BYE-BYE DEMARCO! Obama to Replace Director of FHFA
You know, I was having kind of a crummy day… nothing serious, just dragging my feet a bit and grinding through some writing Iâve been working on for too long… and thinking about how nothing is changing… and then out of the blue it happened… and I started smiling right away… kicking my heels up a bit… even opened a cold beer to celebrate the news.
Nick Timiraos, at the Wall Street Journal, is reporting that the Obama Administration is replacing Edward DeMarco, the current âactingâ director of the Federal Housing Finance Agency, the conservator for the failed mortgage behemoths Fannie Mae and Freddie Mac.
This past year, Ed single-handedly transformed his otherwise obscure position lurking in the bureaucratic shadows of an agency born less than five years ago that few had even heard of, becoming the most hated man in Washington as far as homeowners at risk of foreclosure are concerned.
In the Wall Street Journal article, Nick points out…
âMr. DeMarco has become a lightning rod for criticism over the shortcomings of federal housing policy and has at times thwarted White House initiatives, including an effort to launch a targeted principal-reduction program earlier this year.Â Liberal political activists have called on the president to fire him (which isnât easy to do). His agency has also been criticized by some economists for being too timid to address the housing and mortgage bust.â
Timid?Â DeMarco may be many things, but heâs not timid.Â He has stared down the most powerful man in the country when he wanted Fannie and Freddie to reduce the principal balances on loans, and he ignored President Obama and numerous members of congress too.
DeMarco has been like the Bond villain of the horror movie homeowners have been living in since 2007, âEvictions Are Forever,â or maybe, âYou Only Default Once.âÂ Whenever the question of principal reductions for loans owned by Fannie or Freddie has come up, Ed plays âDoctor No.â
When Freddieâs at your door… you canât run and you canât hide… itâs a double feature: âNightmare on Your Street.âÂ Followed by âInvasion of the Condo Snatchers.âÂ Evicting everyday in neighborhoods everywhere… Rated âRâ for Rat.
Iâve always fantasized about meeting him one day just so I could shake his hand and say, âDude, you really need to think about getting some sun.âÂ I mean, seriously, what would you call his skin color?Â Bloodless?Â Ghastly gray?Â Blanched paste?Â Pallid putty?Â Iâve seen it somewhere before… he looks about like the color of the white Play Doh, remember?
Ed DeMarco is the most caucasian man on the planet.Â He makes Tim Geithner look like Biggie Smalls. Â Some say that when Ed enters a room, the temperature falls so fast you start seeing your breath.
Okay, but seriously… according to Timiraosâ article…
âAdministration officials are still gathering names of potential nominees and havenât pared down to a shortlist or interviewed candidates, according to people familiar with the matter. White House and FHFA officials declined to comment.â
If you want my opinion, donât get too excited… itâs not like Obama will be appointing Liz Warren or anyone like her, more likely itâll be one of Tim Geithnerâs minions and wonât that be exciting for everyone.Â I donât really know, but if the past is any indication of what will happen in the future, well you can dig it, right?
Ed DeMarco: Slow on the Up-take and Absolutely Gifted at Overstating the Obvious
A couple of weeks ago, Ed, while speaking at a meeting of the Securities Industry and Financial Markets Association (âSIFMAâ) told its members that… are you sitting down?
“The secondary mortgage market infrastructure that served this country for many years is broken.”Â Â
And what exactly happened next, I canât help but wonder?Â I wasnât there to see this revelation come to pass, so did the crowd go wild?Â Did anyone audibly guffaw?Â Break into tears and start sobbing?Â What the heck happens when someone in such a position of authority over the lives of so many millions comes out and says something like that?
Me personally?Â I would have needed to find a dinner fork fast and plunge it at least an inch deep into my thigh… just to stop the pain… or prevent myself from falling out of my chair from laughing uncontrollably.Â I would have had to be removed.
Thatâs just brilliant insight Ed, you witless dolt.Â And itâs not correct to say âis broken,â at this moment in time.Â It was BROKEN FIVE YEARS AGO.
Obviously, Ed doesnât get out much and that can be a negative when looking for a job these days, so with that in mind, here are a few other things I think I Ed should bone up on before he hits the job market. Â Â
Lee Harvey acted alone. Â
President Nixon resigned, try not to take it too hard.
The star of âBedtime for Bonzoâ was actually elected president… TWICE.
Some girls donât dry clean their dresses for a very long time.
Are you with me, Ed?
According to Mortgage News Daily, Ed went on to say…
It is not effective when it comes to adapting to market changes, issuing securities that attract private capital, aggregating data, or lowering barriers to market entry he (DeMarco) said.Â There must be some updating and continued maintenance of the government sponsored enterprises securitization infrastructure, “and to the extent possible, we should invest taxpayers’ dollars to this end once, not twice.”
Weâre having a foreclosure crisis , Ed.Â Are you aware of that… you must be.Â Why donât you ever mention that quirky little detail.Â Weâve lost five million homes to-date, Ed.Â Five million.Â So, what exactly should taxpayers be paying for now?Â âUpdating and continued maintenance of the government sponsored enterprises securitization infrastructure?âÂ F#@k you, Ed.
Our bailouts have deprived our financial execs of a learning opportunity…Â
Ed really delivered a very technical and incredibly boring speech, in my view, but more than that he came off sounding like our government is actually in control of stuff… and theyâre clearly not.Â The room must have been absolutely overflowing with pompous, self-important blowhards in pricey suits and custom made shoes, who made their money through a 30-year bull market, as they also destroyed our nationâs economic and societal underpinnings.
