Edward DeMarco

Ever since Moody's head economist Mark Zandi, together with Princeton's Alan Blinder, authored a paper in July 2010 titled "How We Ended The Great Recession" (which incidentally is wrong on two key counts: i) it is a great depression not recession, and ii) it has not ended) it became clear that the Keynesian sycophant would not rest until he somehow found a way to penetrate deep inside one or more of the darkest administrative orifices of the Obama regime. Surely, Zandi must have been heartbroken when it was not him but Jack Lew picked to replace Tim Geithner - a post the Keynesian had a desperate craving for. Yet his recent appointment to head up the ADP "payroll" joint venture, which was nothing more than a test of his propaganda skills, should have given us advance notice something was cooking. Further notice should have emerged when the US Department of Injustice launched its rating agency witch-hunt campaign only against S&P, not Moody's, where the abovementioned Zandi still officially works. Last night all of this finally fell into place, when the WSJ reported that Zandi has emerged as the leading candidate to head the FHFA - the regulator in charge of the two zombiest of zombie US institutions: the still insolvent Fannie and Freddie, in the process kicking out current FHFA head Ed DeMarco who recently emerged as Obama's persona non grata number 1 for his stern refusal to espouse socialist practices and wholesale debt forgiveness and principal reduction.

The man who singlehandedly fought the administration over the idea of converting Fannie and Freddie into the latest taxpayer-funded handout machine, FHFA head Ed DeMarco, and refused to write down Fannie and Freddie home loans in yet another Geithner-conceived debt forgiveness scheme, whose cost like any other non-free lunch will simply end being footed again by yet more taxpayers (what little is left of them), appears to have lost the war, and with the second coming of Obama appears set to be replaced as head of the FHFA. The WSJ reports that "The White House has begun preparations to nominate a new director to lead the agency that oversees Fannie Mae and Freddie Mac as soon as early next year, according to people familiar with the discussions. This would pave the way for President Barack Obama to fill what has become one of the most important economic policy positions in Washington." And so the impetus for as many as possible to default on their mortgage in a wholesale scramble to obtain debt forgiveness, will soon take the nation by storm, while the contingent liability will be transferred to those who still believe that taking out debt should be a prudent activity and one that takes into account future cash flows. In other words, the solvent middle class - those who were prudent stupid enough to save when they should have simply be doing what the government does and spend like a drunken sailor, preferably on credit, will soon be punished once more. And like it. Because according to the new broke normal "it's only fair."

• Subprime bubble is back: Lenders Again Dealing Credit to Risky Clients (NYT)
• Housing bubble is also back: AIG Is Planning a Return to U.S. Property Investing (WSJ)
• Spain and EU Reject Talk of Bailout (FT)
• Coeure Suggests ECB Could Restart Bond Purchases for Spain (Bloomberg)
• IMF Set to Recognise Shrinking Chinese Surplus (FT)
• Government to Propose New Mortgage Servicing Rules (AP)
• Japan Currency Chief Warns Against Delay Over Finances (Bloomberg)
• The 'Michael Corleone' of Libya (Reuters)
• North Korea Says Fuel Being Injected Into Rocket (Reuters)
• SNB Reaffirms Vow to Cap Swiss Franc (FT)

FHFA Acting Director Edward DeMarco offered some prepared remarks today making it abundantly clear that his preference is for forbearance over forgiveness in the great mortgage hole in the US balance sheet's dam. As Bank of America's Chris Flanagan noted this evening "[DeMarco] effectively nixed the idea of broad-based principal forgiveness by Fannie Mae and Freddie Mac" in his comments on the Treasury's incentives to forgive principal on underwater borrowers. Citing three factors - NPV Impact to taxpayer, moral hazard, and operational costs - the FHFA Director indicated that forbearance (simply put - delaying foreclosure) is effectively a shared appreciation mortgage (SAM) without the operational complexities of a more formal SAM. BofA concludes: "his preliminary remarks on the incentive approach to principal forgiveness of GSE loans [mean] that there will be zero to minimal scale of such an approach." Back to the drawing board for the Treasury (or more forced-through unintended consequences?).

...know when to walk away, know when to run.

Stepping softly onto a slippery slope...

History is repeating itself, again.

A few months ago we learned that outgoing Freddie CEO Ed Haldeman quit Freddie after just two years of work, pocketing over $4 million primarily to collect over $21 billion in bailout funds from the US government. Now, it is the turn of the other broke GSE: according to a just filed 8K, Fannie Mae CEO Michael Williams is also stepping down without a replacement, so obviously the decision was made in haste and is an indication that nobody at the helm of the two largest mortgageholders want to do anything with what Obama and the Chairsatan have in store for the two behemoths holdings over $6 trillion in mortgages in their books. Incidentally, according to Forbes, Williams made $4.84 million in comp last year. His claim to fame: receiving a total of $60 billion in Treasury bailout cash (net of $17.2 billion in dividend payments) - hard job that one.

If you are a CEO in America, what is the surest way to get at least $4 million in compensation in two years? Why to burn $14.5 billion of course. Such is the sad plight of mortgage zombie Freddie Mac CEO Ed Haldeman, who as Politico reports, is set to depart the company after just two years of joining. So what is Mr. Haldeman's claim to fame over those 8 quarters? Why nothing short of collecting $14.5 billion in "Treasury Draws" over the two years. What is a draw? The technical definition: "Represents the draw requested based on Freddie Mac’s net worth deficit for the quarter presented. Commencing in 2Q 2011, the draw request represents the company’s net worth deficit at quarter end rounded up to the nearest $1 million." In other words, this is the minimum amount of money that the Treasury had to donate to the nationalized mortgage giant for it to continue pretending it is viable. As the chart below demonstrates, the total "draws" received under Haldeman's tenure amounts to $14.5 billion. This excludes the Q3 number which will be made clear next week. Something tells us with this abrupt departure, the number may be higher to quite higher than expected. But regardless: a job well done Ed. As Politico reports: "Haldeman joined Freddie Mac in 2009 and received $3.9 million in compensation last year, according to Forbes. He intends to remain as CEO until a succession plan is in place. “Ed Haldeman has brought strong leadership to Freddie Mac,” said FHFA acting director Edward DeMarco. “I appreciate his commitment to leadership stability during the upcoming transition." And now you know how to make millions in America and be part of the 1%.

Miller has repeatedly called on Edward DeMarco, Acting Director of FHFA, to do everything in his power to recover these funds. The Congressman is available for a media briefing at 2 p.m. today to discuss what happened to prompt the lawsuits; what needs to happen next to fix the problem; and what it all means for the taxpayer.

When: Tuesday, September 6, 2011
Start time: 2:00pm (EST)
Dial-in number: 1-308-344-6400
Access Code: 150881#

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Tuesday's senatorial farce hearing in which fraudclosure was brushed under the rug under the vigilant stare of one Chriss Dodd is being repeated today, this time in Congress, titled: "Robo-Signing, Chain of Title, Loss Mitigation and Other Issues in Mortgage Servicing." Those wishing to waste some time may do so at the following link. As Maxine Waters is present, the farce will be complete.