Monday, October 26, 2015

Didn't Jack Lew Once Tell Rep. Capuano F&F Repaid Their Debt?

My Response to Antonio Weiss

(Written on 10-19, the day his belligerent article appeared in Bloomberg; see link below.)

I am disappointed.

I had heard Antonio Weiss was a smart fellow, who Senator Elizabeth Warren (D-Mass.) scotched for a full time Treasury job just because of his Wall Street roots.

Well, where he worked almost doesn’t matter; because what he wrote this past week about GSE mortgage reform suggests he isn’t a very deep or critical thinker and a lousy homeownership advocate.

Weiss Says No

In a prominent article, objecting to Fannie Mae’s and Freddie Mac’s recapitalization and release from “conservatorship,” Mr. Weiss--now a counsellor to the Treasury Secretary--rattles off the same Obama administration empty bromide chorus which produced the spot we are in, today. Fannie Mae and Freddie Mae (the GSEs or government sponsored enterprises) locked in “conservatorship,” sending every penny of their earnings to the Treasury General Fund.

That amount now is almost @$240 Billion and growing. Neither has been permitted to retain earnings for protective capital—beyond a minuscule amount--
since former Treasury Secretary Tim Geithner’s 2012 “Third Amendment" sweep decision.

Bank Celebrates Weiss's call Gets Fined

It is telling—as I will expand later--that Weiss’s article came out on the same day that US financial officials charged Barclay’s Bank with a $350 Million fine for violating credit union mortgage operations.

This regulatory tariff shouldn’t be confused with Barclay’s two other major US fines this year, the first for $2.6 Billion as part of a six bank assault on the FOREX and then a US Commodity Futures Trading Commission
(CFTC) fine of $115 Million for false reporting on swaps rates.

In putting thumbs down on some Fannie Mae and Freddie Mac operational future, which could be achieved through Obama regulatory fiat, Weiss naively chose to call on the Congress--which barely can agree on what is the day and date in DC--to cooperate on a massive mortgage finance system reform which he contends will serve the nation better and reduce taxpayers risk. (Mr. Weiss, can you say commercial behemoths “Too Big To Fail?”)

Senators sought to do that last year but limped away, shaking their collective heads because the proposed reform scheme didn’t see worth the anguish, confusion, delay and uncertainty of their legislative proposal which came out the back end of the White House/special interest legislative spaghetti grinder.

No New Plan Antonio, just Nada?

Missing from Weiss’s hollow call to action is any new plan which possibly might pass the formidable GOP dominated congressional committees and not just reward the nation’s largest banks, at the expense of would be homebuyers and other mortgage finance professionals who fear large bank domination.

Weiss now has become a major part of President Obama’s “kick the mortgage can—and a lot else--down the road” and force his Democrat or GOP successor to do what he won’t undertake, even though he has the power to make dramatic executive changes to the Fannie Mae and Freddie Mac situation.

The significance of my comment about Barclay’s Bank’s fine and Weiss’s announcement (which got mirrored later that day by Treasury’s Mike Stegman speaking to the Mortgage Bankers Association) is every single mortgage finance alternative—which this Administration, the Senate and House Republicans solidly endorse—would give the primary and secondary mortgage markets over to the nation’s largest banks and their allies.

So one part of this paranoid Admin calls for “mortgage reform which Congress must pass,” while another office fines the heck out of the banks, who would be the ultimate untrustworthy beneficiaries of the Obama/congressional mortgage market reforms.

Psst, Some Banks Cheat

Maybe now would be a good time to remind the White House and its minions of a certain cruel reality, which vexes most Americans, but which was neatly embodied by one of Barclay’s employees who crowed last May when the bank’s FOREX fine came down. He said, “If you ain’t cheatin’, you ain’t trying.”

Pretty dismal bank mantra to contemplate, right Mr. Weiss? But that is a revealing look into bank DNA and I suspect, coming off Wall Street, you know it quite well!

When the commercial banks in the post-2008 period took down two and a half times what Treasury gave Fannie and Freddie—since their private, non F&F, mortgage bonds losses were close to $500 Billon--did anyone say the bank business model didn’t work, even though their securities were spectacularly more taxpayer costly than the GSEs?

Oh That, Again

For me, what’s almost as hoary is Weiss’s GSE criticism of “privatizing gains and socializing loses.”

What does that mean? Recently I wrote that Fannie and Freddie, in each of their first 38 years (76 total), paid every business loss they incurred from their own revenues, not looking to Uncle Sam for any help.

It was the Bush Administration—that continues to draw critical academic and literary scrutiny of its possible ideological agenda--which chose to put the GSEs into conservatorship, a very questionable decision still being challenged in the courts and forced on them $187 Billion (closer to $150 Billion, if you look at the details), which has been paid back—similar to the various banks which got federal financial assistance at that time—even though Weiss and others argue the money hasn’t been repaid.

Financial Support Has Been Repaid

If you ask most Americans, Mr. Weiss, “When you borrow 187 apples and repay 240 apples, have you paid off your debt?” The answer is “Yes.”

But, what if there was an unprecedented critical stipulation applied to the GSEs that no other firm faced?

And there was.

No bank or other financial service companies had its version of the  bizarre application of “GSE debt can never be repaid but goes on forever.”

What also is painfully transparent is Weiss’s ignorance or premeditated diminution of Fannie’s and Freddie’s successful post-2008 regulation.  That new oversight paradigm has all but foreclosed the same pre-2008 scenario from reoccurring. (Why, Mr. Weiss, do you think the GSEs have prospered financially since then and “repaid” all of that taxpayer money?)

