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On Eddie D. - the NFP, and China Too
Edward De Marco is the acting head of the FHFA. He is responsible for what happens at Fannie and Freddie. A lot of people hate this guy and want to see him sacked. I like him. I think he is one a few people in D.C. who actually gives a damn about taxpayer losses at the mortgage agencies.
As per usual in America, this is a matter between left and right. Democrats hate De Marco. The Republicans are standing behind him.
The latest saga in this love-hate story is a letter that De Marco wrote to Senators Richard Shelby (R -AL) and Tim Johnson (D - SD). (Link) The issue is whether Fan and Fred should write down the principal on mortgages they own. De Marco said flat, “no”. The following is the critical sentence. Note that De Marco uses “I” when he says who made the decision. I give him an “A” for putting his head on the line.
I have concluded that Fannie Mae and Freddie Mac’s adoption of HAM PPRA would not make a meaningful improvement in reducing foreclosures in a cost effective way for taxpayers.
I think this is a pretty simple issue. What is De Marco’s Congressional mandate?
conserve the assets and property of the regulated entity
There is more to the FHFA mandate, but it was the objective of the original legislation to minimize the risks to taxpayers. There is nothing in the laws that created FHFA after Fan and Fred blew up, that allows De Marco to use the former agencies as a tool of national economic policy.
There are valid arguments on both sides of the debt forgiveness debate. It there was a magic wand that could be waved, and all underwater mortgages were eliminated, it would have significant economic benefits. Unfortunately there are no magic wands, and there is no free money available to accomplish the write-downs.
Everyone in D.C. (including Obama) knows that there is no way in hell that Congress is going to come up with the loot necessary to achieve the mortgage forgiveness. But, as the law stands now, Congress/Treasury are forced to make up any losses at Fan and Fred.
So, in theory, if the Agencies went on a tear, and wrote down principle, they would suffer huge losses, and Congress would be obligated to cover those losses. No additional legislation would be required. Of course this would violate the terms of the 2008 laws that set up FHFA. Ed De Marco is standing in the way of the Administration's desires.
Who are the folks who are pushing De Marco to provide debt relief? One group that is been particularly vocal on this issue is Rebuild The Dream.
This outfit is run by a fellow named Van Jones, who just happens to have worked for Obama as a Green jobs czar. I find it it interesting that Mr. Jones has gone from Green, to mortgages. Possibly he’s just a political hack, who does what he is told (and paid for).
Speaking of hacks, Paul Krugman has weighed in on this (Link). PK is desperate to spend some more government money. He would love to see another $400Bn go out the door, and just put the bill on the next few generations. His thoughts (Link) on De Marco’s career path:
Because De Marco is civil service, he can’t be kicked into the street, but that’s irrelevant — he can be put into an equivalent-salary job at the Small Animals Administration, or something.
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Democrats in Congress have been calling for De Marco’s head for some time. Elija Cummings and Maxine Waters have been making poor Ed’s life miserable.
Other Democrats have chimed in on the recent decision (The Hill – Link)
Senate Majority Whip Dick Durbin (D-Ill.) blasted De Marco's decision as "short-sighted" and an “abdication of his responsibility.”
Elijah Cummings and fellow Oversight member John Tierney (D-Mass.) have accused De Marco of withholding documents that would reveal the benefits of principal reductions.
The Administration is doing everything they can to lean on Eddie. Timmy Geithner was quick to respond:
“I do not believe it is the best decision for the country,” Treasury Secretary Timothy Geithner wrote in a letter to De Marco.
There are some Republicans who have stood behind De Marco. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) said De Marco made the right call.
“The administration put incredible political pressure on Director De Marco, and he deserves praise for standing up for the best interests of the American people,"
In the end, De Marco has one very solid supporter, Senator Richard Shelby (R -AL). With Shelby backing De Marco, his job is safe for a few more months.
Mr. De Marco's career as the head of the FHFA will come to an end with a week or so after the next election. If Obama is re-elected, he will fire De Marco and appoint someone who is friendly to a mortgage write-off, paid for with tax payer funded losses at the Agencies. Obama will do this in a recess appointment, and Congress will not have a say in the outcome.
There is so much riding on this election.
++++
On Those Payroll Numbers
A fellow sent me this summary of the July Non-Farms payroll report. Will someone please tell me what the "good news" is in this? I don’t see it. What am I missing?
This morning, Barrons chimed in on the NFP report. I thought it was interesting that it quoted Zero Hedge when it pooh-poohed all the hype from the MSM (and the White House).
Here, courtesy of Zero Hedge, we might be able to provide a clue as to how the BLS managed that little trick: It added 377,000 jobs for seasonal adjustment. That just happened to be the largest such adjustment in July for the past 10 years.
Moreover, the always interesting but not particularly reliable birth/death model chipped in 52,000 additions. Together, these happy statistical enhancements added up to something like 429,000, which even by our rudimentary math dwarfs 163,000.
