Obama Prepares To Kick Out Fannie's Ed DeMarco
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."
The director the Federal Housing Finance Agency has emerged as a key policymaker because it is the principal gatekeeper to Fannie and Freddie, the mortgage giants that own or guarantee half of all mortgages, at a time when broken mortgage markets have become a top concern of officials at the White House and the Federal Reserve.
The FHFA’s current director, Edward DeMarco, took the job more than three years ago in an “acting,” or interim, capacity. He has remained in the position after the Obama administration’s first nominee for the job, Joseph Smith Jr., then the North Carolina banking commissioner, withdrew from consideration in January 2011 amid opposition from Senate Republicans. The FHFA, created 4½ years ago, has never had its own director confirmed by the Senate.
Administration officials are still gathering names of potential nominees and haven’t pared down to a shortlist or interviewed candidates, according to people familiar with the matter. White House and FHFA officials declined to comment.
Officials are said to be considering an array of candidates: financial regulators or professionals, academics, and current administration officials. Two names frequently mentioned by housing-policy analysts are Susan Wachter, a professor of real-estate finance at the University of Pennsylvania’s Wharton School who served in the Clinton administration, and Michael Stegman, who currently serves as an adviser to Treasury Secretary Timothy Geithner on housing finance. Both declined to comment.
Jonathan Fiechter, deputy director for monetary and capital markets at the International Monetary Fund, was approached about taking the job several years ago. Mr. Fiechter, who has held senior positions at the Office of the Comptroller of the Currency and the Office of Thrift Supervision, says he hasn’t had formal discussions recently.
After Mr. Smith withdrew from consideration, the Obama administration considered nominating Jim Millstein, the corporate restructuring executive who oversaw the Treasury’s re-privatization of American International Group AIG -2.26%, but backed off when it appeared that any nominee would be blocked, according to people familiar with the matter. “That ship has sailed,” said Mr. Millstein, who has since started his own restructuring company. He says he isn’t interested in the job if it is to be a caretaker position.
While DeMarco's replacement is yet to be determined, one thing can be sure: the next head of the FHFA will not share his predecessor's values. What are they?
Mr. DeMarco has argued that his legal mandate to conserve the assets of Fannie and Freddie leaves little room for policy proposals that have high upfront costs or uncertain future benefits. The career civil servant was the No. 2 official at the agency until his predecessor, an appointee of President George W. Bush, decamped for the private sector.
What is lost in translation is that GSE asset impairment would also lead to a possible future impairment of their liabilities, which are, for all intents and purposes, Federally guaranteed obligations of the US government ever since their September 2008 nationalization (after all the Fed is monetizing $40 billion of GSE debt each month precisely thanks to this loophole). As such, the cost will be borne out by those who still pay in taxes into that great insolvent institution known as the US, as all such tax payments will merely go to fund - both on a current and accrued basis - yet another massive financial black hole.
Then again, who cares about details any more in a banana republic enamored with ultra-short term results and generating upticks in the DJIA at any (taxpayer) cost.