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Well, it goes as it always goes with failures. At some point, everyone starts searching for scapegoats. Then, later, some innocent will be punished (such as the US taxpayer and the poor etc).
This will go on for quite a while still.
one of the reasons I gave up reading much of the NYT long ago, except the sports scores, can't twist those or leave things out. This is a problem with all media, people who write, comment etc on things they know little about and do not take time to find the truth. It's all about just getting something into the ether and not truly vetting the info. anonymous sources is what got them in trouble with the WMD storyline. Fools never learn.
Volcker, Volcker - the name rings a bell. Some Carter appointee, right?
As a matter of fact, it just might be that Carter appointed him to this -
'Prior to being named the assistant to Volcker, Syron was deputy assistant secretary of the United States Treasury with responsibility for developing the department's position on all domestic economic policy issues, and extensive interaction with other executive branch agencies, Congress and the public.'
Now, can't blame Syron for not naming names in his biography page of anyone that have appointed him to government positions, but maybe the NYT was trying to be nice, avoiding any association of Syron with either Carter or a Bush.
Nah, must be some other reason.
Second grumpyoldvet's take.
Who cares if the NYT does a hit job on Freddie? Yes the article is lousy but it ain't the NYT that's going to cost the American people billions of dollars. Who really cares?
Freddie and his fat little sister Fanny never should have been public companies to start with, The guy can't help that.
Yes the article is lousy but it ain't the NYT that's going to cost the American people billions of dollars. Who really cares?
Why are you so sure Freddie is going to cost the Peeps billions of dollars?
Because of the things you read in the Times?
A third on grumpyoldvet's take.
Almost without fail, when you read something a journalist writes on a topic you have slightly more than the average knowledge of, you will find the journalist has fluffed it.
Bad writing or not, there are kernels of truth, such as:
"Those and other choices initially paid off for Mr. Syron, who has collected more than $38 million in compensation since 2003."
sounds like a lot of money to run a company into the ground.
Syron has no shortage of enemies. At Thermo, he identified and removed 3 layers of deadwood who were ruining the company. Thermo was failing when he took the helm. He realigned the businesses and dispatched the old Helms men and turned Thermo into a money making machine for shareholders.
I'm sure he performed a similar job at Freddie with different circumstances.
One more thing, if anyone's looking for a dunce or a crook, boy oh boy have you got the wrong guy.
I only say it because I think you (apologies for merging you and CR together a bit here) are knowledgeable about the resi market and enjoy your blogging on it, and general confidence in opinions generally requires that mistakes are admitted and corrected, and the pot generally cannot call the kettle black and retain too much 'street cred'.
So, calling out a reported for only pasting the juicy part of the resume in an article, is no worse (actually, much less so) than copying out the scare-tactic headlines and misrepresenting (in one case, grossly so) the data in your last two CRE posts.
With all due respect, you are quickly losing your credibility, at least with me.
I take small issue with this point:
a former employee wrote a memo in 2004 that apparently didn't impress Syron all that much. A lot of us wrote memos in 2004 that didn't impress a lot of people all that much.
this was Freddies CHIEF RISK OFFICER. Seems like the CEO should perhaps take some time to vet out the memo of the CRO, no? regardless of how unimpressed he was?
not defending the Times' article, but there does seem to be a story here.
I for one am glad that the NYTimes has published this. As the article by Paul Gigot outlined the events of the past several years, 2 weeks ago, and as seen by the ease with which the Housing Bill has passed, there's been an unholy alliance between both parties and an extreme corruption of the political process as related to housing - the GSEs have been an integral part of this.
The Fannie Mae Gang - WSJ.com
-K
the NYT coodanode.
what will it take to convince the professional class, those glorified trade-school graduates (like MBA's) and all like ilk that the "paper of record" is nothing but a sham, a fraud. it's job is to misinform, to mislead, to protect its primary stakeholders, the owners of capital. it's disgusting.
planes used as missiles?
hoocoodanode.
Tanta and Syron,
sitting in a tree...
sounds like a lot of money to run a company into the ground.
Well, yes, it certainly does in comparison to what I made in 2003-2008.
But how many CEOs of financial companies the size of Freddie Mac made a mere $7.5 MM a year in this period?
I also think "running the company into the ground" is just simply weird.
i thought this line was good:
The companies also collected fees in exchange for guaranteeing that borrowers would repay other home loans.
really? i didn't know that was what they were guaranteeing.
this was Freddies CHIEF RISK OFFICER.