In other words, a room full of people born on third base thinking they all hit triples that screwed up so badly they should all be near homelessness today, if not in jail, but who were bailed out royally and as a result, now donât even think they did anything wrong.
Ed explained that there are âmany views and many important issues about access to credit and fair treatment for borrowers, and fostering a competitive primary and secondary mortgage market.âÂ
Yawn… huh?Â Sorry, I dozed off there for a moment.Â Okay, commence your fostering.Â Wake me after nothing has worked.
Then he said… âBut if we really are serious about expanding the private sector’s role in housing finance, we must consider what types of changes are necessary to bring private capital back to the housing finance market.â
See… this is hysterical.Â These guys actually think they can bring private capital into the housing finance market by considering what types of changes might be necessary… they think theyâll be able to figure it out, and everything will be groovy and profitable once again.Â They really believe theyâre the smartest guys in the room… or on the planet.
The truth is, they donât really know how they succeeded, and with our $16 trillion bailout of everything financial, we deprived them of the learning experience that would have otherwise been available to them.Â And so they learned nothing from the melting down of the global financial markets… nothing.
For the most part, all they seem to think is that we had a recession, but these things are cyclical and itâs over now, and theyâre all hopped up and ready to get back to their careers binging and pillaging because, after all, thatâs what theyâre so good at… they think.
They are deluding themselves.Â Perhaps they would have learned a few things from our economic and financial collapse, had we even allowed them to drop to one knee, if not collapse… but we didnât even do that.Â Instead, it is obvious from reading about this meeting and the content of DeMarcoâs speech, that by bailing them out so thoroughly and so quickly, we eliminated the potential for any real learning to occur.
The truth is… with QE forever in place, weâre still bailing them out today and the somewhat terrifying result, it seems, is that many barely even remember what happened in 2007 to bring us here.
The mortgage market is not just dominated by the government, the mortgage market is the government, and thatâs not just here in the US, itâs everywhere.Â Governments are the lenders of ONLY resort.
This is the case because there is no market for private securitizations.Â The only one or two that have been done have been very high FICO scores, with very low LTVs… as in 50 percent… and tons of over-collateralization besides.Â Nothing indicative of any sort of reemerging private securitization market… not even close.
Some seem to want to believe that it is because of the government stepping in that private money has stepped out, but thatâs precisely what I mean when I say they canât remember what brought us to this point.
The private securitization market is broken because the Wall Street investment banks in conjunction with some of the most predatory sub-prime lenders the world has ever known, combined to fraudulently package mortgage-backed securities, wrangled their way into Moodyâs AAA ratings, and either sold them, or repackaged them into collateralized debt obligations, thus taking on in more amounts of leverage.
We all should know what happened next, so the only points Iâll makes are these:
- The securitization market is broken because no one trusts what it produces anymore.Â And thatâs not going to change for a very long time.Â We lost trust in our ratings agencies before in 1929… we started using them again in 1969… 40 years to regain the trust that was destroyed when they failed to predict the coming of The Great Depression.
- If the government stops lending there wonât be any lending.Â Private capital wonât fill any holes, because no one will take the risk especially with rates so low.Â And if rates rise, it could throw us into another recession, and it will increase the number of foreclosures weâre now seeing… about 100,000 foreclosure notices and 50,000 homes actually repossessed each month.
- It is likely that no one will trust our private securitization market for many years no matter what we do, but there should be no question that no one will trust it until we address the inadequacies that allowed investors to be defrauded.Â And so far, we havenât even been willing to talk about those inadequacies in any meaningful way.
- Itâs impossible for me to imagine why anyone thinks otherwise, but investors are not going to re-start sub-prime lending without a functioning private securitization market… period.Â Not with interest rates where they are and not with higher rates either.Â Itâs to much risk unless weâre talking about hard money rates.
- Waiting for the private securitization market to return, especially while having failed to fix anything meaningful, is essentially like waiting for the dot-com VC market to come back.Â Why doesnât everyone understand that?
So, thatâs it for Ed DeMarcoâs speech and for Ed DeMarco… a man who will not be missed. Â
One thing I am looking forward to in the near future is reporting on how DeMarcoâs assumptions were wrong and how he should have lowered loan balances to prevent future foreclosures instead of waiting for them to happen.Â Itâll be too late to change anything, of course, but it will still be gratifying to rub his myopic idiocy in his cadaverous countenance.
So, goodbye Mr. DeMarco… I sincerely hope you are are hit by a life event while underwater in your mortgaged home and your loan is serviced by Wells Fargo, and owned by Freddie Mac.
Â Remember the Goodbye song from The Sound of Music? Â
Well, below is my idea of what we can all sing to Ed.
So Long, Farewell, Auf Wiedersehen, Goodnight
All these years weâve been saying only one special prayer
Perhaps millions have said it too
We tried like the devil, you remained undeterred
Caused damage that we can’t undo…
Marta, Gretl, Brigitta:
Children: Marta, Gretl, Brigitta:
Your work was uninspired
No one could get you fired
You made kids cry . . .
Marta, Gretl, Brigitta:
. . . Screw you!
So Long, Farewell, Auf Wiedersehen, Goodnight
Iâm glad that now, youâll be out of our sight.
So long, farewell, auf Wiedersehn, adieu
Now that youâre gone, perhaps we will pull through
So long, farewell, auf ‘voir , auf wiedersehn
Youâre views were wrong, and also inhumane
So long, farewell, auf Wiedersehn, goodbye
You made bad rules, and forced us to comply
Apply… Deny… You Lie…