The link to the ZH analysis (Here).
++++
A Big Change in China
I urge any of my readers who have not yet read John Hempton’s latest missive on China to do so. (LINK)
The first part of the article reads like a stock report on luxury goods manufactures. (Hempton is short). But read to the end of this piece to understand how the Bo Xilai murder scandal (and the soon to be executed wife) has changed the lay of the land in China.
Quite frankly, this article scared the crap out of me.
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Good points.
That would be the "I tried to speculate on housing in 2005 to get rich and loaded-up with debt but it didn't work out and now I'm ruined" Americans?
Bruce, looking into Jones' background would be an amusing use of a bit of your time.
http://www.amazon.com/Van-Jones/e/B001KI523G/ref=sr_tc_2_0?qid=134410733...
Green? Watermellon comes to mind.
- Ned
Public opinion so often sounds like Late Empire stuff these days, when it could just as well be Third Turning excess being scourged during a Fourth Turning cleansing (same as in past eras), and enough people in America will re-discover the Willingness & Ingenuity of their forebears, making the country anew, via healthy and useful free enterprise. Let's hope so.
Thanks, Bruce, for another outstanding article that manages to combine 3 separate issues, but that still accomplishes a rational, concise and compelling analysis of each.
You have a critical eye for things others either miss or don't elaborate upon nearly enough, given the importance of the subject matter.
It's good to see Zero Hedge getting recognition for doing the heavy lifting in separating the wheat from the chaff in terms of NFP datum and statistical torturing that the 'mainstream financial media' apparently can't be bothered with, too.
What about the homeowner? Commercial borrower can file Chapter 11 and the judge will reduce the debt to be in line with the fair market value of the asset. The homeowner gets no such relief. Why? Because the law says so. Why? Because the lenders, all of them, the MBS crowd, the Agencies, the banks, lobbied against it. Pure economic muscle. No rational reason why an office building owner can do the cram down and the individual living in the house next door cannot.
They are afraid that if the homeowner can get this fair and rational treatment, there will be mass bankruptcies. Duh. At least each borrower would get a fair shake.
Stuff of nonsense!! I have an up to date mortgage and my house is not underwater. If you give money to the idiots, you better damn sure be ready to give some to EVERY home owner in the country. Now tell me about fairness again.
Oh, me too. Mortgage current and sitting on fat cushion of equity. Have job. My point is that each homeowner's situation is different. Most defaults are caused by job loss, divorce and medical costs, not by lazy fools defaulting strategically. Most Americans too proud ... or ignorant ... to do that. Why not let each case get judged by a judge like the commercial cases are? Why screw the entire population of borrower? Congress is protecting the banks. It's where the money is. Like Willie Sutton said.
I agree with your premise. I am in essentially the same position, except break even rather than under water.
Regardless, this is a classic strategy for progressives. And it often works.
Buckle up!
Regards,
Cooter
I'm current on the mortgage as well, and have no fear of being otherwise. I'd draw a parallel, however, to this with the bailing out of the big banks and letting the regional banks and S&Ls just go to hell on their own. It's not "fair" but they did it anyhow. Just like AIG got some great business stirred up for themselves because their government backed status gave them more clout and lower costs of doing business. It's all screwed up now. There has to be a place to stop the madness and the FHFA situation looks like a good starting point. Too bad the hammer has to fall on homeowners who bit off more than they could chew while the banks that made the crappy loans are reaping all the benefits. Those homeowners should be the first to hit the streets with their pitchforks and torches. The folks in Warshenden DC are really pissing off the wrong people!
Spent July in Beijing. Nobody there has even heard of Bo Xilai.
Scary, indeed.
Bruce,
Any feel for how many of the Rs actually support DeMarco vs. how many are just automatically against anything Obama wants?
Yes.
And I'd like to know Bruce's take on the Eurusd following Friday's frenzied flourish.
(I'm just looking for some Bearish confirmation bias)
Thanks
It looks sensational, but I had been saying the luxury goods activity in HK was flattening months before this scandal broke.
I'm in TST, where all the high end retail venues are located, all the time. I noticed the difference back around Chinese New Year.
My theory is businesses are not throwing off the excess cash flows necessary to lubricate the extravagant gift giving which has always been intrinsic to Chinese business culture. One might assume that it is all business corruption, but culturally it is murky. What is clear is all the extravagant stuff winds up being a business gift. The flagship retail premises are actually designed as venues for corporate events.
The instinct of corrupt bureaucrats to lie low, is an add on which exacerbates the high end situation. Many of them would travel to HK for a shopping experience on someone else's credit card.
And they are all scared now since it is unclear what the outcome will be. Better to avoid attention by keeping your head down.