Yeah, but Syron was Freddie's CHIEF EXECTUIVE OFFICER.
Which fancy title are you going to believe?
Regardless of slant, I just loved this quote:
Mr. Syron contends his options were limited.
If I had better foresight, maybe I could have improved things a little bit, he said. But frankly, if I had perfect foresight, I would never have taken this job in the first place.
... no good deed goes unpunished!
I actually liked this line even better:
The only real protection against such a downfall was purchasing only the safest loans.
How true. The only real protection against risk is not taking any. The Times should patent that.
If anybody gets to the end of the article they'll find this quote:
Ive had four other jobs as C.E.O., and I came out of them all pretty well, Mr. Syron said. What Im working for right now is to save my reputation.
Self-centred, no? . I can think of a lot more things he should working for right now
-K
No, not because of what I read in the Times. Because of the Foreclosure Prevention Act of 2008. Who knows, maybe we'll all get lucky and it won't cost the taxpayers a dime. I wouldn't bet on it.
How autonomous can you be running a GSE? It's an allegedly private company charged with following a public mandate. The public mandate will supersede the interests of the shareholders.
Mr. Mudd said the companies were victims of circumstance.
Youve got the worst housing crisis in U.S. recorded history, and were the largest housing finance company in the country, so when one goes down, the other goes with it, he said.
Gee Mr. Mudd, do you think you may have contributed to the problem at all?
This reporter is a clueless hit man.
Self-centred, no? . I can think of a lot more things he should working for right now
Like what? Ruining his reputation?
I read that as Syron saying that he doesn't actually need a job, and he doesn't actually need this one, which even back in 2003 looked like the kind of swamp-draining that would probably not make anybody a hero whatever you did. But he took the job and he aligns his own reputation with doing what he thinks is the right thing for Freddie.
What's so wrong with that? We are all free to differ with his opinion of what is the right thing for Freddie. But would you prefer someone who doesn't care about his own reputation?
How could anyone think buying loans, the origination of which were premised on the notion that the rising assets with which they were secured, might reverse course and decline?
That wasn't a risk worth listening to a risk officer about, n'cest pas?
That said, Syron did what anyone in his position would have done. As he says, he had several constituencies to keep happy--credit markets, Congress, shareholders, etc. Unfortunately, none of them were the taxpayers that would be on the hook for his kowtowing to the others.
This reporter is a clueless hit man.
You don't count, PJ. You aren't anonymous.
Post that comment again as "Masked Avenger" and we'll take you seriously.
I confess. I was the second gun-pig on the grassy nole.
He should be working for fixing the real problems with Freddie - one's own reputation fixing should be done one's own time not the company's time.
As regards not needing the job, he TOOK the job and didn't do a good job of balancing the conflicting pressures well - which was his JOB as CEO.
He deserves all the opprobrium. A straightforward - "Yeah I screwed up" ( no immediate qualifications and yeah, buts ) would be a start on his efforts at salvaging his reputation but those efforts are best done OUTSIDE of FRE. He should resign and focus on his personal effort and let someone else work on FRE.
-K
Look, its the running of the BULLS
Oil below 120, no bad news reported
You gotta know that the GSE are simply congressional lapdogs.
I feel no sympathy for anyone who voluntarily put themselves in the line of fire to take a "leadership" AKA scapegoat role in this great scam.
I can't fault the guy's effectiveness on the job unless I have real familiarity with his effectiveness on the job.
As to fixing real problems at Freddie, any credible evidence he wasn't doing precisely that? Syron's not the only one we know who's waded into a swamp not of his own making.
I feel no sympathy for anyone who voluntarily put themselves in the line of fire to take a "leadership" AKA scapegoat role in this great scam
Why is this about "sympathy" (or the lack thereof)?
Why do all these anonymous sources fear that criticizing Syron will damage their careers? Why do they want these careers if the only way to keep them is to not rock Dick Syron's boat? Why does Syron have to have more courage than his critics?
I'm really curious about that.
Good morning Tanta and friends.
I have a feeling many people are going to miss what seems like your main point, that it would be nice if newspapers would name names rather than rely on shouts in the dark for their money quotes...
"how many of them were found on Yahoo! message boards."
Shouldn't we give NYT the benefit of doubt?
This reporter is a clueless hit man.
........
"He said we couldnt afford to say no to anyone, Mr. Andrukonis said. Over the next three years, Freddie Mac continued buying riskier loans."
