Fannie Mae-No Politics (FNMA)

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Bill Maloni's latest GSE Blog

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Monday, February 24, 2014

"Money, that’s what I want...whole lotta money"

Franklin D Is Spinning in His Grave!

As a “Big Foot” believer (guess I should fess up about UFO’s and Nessie, too), I don’t dismiss eerie stories, easily.

So, it was with an open mind that I listened Friday night to an account about a lost trekker.

As this story goes, it was a dark and stormy frigid night, lightning, thunder, rain, even the threat of snow. The traveler--lost in the dark and foul weather--stumbles by President’s Franklin Roosevelt’s grave in Hyde Park, New York, and notices press releases and copies of media reports of Fannie Mae’s 2013 earnings strewn everywhere.

It was then, the frightened wanderer reported sounds of crystal goblets clanking and raspy voices singing, “Happy Days are Here, Again.”

The hapless visitor swore he heard tributes being exchanged between voices which sounded like Roosevelt’s and ghostly visitors Harry Hopkins, and Harold Ickes (the original), three men who had their hands all over the New Deal elements which, among other things, created the original Fannie Mae in 1938.

(Billions in financial success can produce that jocularity in humans and the dead or their spirits.)

The storyteller also claimed at least two of the eerie voices laughingly and in unison sang out, “Bleep you, Corker-Warner!” (Apparently, even historical cemeteries have rules of decorum, as well as access to the latest mortgage finance news.)

This hellish take sounds real to me and if it isn’t true, I want it to be.

Fannie 2013 Earnings, Huge

Yes, Fannie Mae announced final 2013 earnings of $84 Billion (What do you think of those apples, Mike Stegman?) and now will pay an additional $7.2 Billion to the Treasury in fourth quarter 2013 revenue.

Freddie will post its 2013 numbers any day now and will shuttle more GSE cash to Uncle Sam, putting the two entities firmly and forever on the plus side of repaying the taxpayers more than the $187 Billion invested in the two in 2008.

The many times excellent WSJ reporter, Nick Timiraos, delivers again, with the story, below, detailing Fannie's financial achievements.

http://online.wsj.com/news/article_email/SB10001424052702303636404579396700697415902-lMyQjAxMTA0MDIwMzEyNDMyWj

Not bad F&F work, taking only three years to pay back what most people thought was lost forever to the taxpayers. (Yes, the first two years involved borrowing $40 Billion to pay back Treasury which had first borrowed the $40 Billion and.....oh, more on that farce in a future blog.)

Yes, I know the principal technically can never be repaid—until some Secretary of Treasury explores his authority and changes that circumstance—but most Americans looking at the facts only will understand that F&F received $187.5 Billion and will have paid back over $200 Billion and rising.

Fannie’s execs suggest 2014 earnings will not be as robust because of market reasons, but what also is likely is Fannie (and Freddie) will continue to produce positive numbers into the near future.

What’s It Really Mean?

More noise causing congressional doubt, more attention to the “how did we get here,” with an eye toward all of those who want to launch dramatic and untested solutions to what may be a much smaller problem than most think.

It won’t end the GSE controversy and the misstatements. But it could cause some greater number to suggest, “Maybe, we should just fix them up, not blow them up.”

But, not enough will feel that way, in the near term, to make a difference.

This is a positive story for the Obama Administration, which loves the F&F revenue but apparently little else about them.

The earnings will permit the White House to ride both sides of the tracks, i.e. talk of mortgage reform and getting rid of F&F but raking in billions from the two golden geese it doesn’t want sacrificed any time soon.

Fannie’s and Freddie’s success also allows Mel Watt, their safety and soundness boss, to ease into his new responsibilities and have the luxury of exploring ways in which he—utilizing F&F--can soften some of the tougher new borrower credit challenges and even explore ways to help underwater mortgagors. Neither of which—in the new Obama spirit du jour—requires congressional blessing.

Confusion in the Senate?