I agree WB7. However, let's push the timeframe back 30 years or so. The luxury market was strong in HK (no sales tax)before the uncles had any cash to flash (and was the only advertising you saw on Tele). Now they can buy all over Europe and get the VAT back (just go to Heathrow's terminal 5 to see them queued). As for the Bo debacle this was pure political-economy stuff if one bothered to attend conferences at the CIRD. The debate was between 'reformers' and those who want to go back to the 1950s Stalinist economy-i.e. SOEs vs. the 'market'. As for Mao (other posters) he is embarrassing kitsch except for a few who were red guards during the GPCR.
Do they still go to that jazz place and drink Guiness?
Keep your head down, mouth shut, and at every opportunity, praise Mao for the tremendous victory over the capitalists.
Then, when you get home, say what you really feel.
Maybe it's only like this on the mainland.
In the four years I operated on the Mainland I never once heard anyone praise Mao.
I once talked to an otherwise always reasonable person who stated that less than 20 people were killed at Tiananmen Square, more of them soldiers than civilians, and that is was essentially a non-event.
Whenever it came up in conversation the Chinese on the mainland I've talked with despise Mao. As for shopping in HK and environs, lots of eye candy besides the watches and rings.
You must not have been privy to the darker humor of Beijing. I always hear how it's different, but I've only been there so I wouldn't know otherwise.
"There are valid arguments on both sides of the debt forgiveness debate."
Really? I'd like to know what those reasons are. Do they hold up to an examination of the secondary or unintended consequences?
Also, you said, "Tim Johnson (S - SD)". I'll assume this was a typo and not a freudian slip assigning the Senator to the Socialist Party.
Ooops....
The "S" is right next to the "D", and I did not see it.
I fixed it, tks.
b
Shelby is not the Senator from TN, he's from AL. I know it seems like it's all same down there, but names are names.
Selby is not the Senator from AL, he's the representative of Tokyo Prefecture.
I know it seems like it's all the same down there, but money is money.
The death penalty is a horrible thing
We are down to about 20 awful nations in the world that put people to death, the execution leaders being the USA, China and Iran
Public sector killing is a barbarism ... it is a shame of Europe to be such a close partner of the sadistically killing USA ...
Relations to other countries, trade or otherwise, should first of all be premised upon whether those countries practice or allow torture, have a death penalty, or any other kind of physical bodily judicial penalties
"Public sector killing is a barbarism"
Curious distinction.
On a horrible scale, the death penalty isn't a tenth as awful as ignorant Europeans.
Questions 4ya BGIB-----You have kids?
If someone brutally murdered or Sandusky'd ur kid, would you get old testament on them or turn the other cheek?
Too many people are wrongfully put to death conveyor belt style in the US which makes me ambivalent.
Just asking.
Too many people are wrongfully put to death conveyor belt style in the US which makes me ambivalent.
Exactly. There are plenty of crimes worthy of the death penalty... but anyone who trusts the State to administer it fairly is not thinking straight.
So locking people up for life instead at least means that if new evidence comes to light, the innocent ones might get freed. A bit difficult to do if you've killed them.
hahahaha.. Europeans still being judgmental over the rest of the world. How surprising. Yes your shit doesn't stink.. Just keep saying it until it becomes true.
Yes, you guys don't need a death penalty. Your poor deluded citizens out of desperation for human dignity kill themselves for you. Jam your righteous indignation up your ass.
I can not wait till dead bodies roll in the public sector streets when the EU State starts killing its inmates outright. Oh, wait...
Pssssst. Bank Guy In Brussels has his knickers in a twist because Belgium isn't even a real country, but rather a sort of duchy brimming with power-mad Eurocrats and child molesters. As far as I can tell, they still don't have a real government (I don't take that socialist Walloon farce seriously) but they do have a 21% VAT tax and a high suicide rate, especially among younger people.
Have a look at Belgium in the Olympic medal table. 'Nuff said
Why are you Belgians bitching that Michelle Martin is getting out of jail? Don't you reform people in your prisons? So it's more humane to lock them up indefinitely then let the law determine she is rehabilitated?
Oh yea, and if you are so disgusted by the death penalty stop buying your oil from Russia. They never abolished it, and it looks like the moratorium may be removed.
Keep down ticking me you hypocrites I could give a rats ass.
They'll dust it off for use against Pussy Riot.
Somewhat OT:
FWIW, I think that any potential refi, forgiveness, etc. programs should look at original downpayment. My guess is that any 0% down, 5%<= down, interest only etc. that get any program are probably the same ones that do not perform afterwards. If someone put 20% down and cannot at least refi at todays low rates, well, that is a real shame is all.
Bruce: I was hoping you would update us on currencies.
Bruce does what he wants. He is a fucking ZH legend. You should ask not what Bruce can do for you, but ask what you can do for Bruce.
What can I do for you, Bruce?
Educate him on the reason for the construction and the makeup of the EUR.