Politics and Prose audience laughed at that distorted and very inaccurate historical factoid, a man in the back of the room loudly exclaimed, “That is me, I’ve been telling that to people for years.”

I later found the man and as he was checking out his McLean book purchase, and asked him why he believed that and he said, “Well weren’t all of those bank securities (meaning PLS) backed by Fannie and Freddie?”

When I explained why the opposite was true and “$2.7 Trillion in PLS” sold internationally by banks meant  Private Label Securities, issued outside of the GSE systems and not backed by F&F, he was embarrassed and perplexed, saying, “I have to read this book right way.”

I hope that gentleman becomes a microcosm for the nation and learns the truth after reading “On Shaky Ground…” and then engages others with his fresh knowledge.

By all means, buy and read Bethany McLean’s book, consume those interviews and watch the videos.

Remember, she firmly believes Fannie and Freddie need to stay operational in the mortgage market to insure long term fixed rate financing, standardization and efficiency for consumers and as a counterweight to the market and political influence of the nation’s big banks.

(Related/unrelated. I bumped into two Fannie employees at the P&P event and both laughed and threw cold water on any talk of an "employee walkout", noting that the individual associated with such talk does not work for Fannie or Freddie.)

Here is a list of the events, with videos in which Ms. McLean engaged. In addition, I also linked some articles and reviews about her and her book, as well as a link to upcoming events.


Columbia Global Reports: 'Shaky Ground' Launch Event Video McLean, Bill Ackman, and Frank Raines)
Tuesday, September 15, 2015


Charlie RoseA discussion about Fannie Mae and Freddie Mac with Bethany McLean, author of “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants,” and Bill Ackman of Pershing Square Capital.


MarketPlace: U.S. mortgage giants under the microscope


WNYC: The battleground that's Fannie and Freddie 


Museum of American Finance: Bethany McLean on "Why Does the US Government Want Fannie and Freddie Dead?"


Yahoo: Video interview: The biggest remaining risk in today's financial system, hiding in plain sight


CNBC: Mortgage giants on 'Shaky Ground'? 


New America:   Shaky Ground, The Strange Saga of the U.S. Mortgage Giants

The Street: Fates of Fannie and Freddie Need to Be Settled ASAP Says Bethany McLean

Columbia Global Reports Upcoming Events Link

What’s New With David Fiderer’s Book

David Fiderer is someone who has written extensively about the bank PLS investment madness documenting their sloppiness, blunders, lying and, most importantly, their huge losses, far larger than any set of F&F securities.

In a surprise to me, a week ago, David Fiderer published his e-book on Amazon, “The Plot to Destroy Fannie Mae, Anatomy of a Power Grab, which excoriates in great detail senior government and regulatory officials, starting with former Treasury Secretary Henry “Hank” Paulson, for their haphazard, reckless, and demagogic treatment of Fannie Mae and Freddie Mac.

In his author’s zeal, David later admitted that the book was not totally ready for prime time and needing some reorganization, cleansing of typos, and made easier to read.

While I didn’t disagree, I also told anyone who asked me, Fiderer’s research and fact finding are solid and his conclusions so disturbing, that his work’s surface flaws do not undercut what he produced.

Read it and see for yourself.”

The good news is DF is working with an editor and hopes shortly to reissue his work, possibly in print form. But, I’ll remind all that, the original is on Amazon, you don’t need a Kindle to read it; any sort of e-reader can access it.

Senators reintroduce F&F “Jump Start”

This Jon Prior article in Politico last week (below) caused some angst in the GSE community because Sen. Elizabeth Warren first supported this bill, then opposed it taking off her name, and finally jumped on a new version but with the same poisonous impact. Its fate still is up in the air because the SDC ranking member, Sen. Sherrod Brown (D-Ohio) opposes it and reportedly has a “hold” on the legislation?
By Jon Prior

09/16/2015 11:13 AM EDT

Members of the Senate Banking Committee, led by Bob Corker, Mark Warner, and Elizabeth Warren, reintroduced a bill today that would prevent the government from selling its stake in Fannie Mae and Freddie Mac without instructions from Congress.
After failing to be fast-tracked through the Senate this week, the bill is being pushed for a vote after language was added that would prevent lawmakers from raising fees charged by the two companies to be spent on other government programs. The committee's top Democrat, Sherrod Brown, had put a hold on that process. He told POLITICO earlier today he was against a piecemeal approach to housing reform and wanted the proposal to go through regular process. Warren had thrown up a roadblock, too, after language centering on the fees was taken out. Another provision was separated out that would suspend pay hikes for the chief executives of Fannie and Freddie, but that was pushed through the Senate last night.

"While comprehensive reform is my preference, we must not allow a small minority to prevent us from making any progress at all," Corker said in a statement today.

The bill stands long odds of becoming law, as it's unknown whether Senate and House leaders will want to take up the controversial proposal. The bill would hurt shareholders who are suing the Obama administration seeking a court to allow Fannie and Freddie to pay down the government's stake in the firms after they returned more in profits to the Treasury than the $187.5 billion they received in bailouts.

What Others Are Saying?

Presidential Corner
Latest GOP Candidates Rankings

Trump and Carly Fiorina at the top
Support me so I can sell your info (Carly)

Common Question: Hillary’s Achievements??


Trump on “Obama is a Muslim”

Have Trump antics driven up Hispanic voter registration

Fannie and Freddie Corner


“Big Banks Can’t Be Trusted to Replace GSEs”

Paul Muolo in IMF

Short Takes: Almost All GSE-Related Legislation is DOA / Don’t Kill the Golden Goose / Those Crazy Common Investors / The GSEs Are Worth $35.2 Billion? / Brian Webster’s Resume

By Paul Muolo
What will happen if Congress gets the authority to block (or approve) the Treasury Department from selling its senior preferred stock in Fannie Mae and Freddie Mac? First off, it’s unlikely that such a bill will ever pass. Industry lobbyists suggest that the only GSE bill that might have a chance in the current Congress is one that guts the recent pay raises implemented by the Federal Housing Finance Agency for the CEOs of the GSE

Keep in mind that few think Treasury would be willing to unload its senior preferred shares because that means the $20 billion to $30 billion the two contribute to the Treasury each year (at least) would go away. Then again, if Treasury received a bid of $100 billion (for example) for their holdings maybe…
GSE FACT CHECK #1: Meanwhile, the common shares of Fannie and Freddie have a current market capitalization rate of $19.60 billion, based on trading prices Tuesday afternoon. Many consider the common shares worthless, but no one has told the dreamers and speculators who continue to buy the stocks.  
GSE FACT CHECK #2: So, what are Fannie and Freddie really worth? At three-times annual earnings (based on 2Q15 results) that would be $35.2 billion. The calculation excludes franchise value and goodwill.

General Politics Corner

The Odd Couple

Bye-Bye Randy, Good move, enjoy your family

Bank Screw Up Corner


Maloni, 9-21-2015

(Note: This is going up after original publication. There is no Pope, golf, Ulaanbator, Mormon  GSE discussion, etc. etc. it is Maloni tongue-in-cheek humor.)