As Sen. Bob Corker (R-Tenn.) was busy threatening his Tennessee constituents against voting for union representation at the Chattanooga Volkswagen plant, his Corker-Warner (D-Va.) legislative proposal abolishing Fannie and Freddie hit some Senate bumps in the road.

Banking Committee Chairman Tim Johnson (D-SD.) may have encountered problems trying to produce a bipartisan package which can satisfy his ranking senior GOP colleague Mike Crapo (R-Idaho).

A promised Johnson-Crapo legislation unveiling, supposedly relying on parts of Corker-Warner, now may emerge only as common principles, and not detailed statutory proposals.

That’s not good and doesn’t make me happy; it reflects the problems that any person or group faces in trying to satisfy so many conflicting housing and mortgage finance interests.

As I’ve blogged before, I’d hope the Senate committee leadership comes up with something and puts it out there for debate and amendments, forcing Senators and their industry supporters to vote up or down a package.

(Wouldn’t it be something if Corker’s anti-union antics caught the attention of the Senate’s D leadership, which decided it wasn’t going to help Corker do anything? I am not chortling, really, I am not!)

Beware…..Imposter

To anyone using a “Yahoo Fannie Mae” message boards, someone has been masquerading as Tim Howard and offering advice and commentary, pretending to be the former Fannie CFO.

It’s not “our Tim,” but a poser. Anyone encountering the fraud using that ID don’t follow his/her investment advice.

Speaking of Tim Howard, this past week, the Fed made pubic reams of its meeting records from the 2008 financial meltdown and now everyone is using their 20-20 hindsight to suggest which sitting Fed Governor was a seer, a mensch, a dummy, etc. etc. (See Morgenson at the blog's end.)

I won’t go there, but I will reveal something about the US Treasury which astounded Tim Howard and many Fannie Mae folks, several years ago when they carried out a Frank Raines strategic request in 2000.

Raines decided that Fannie needed to do a much better job of explaining to Administration regulatory officials exactly how we conducted our business, since so many casual encounters with US regulatory officials proved them pretty uninformed, if not shallow, in what the company did and how it did it. (Keep thinking of the Fed 2008 minutes.)

So, a squad of Fannie’s top people conducted “Fannie Mae 101” for the senior folks at the Treasury, but came back stunned at the combination of inaccuracies and plain “dumb heads” they encountered in policy power positions at both locations.

Many of those traits still were on display in the 2008 Fed minutes and the confusion, hearsay, and plain inaccuracies that those solons threw back and forth at one another.

A Maloni Video From the Past,

(Thanks to Tim Sokol for unearthing this 2010 bit of history.)

What Others Are Saying

--Ruth Martell in Marketwatch discusses Fannie’s 2013 earnings.

http://www.marketwatch.com/story/political-legal-hopes-buoy-fannie-freddie-rally-2014-02-14

--The NYT’s Gretchen Morgenson’s suggests Fed was unprepared for 2008 crisis.

http://www.nytimes.com/2014/02/23/business/a-new-light-on-regulators-in-the-dark.html?ref=gretchenmorgenson&_r=0

--Ralph Nader uses Reuter’s to answer Bethany McLean’s column.

http://blogs.reuters.com/great-debate/2014/02/21/fannie-and-freddie-are-more-complicated-than-that/

--Speaking of Ralph Nader, writing in Forbes Magazine, Jon Entine examines the plight of F&F common and preferred shareholders.

http://www.forbes.com/sites/jonentine/2014/02/21/with-fannie-and-freddie-debt-repaid-to-taxpayers-will-uncle-sam-turn-shareholders-into-zombie-investors/

Nick Timiraos scores, again, this time on the fortunes of major common investor Bill Ackman

http://blogs.wsj.com/moneybeat/2014/02/23/ackman-sees-big-upside-to-fannie-freddie-bet/

I could have written this, but didn’t. Maybe I have an acolyte out there, a mini-Maloni!

http://www.valuewalk.com/2014/02/fannie-mae-freddie-mac-sen-mark-warners-hypocrisy/?utm_source=twitterfeed&utm_medium=twitter

Maloni, 2-24-2014