That is the fascinating quote to me, the guy is head of a GSE, he doesn't sound like a dolt so I have to imagine he cares about underwriting standards.
So what were the supposed costs of saying no to certain loans? Being lynched by congress? Financial slowdown?
What?
It seems a little bit strange that every single reporter who criticise Fannie or Freddie, is a hit-man acording to Tanta.
But I remember a few years ago Tanta telling us what a great economist F.D.(derivative) Raines (ex CEO of Fannie) was, and what a great job F&F were doing. Very much the same story, just a different name.
Adding that if it was congress then this is the stupidest quote of the day:
"Others, however, dismiss that explanation. Sure, its hard to deal with the pressures of Congress and shareholders and regulators, said a former high-ranking Freddie Mac executive. But thats why executives get paid so much. Its not acceptable to blame those pressures for making bad choices."
So the people at the top are really smart, so saddling them with impossibly conflicting requirements doesn't count.
The past is the past. What about their books. Can anyone make sense of them even now?
Charlatan,
You have publicly questioned the uprightness of two recent posts on this blog, without identifying the posts. In response to a post on bad journalistic practices, there is a nice little irony in that. Which recent posts do you think misrepresent the data? 'Cause if the point you are trying to make is that our hosts have to agree with your view on the data or lose credibility with you, which is the way I read what you have written, I'm not sure why the rest of us should care. To make this more than a diatribe, you need to tell us which recent posts you object to, and why.
Why are you so sure Freddie is going to cost the Peeps billions of dollars?
Personally I think it's because they made loans to Americans to buy houses when house prices were not at levels where Americans could afford to buy houses.
Mobius Says Fed Should Cut Rates to 1% to Fuel Growth
Mobius Says Fed Should Cut Rates to 1% to Spur Growth (Update3) - Bloomberg.com
I have no problem with unnamed sources.
Watergate, pentagon papers, My Lai are quick items that come to mind when considering unnamed sources.
Look, the reporters understand that there are conflicts of interest. It's their job to see the forest not just the trees. If they screw up, then Darwin selects their career for removal. And if they get it right, then other anonymous sources will bring them more material. (Seymour Hersh receives much pentagon work simply because insiders who were themselves outraged by My Lai think that he dealt with a tough topic in a reasonable fashion.)
While it would be great if everyone had the courage to put their careers on the line in order to slam a slimebag, everyone has families to feed and (ahem) mortgages to pay. So it's the way that "breaking stories" has evolved.
I agree with the earlier comments on NYT's competence. When I read the paper's coverage on subjects I know in some depth, I inevitably find either the dull repetition of commonly-held ideas or ample evidence of a quick study.
Fact checking isn't enough. Someone needs to look at whether or not the arguments themselves have substance and whether or not they hang together logically. I can only imagine what sort of staff that would entail.
"Why do all these anonymous sources fear that criticizing Syron will damage their careers?"
Because it might?
"Why do they want these careers if the only way to keep them is to not rock Dick Syron's boat?"
Because they've got bills to pay?
"Why does Syron have to have more courage than his critics?"
Because he is The Funding Fuehrer.
"Why are you so sure Freddie is going to cost the Peeps billions of dollars?"
Let's not put lipstick on a pig. This beast is so massively leveraged that even a small downtick in housing would have resulted in massive losses. Their controller said in May that they were confident that they were well capitalized, since they could survive another 7% drop in house prices. His quote was that 20% would be another story. Frankly, I think 20% is optimistic.
And FRE continues to dig its own grave, despite the fact that other lenders can't afford to originate loans.
I agree with much you say Tanta, but I simply can't support you on this one.
I did a bit of Googling on
David A. Andrukonis, CHIEF RISK OFFICER and author of that prescient 2004 memo.
This was interesting: in 2000 he was writing articles defending FRE's entrance into subprime lending:
So, why did Freddie Mac buy an estimated $11 billion in subprime mortgages last year? Why are we making headlines and drawing criticism from groups with vested interests in the status quo for entering the $130 billion-a-year subprime market at all? How will any of this help the mortgage industry rid itself of predatory lenders and help consumers?
Well, the answers are simple. We're buying subprime mortgages because we believe it's part of our job. Bringing liquidity to the whole gamut of the mortgage market is embedded in the mission that Congress chartered us to do 30 years ago. Doing business in key subprime market segments signals a turning point that will ultimately provide more borrowers with wider access to the American dream. So, instead of the high-pressure world of the worst predatory lenders, it is Freddie Mac's objective to work with responsible lenders who will help borrowers discover a modern, fair, simple and accessible mortgage process, and homeownership opportunities that will be more affordable.
