Timely
Debut for Howard’s Book;
Who’s
Peeping the F&F Watchers?
Could former Fannie CFO Tim Howard’s book, “The Mortgage Wars” (McGraw Hill, due
out Thanksgiving) come out at a better time? Not likely.
Lots
of F&F Talk
I am sure the timing has more to do with holiday sales
more than anything else, but the Congress and others seem to be spurring book
interest with their ongoing GSE issues nattering.
Whether its attention to the Corker-Warner bill, or possibly
a new proposal from Senators Tim Johnson (D-SD) and Mike Crapo (R-Idaho), fallout
from the initial Senate vote--a procedural one—to approve Mel Watt to succeed FHFA’s
Ed DeMarco, and even the floundering Hensarling bill which still lacks
sufficient GOP support in the House, despite it’s “go forward without F&F
and let the big banks do everything approach.
Each of these topics, as well as the next few, heighten
interest in what Mr. Howard has to say about DC’s past mortgage finance perfidy.
Good
F&F Earnings Coming
In addition, Fannie and Freddie will announce significant
earnings soon, possibly this week, moving ever so close to repaying all of the money
Treasury put into them.
Recognition
of Their Value
If the preceding doesn’t wet appetites for Howard’s
disclosures, one reads conservative Jim Glassman arguing to keep Fannie and Freddie
around and hears the immensely capable and always quotable, Lew Ranieri (“the
father of the MBS”) telling a DC conference this week, “There’s no viable
alternative to Fannie Mae and Freddie Mac.” (Source: Inside Mortgage Finance.)
Howard offers a very detailed dissection of Fannie Mae’s
approach to its business challenges, its successes before and during “The Mortgage
Wars” (the bitter fight between business and ideological opponents with the
Bush Administration joining the “bad guys”) and initially how Fannie’s tactics prevailed against the opponents’ skullduggery.
Revelations
I bet that there aren’t 10 people in Washington who realize
one absolutely amazing irony, amid their
flawed memories of Fannie as a law breaking wilder.
In the political mugging which started it all, a regulatory
dispute over appropriate execution of a major new accounting regulation—and
peddled by GSE enemies to a clueless Congress and media as “Fannie cooked its
books and then gave themselves bonuses”--Fannie
Mae’s much maligned methodology prevailed and became industry practice.
The book discusses in
detail the bogus contention of “securities fraud”--ladled out in 2004 by the
Office of Financial Housing Enterprise Oversight (OFHEO) and backed by a very
wobbly SEC—and that claim’s rejection by a federal district court judge last
year.
A
review of Fannie’s lengthy and tortuous fight with the Bush
Administration over implementing the Financial Accounting Standards Board
(FASB) “mark to market” regulation, or FAS 133, reveals the little known fact
that Fannie had it right all along.
That's Worth Repeating!
The derivative accounting Fannie Mae used under Tim Howard as CFO—to
which OFHEO and the SEC blindly objected--was judged by the accounting
profession in 2007 to be the preferred compliance method for other large
financial services companies to use.
Mel Watt (D-NC)
Senate Democrats lost a procedural
vote last week to make Mel Watt the new FHFA Director and dump Ed DeMarco.
(Watt’s nomination got 56 votes, a clear majority, but needed 60). It might be
resurrected, but that will be a tough fight.
WH needs to do some more
wheeling and dealing if it wants Watt that much; the easiest move would be to
find the veteran Congressman a sinecure elsewhere in the Administration and
move on and hope they can identify somebody who has a stronger mortgage finance
and securities history.
DeMarco: Who Watches the Watchers?
Still lots of resentment
from many, many senior Fannie and Freddie professionals over the gratuitous putdown
comments Director Ed DeMarco offered at the Zillow DC mortgage reform
conference.
I was socializing with a
usually tight lipped Freddie official, who suddenly erupted over DeMarco’s
F&F “dissing” and then went on to scold the F&F regulator’s history of
wasteful spending.
The Freddie official literally
was sputtering, as he discussed FHFA’s currently questionable folly, a “common underwriting
platform.”
“It’s FHFA’s wet dream
to create a new narrow purpose corporation, get them their own HQ, and have
them take the best from F&F’s and build something nobody really needs or
wants. Who watches the guys who watch Fannie and Freddie? They are spending hundreds
of millions of dollars on wasteful projects and nobody says, Boo. “
I suggested he should
complain to Rep, Darrell Issa (R-Cal), the House Chairman of the oversight Government
Operations Committee, pointing out that all F&F earnings, net of capital, not
squandered on useless projects goes right into Treasury’s general fund. And whatever FHFA decides to divert for their
own spending purposes, doesn’t.
That should get some GOP
Teahadist upset, unless they feel, “Oh, who cares, it’s just money taken from
the evil twins?”
Ted Cruz
Speaking of the Tea
Party and one of its favorite sons, Sen. Ted Cruz (R-Tex), here’s a brief story
on the Senator’s father, who is a church “Pastor” and last year suggested that President
Obama be “sent back to Kenya.”
Let’s see, should
someone suggest that Senator Cruz be sent back to his birthplace Canada or his
ancestral home in Cuba?
I certainly hope no
serious Democrat threatens such cowardly action—not because it wouldn’t be just
desserts and represent “back at you”—but I don’t anything to slow down Senator
Teddy’s campaign to get the 2013 GOP presidential nomination and “rent asunder”
the Grand Old Party, as a Pastor might say, and forcing TC to generate a third
party in 2016.
After putting together
the above segment and before sending out the blog, I came across this follow-up
story, which fairness suggests I link.
http://politicalticker.blogs.cnn.com/2013/11/02/ted-cruz-responds-to-fathers-ill-advised-joke/?hpt=hp_t3
Senator
Mark Warner (D-Va.)
Mark Warner is half of “Corker-Warner,” the Senate tandem
sponsoring the abolish Fannie and Freddie proposal, which seems to be flailing
as dozens of questions are raised about its efficacy. “Corker” is Bob Corker
(R-Tenn.
Warner was on a panel last week at a DC mortgage reform conference
to discuss their bill and was asked a question about “Fannie Mae,” which must
have struck a raw cord or caused him to “geeze” about his imaginary pre-Senate financial
acumen/success.
The conference video sound wasn’t superb. Audience
questions and comments were not well amplified. In quizzing Warner, it sounded
as if a questioner suggested something positive about Fannie Mae. But with a
dismissive wave Warner said (I am now paraphrasing), “Don’t tell me about Fannie
Mae and Freddie Mac. I was a venture capitalist before joining the US Senate
and if I had the $186 Billion they received from the government, I would have
gotten 30-1 return from it.”
Really, Senator Warner, really? Venture capitalist? You could do a 30-1
return? That’s how many four baggers to what power?
Let’s see Treasury's F&F $186 Billion cash injection, times 30, is a scosh under $5.5 Trillion
and change.
So the Obama Administration just could have given you all
of that money or put you in charge of investing it and you could have wiped out
a third of our cumulative national debt?
In your own mind, you are good and, obviously, underutilized!
I am curious if you would have put it all in pork bellies
or some other surefire deal or would you have deigned also to run the nation’s
primary and secondary mortgage markets, too, so that consumer, lenders, and mortgage
investors could interact successfully?
You talk a good game, Senator, but your answer to the questioner says
you display arrogance and hubris not needed
today on Capitol Hill.
Some of us skeptics continue to worry --when you keep reminding
audiences that your bill isn’t a finished product and that you are open for business to make changes--that you are trolling for campaign funds. But then I’m a cynic.
I suggest, next time, just do your homework and answer
the guy’s Fannie Mae question.
Maloni,
11-3-2013