The GSEs current regulation: which nobody wants dramatically altered, allowed both companies to repay taxpayers @$240 Billion; limited the type of mortgages they can securitize and improved the credit profiles on those loans; resulted in them reducing dramatically the sizes of their retained portfolios; and ushered in creative ways to sell their remaining losing mortgages to other “private investors,” utilizing private mortgage insurance tools and other devices.

Mr. Weiss, are your favored banks so well regulated?

But, but, Why all of those Bank Fines, If They are The Answer?

If so, why have they been hit with over $100 Billion in US regulatory fines—in the same post-2008 time frame, constituting a broad range of serious legal and regulatory violations and wrong doings (laundering Mexican drug money, commercially dealing with Middle Eastern extremists and governments, manipulating the LIBOR index to which most US adjustable rate loans are tied, etc., etc., etc.)?

Lost in all of the smokescreen this Administration creates is that mortgage market players, meaning home buyers, lenders, Realtors and builders, are very familiar with Fannie and Freddie and how they work in conjunction with their own personal and business objectives.

Only tinkering a little with them and their nationwide business relationships, to the extent necessary, is far more practical than abolishing the GSEs and starting anew in a non-stop, vibrant $11 Trillion US mortgage/housing market which approaches 18% of our GNP.

My friend, Bethany McLean, an award winning financial services and GSE author, is fond of summoning Winston Churchill’s memory and applying the great British war time leader’s word about “democracy,” when she paraphrases, “Fannie and Freddie may be the worst form of mortgage finance system, except for all of the others.”


My Bad!

I was so PO’d when I first read Antonio Weiss’s article, I sat down and quickly penned the above.

I cleaned up my inevitable typos and sent it to a friendly journal, asking if it would be interested in printing it?

They were, but raised some issues about the strength of a few comments I made both about Weiss and the nation’s big banks.

My first reaction—which is why the column appears in my blog and not a major medium—is that I have multiple reasons for my view of larcenous bank behavior, which the financial institutions seem to reinforce every few weeks, and I wasn’t going to water them down (although I could have).

Weiss I don’t know, but speculated on his “type,” given the nature of his arguments.

Bottom line--in sending out my screed to a journal which publishes to a much bigger audience and more frequently than I--it has the right and obligation to seek whatever quality they want in a “guest” column.

This is my blog and, first and foremost, before I publish my own stuff, it has to satisfy my objectives.

It’s their publication and the same principle applies.

So guys, you were right and I was wrong because I forgot a most important social tenet, “Your house, your rules.”

What Others Are Saying

Presidential Corner

A nation (likely) thanks you Joe Biden. I do.

With all due respect, I think you would have been hurt more by running and the tepid reception you would have encountered, as well as the partisan (and Democrat) slings and arrows your campaign would have produced.

The money you didn’t take in can be used by others in the general election and you should get “thanks” for that, too.

Elephants Square Off, Bush Trump No CIC

Trump versus Bush and Bush

GOP Establishment Readies War in Trump?


But, beginning of Jeb’s end?


Is Hillary now Thriving? Excellent “Debate,”
Biden drops out, GOP flubs Benghazi Hearing
Fannie and Freddie Corner

Fortune (nastily) says “no GSE reform”

Fiderer offers Twitter entertainment advice…

  David Fiderer (@Ny1david)

10/23/15, 11:47 AM
Thought Trey Gowdy's case against Hillary was persuasive? Sign up to hear Ed Pinto's case against the GSEs.

John Bancroft in Inside Mortgage Finance

GSE CEO’s Urge CSP Patience (Heh, heh, heh!)

Fannie, Freddie CEOs Urge Patience to the Industry on the Single GSE Security
By John Bancroft,

Fannie Mae and Freddie Mac rolled into their eighth year of government conservatorship pushing forward the two major reforms they can accomplish under their existing charters: selling off a significant portion of the credit risk on their current business and building a new MBS platform.

Top officials from the two government-sponsored enterprises urged the industry to be patient about the launch of the common securitization platform and, a little further down the road, the single security for GSE to-be-announced MBS.
“It will happen,” said Don Layton, CEO at Freddie Mac, during this week’s annual convention of the Mortgage Bankers Association. The joint venture is staffed and “no longer living like poor cousins” at the GSEs themselves. But the timing is uncertain, as with any major technology change, he said.

“It is a big undertaking involving some $5 trillion in assets,” Tim Mayopoulos, CEO of Fannie Mae, reminded the industry.

Bank Mess Up Corner

Barclay’s Pays latest big bank fine (3rd third in 2015); almost $3 Billion for only for one bank

General Political Commentary Corner

History of the House Speakership


Conservatives Balk at Some Ryan Demands; some call him “The Prince of Janesville”

Extreme GOP statements

House R's spending bill would repeal much of “Obamacare”

Michael Gerson Asks Key Question About House GOP


Does Rep. Elmers’ “Affair” Have Legs in NC?


Foreign Policy Corner

Krauthammer Flails Obama over Putin Syria Success

ISIL combatants hit by Russia & Syrian jets. Yay??



Tune in Wednesday Night, 10-28, to the next GOP presidential debate, on CNBC.

Maloni, 10-26-2015


G. Buckman said...

Bill, nice work! Way to hold Weiss' feet to the fire. To bad you didn't get published. Any chance still or is that window closed?

FYI, new shareholder suit against FHFA filed in KY recently.


Landry was more like Laundry yesterday. Oh well, 2-2 w/out Ben not so bad I guess.

Bill Maloni said...

GB--Unfortunately the Steeler Defense reverted to form; with BB back, look for 38-31 scores in the future, just hope we're on the top of those.


No on the publishing side, unless I lower the rhetoric and tone, but that's not my choice.

I wanted something out quick and opted not to self publish and try and put it in a vehicle that publishes daily and they were right to insist on their standards. As it turned out, I did blog publish and lost a week, but I have no complaints.