Article: Entering the Subprime Arena. | AccessMyLibrary - Promoting library advocacy
Better to have an imperfect story out there -- anonymous sources and all -- that Tanta can tear apart and enlighten us with than to have nothing.
tanta, you continue to defend (worship) the GSEs. They are a quicksand pit where taxpayer treasure will go in and executive bonuses come out. Busting them into little fragments and selling off the scraps should be the first priority of the newly appointed regulator (executor).
sk -
How dare you compare the recent editorial in the WSJ - which was fucking excellent, btw - penned by none of than Paul Gigot to this piece of slop from the ignominious Charles Duhigg? Just because both are critical of the GSEs? At least Gigot makes a number of salient points. The NYT article, OTOH, is the work of a clueless hit-man.
For instance, what the hell kind of damning accusation is "Richard F. Syron, in 2004 received a memo from Freddie Macs chief risk officer warning him that the firm was financing questionable loans that threatened its financial health."
Here's a newsflash. That's what Chief Risk Officers do. They warn the CEO of potentially risky shit. In memos, even. What seems to be ignored, if anything, is the fact that businesses must take risks, which isn't necessarily a bad thing, so long as they are calculated risks (no pun intended).
"Why do all these anonymous sources fear that criticizing Syron will damage their careers?"
Excuse me, how do you promote in an organization if you publicly ridicule its leadership? Perhaps they are anonymous not because they are afraid but because their wives/husband and children who also have a stake in their careers would kill them.
"Why do they want these careers if the only way to keep them is to not rock Dick Syron's boat?"
Because they need to pay bills.
"Why does Syron have to have more courage than his critics?"
You can't be serious Tanta. I guarantee any of these anonymous sources would become very public if their name was needed because you have to make that $38 million dollar paycheck to someone.
What's the use case for anonymoty?
Why have silly handles like 'rebear'? Why don't i just put my real name and street address while posting? Why do i not do that? Privacy?
I understand 'rebear' will never get quoted but 'CR' and 'Tanta' do.
My friend who works at Freddie and is a low level grunt (he actually builds the internal credit risk models) had already given up in 2004. He said they are just handing out money to whoever wants it. He said the only reason he was still there was he wanted to be vested because they have a generous benefits.
barely,
Exactly what model for 30 year fixed mortgages would you prefer without GSE's or a government agency with the same purpose, backing it up?
"Tanta", posting anonymously under a pseudonym, (and who's financial interests are unknown and unknowable to her readers) has taken it upon herself to be the great contrarian of the mortgage debacle, slaying pretenders right and left with the sword of righteousness. In keeping with our times, you are either with her, or against her. If you have opposing opinions, be prepared to have them twisted into depictions of your simple-mindedness, racism, classism, etc.
Watergate, pentagon papers, My Lai are quick items that come to mind when considering unnamed sources.
Not to mention HUAC, WMD in Iraq, and Satanic Ritual Abuse In Daycare Centers. Which also come to mind when considering unnamed sources.
My problem here is that everybody wants to pretend like they're Daniel Ellsberg for bad-mouthing a CEO. At some point that becomes delusions of grandeur.
I don't know the guy but I'm not quite willing to put "Syron" and "Courage" in the same sentence.
Remember those death threats Meredith Whitney got for telling the truth?
I think you're letting your hatred--yes, hatred--of the NYT get the better of you, Tanta. After all is said and done, do you or do you not believe that the Freddy Mac CEO was told several times well in advance that the actions he was taking were inordinately risky?
tanta, you continue to defend (worship) the GSEs. They are a quicksand pit where taxpayer treasure will go in and executive bonuses come out.
But it didn't have to be this way. When the GSEs were first created, they fundamentally changed US mortgage lending for the better.
What, I wonder, happened in the last thirty years that could've made these organizations little better than wards of the state?
I liked the NYTimes article as it provides evidence that Freddie Mac was applying affirmative action principles to its lending operations. The breakdown in lending standards was a direct result of Syron's ideological commitment to helping minorities.
Further reading:
Taki’s Magazine, edited by Taki Theodoracopulos
Why are you so sure Freddie is going to cost the Peeps billions of dollars?
Because of the things you read in the Times?
Tanta | Homepage | 08.05.08 - 8:57 am | #
No, because Mish & Karl say its so...
BTW - you don't suppose any of those anonies cited by the Times were throw aways from failed wholesale branches of IB connected originators whose PRIVATE LABEL MBS blew up? No grudges or resentment possible, right?
I cooda beena contenda!
"I did a bit of Googling on
David A. Andrukonis, CHIEF RISK OFFICER and author of that prescient 2004 memo.
This was interesting: in 2000 he was writing articles defending FRE's entrance into subprime lending:"
Tanta, what's going on? If I drive during the day with my lights off, but turn them on at night, does that mean I've flip-flopped? 2000 versus 2004? The guy isn't entitled to change his view?
bob in MA-
Spot on...
Just a little ironic for me...
Ciao
MS
I'm so implausible to believe that the head of a organization making ridiculous money during an incredible bubble would be reluctant/unwilling to practice restraint and thus necessarily hurt their short-term investors.
Not believeable. the NYT article is therefore complete fabrication.
I think I overheard my two cats dicusssing Syron the other day. In the interest of full disclosure, unlike the practices of the NYT, I must disclose that neither of my cats ever worked at Freddie.
However they may be the source of some of deep background the NYT article.
To be fair, what % of the subprime market in 2000 was dreck? I'd certainly bet it will have a lower default rate than the 03-08 vintage.. thus, what if the guy thought in 00 that the subprime was OK but by 03 his thoughts had changed?
What, I wonder, happened in the last thirty years that could've made these organizations little better than wards of the state?
The problem with Fannie and Freddie is that they got too big--they got to the size where their failure would be catastrophic to the economy. The correct route would have been for the government to continue down the path it started when it split off Freddie--to break them up into smaller chunks that could compete with each other and, potentially, fail without breaking the economy. If we had gotten around to breaking them down into Franklin, Filip, Floppy, Fritz, Forrest, Fatima, Floozy, Fiona, and Fruma we wouldn't be in the trouble we're in now.
Tanta, what's going on? If I drive during the day with my lights off, but turn them on at night, does that mean I've flip-flopped? 2000 versus 2004? The guy isn't entitled to change his view?
Of course he's entitled to change his view. Although not having access to this memo, I can't say that he exactly did or not.
But things that looked credible in 2000 may have started to look iffy in 2004.
Things that looked alarmist in 2004 may have started to look more plausible a year or two later.
For all I know, Andrukonis, who had been with FRE since I think 1980 and who was the risk officer when all the irregularities went on that led to Syron taking over in 2003, was associated by Syron with the People Who Got Us Into This Mess, and that 2004 memo was ass-covering. Maybe, maybe not. But we sure aren't being invited to consider that.
Well, this clue-less hit man, the NYTimes reporter Charles Duhigg, studied history at Yale and got an MBA from Harvard and won a Hillman Foundation journalism award in 2007 for his "Golden Opportunities" series.
-K
Oil DOWN! We can't have that. The Fed needs to cut rates some more to juice up the oil market. Without bubbles we're doomed and they know it.
Not to mention HUAC, WMD in Iraq, and Satanic Ritual Abuse In Daycare Centers. Which also come to mind when considering unnamed sources.
No doubt, there is a signal-to-noise. And like I said, Darwin will select those who screw up. From your examples, McCarthy died penniless for HUAC. In contrast, Woodward and Bernstein were rewarded handsomely. Noteably in limbo is Dan Rather who, despite a distinguished career, is going to spend the end of his career sorting out whether or not he was right on some Bush papers.
There is, of course, a reason why you cannot admit anonymous testimony in court. But this isn't a trial, it's a newspaper. If Syron is libeled, he has recourse. I predict that he won't file a libel lawsuit.
Think it is a mistake to blame to borrower here. The lender should have sufficient risk management models to prevent loan losses. To say that FRE is run by idealists ignore the fact that they raked in millions while pursuing their "ideals"
OT I rather see the market trade up before the FED rather than trade down the market always seems to defy the FED a few weeks out.
A very disappointing post, Tanta. So much indignation so early in the morning over slights to the powerful and wealthy -- very puzzling. Even Syron is not so shrill in his own defense: "If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place."
Sounds like a de facto admission that FRE and its mission are critically flawed to me. If Syron can own up to it, why can't Tanta?
Sounds like a de facto admission that FRE and its mission are critically flawed to me.
How in the world do you get that from that quote?
"Maybe, maybe not. But we sure aren't being invited to consider that."
Well, if we're going to examine everyone's motives then maybe we could put that in the footnotes as a dissenting opinion?
That should read "It's"....damn typos.
After all is said and done, do you or do you not believe that the Freddy Mac CEO was told several times well in advance that the actions he was taking were inordinately risky?
I told the whole effing world on my blog that everybody in the industry was taking too much risk. So Syron didn't listen to me, either.
When I say I also wrote some pretty scorching memos in 2004, I meant that. I didn't work for Freddie; I worked for a private mortgage investor that was taking risks FRE could only dream of. Sometimes I was right; sometimes I was right waaaaay tooooo soooooon. Sometimes I was wrong. (I thought OAs would blow up long before they did.)
But Alan Greenspan's memos were more popular than mine. Go figure.
I am quite sure that Syron did a lot of things that he was warned would be risky that turned out great, too.
What I find hard to believe is the claim that Syron just point-blank refused to consider the risks. And that seems to be what Andrukonis is claiming.
The NYT is THE establishment newspaper. They have never been a muckraking paper, the serve the ruling elites and the ruling elites only . . . it just so happens they have a great crossword, and the bourgeoisie love to feel important by reading it . . .
But after Judy F'ing Miller sold the Iraq war on the front page, Michael Gordon tried to sell an Iran war on the front page, countless articles pushing US oil interests in South America and Russia (attacking Chavez, and insinuating the prosecution of Khodorkovsky was merely political) . . . the final straw fro me was giving Bill Kristol a column. Subscription cancelled, and good riddance.
The danger of the NYT is that people believe it is a liberal paper. It is part of the establishment power structure, and it always has been.
Nice work Tanta.
Even Syron is not so shrill in his own defense: "If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place."
Don't have time to respond to the entire piece, but I will to this.
I've dabbled in journalism in the past, and in reading this article this quote, in particular, jumps out to me as something that was probably said in response to a completely unrelated line of inquiry that the writer has tried to link to the premise being explored in that part of the article in an effort to (a) further demonize the subject and (b) make it seem like he was giving Syron "equal time" to refute the allegation being made.
I'd almost guarantee you that the question that prompted Syron's response above had absolutely nothing to do with Andrukonis' two previous quotes, or about buying increasingly riskier loans.
For all I know, Andrukonis, who had been with FRE since I think 1980 and who was the risk officer when all the irregularities went on that led to Syron taking over in 2003, was associated by Syron with the People Who Got Us Into This Mess, and that 2004 memo was ass-covering. Maybe, maybe not. But we sure aren't being invited to consider that.
Oh no. Not this line of reasoning. The old "for all I know, Mr. A might have been a drug-addicted crackhead who cheated on his wife with gay abortion doctors, but we sure aren't being invited to consider that".
Nice. I will call this the Empty Strawman Axiom Application. The shittiet way to argue, really.
Sorry, but I think you're doing the hit job. Dr. Syron is accused of ignoring critical information that Freddie was taking unacceptable risks. His (previously) stellar experience is not a defense. Indeed, it would sharpen the accusation because it would indicate he was particularly well-suited to evaluate the risks and yet he still made the wrong decision. The Times does present Freddie's (legitimate) defense, which is that Andrukonis didn't write the memo.
Anonymous sources are not a problem if there's reasonable verification of their claims, and there is (an on-the-record source claiming a specific memo). Frankly, Syron shouldn't have needed a memo to know there were house pricing risks anyway.
You're third comment is complaining the Times calls the decline "unlikely". Well, probably all the people involved thought that at the time, so I don't see why we should get strung out. And, like the experience business, if a reasonably informed person would have concluded declines were likely then Mr Syron's failure is more, not less extreme.
So, you ding the NYT for a "hit job" and criticize them for their presentation of three facts - all of which would put Syron in a WORSE light if they had been presented your way. The NYT criticizes Syron, and puts up enough evidence to support the criticism. Yeah, had they added the evidence you bring up the criticism would be even more damning, but it's strong enough as it as and the article is long enough. I don't see the problem.
slaying pretenders right and left with the sword of righteousness
Heh. Just make sure you don't bring up righteousness, or any other moral argument. That's judgmental.
mp: nail. head.
Cheers,
prat
so is tanta your real name. Pot, kettle, black.
People still read the NYTimes?
Sounds like a de facto admission that FRE and its mission are critically flawed to me.
Syron saying that if his foresight was better he could have improved things is an admission that FRE's mission is critically flawed?
If anyone had better foresight, anything could be improved at any company at any time. Good lord.
The GSEs are GSEs. You have the right to the opinion that there is a critical flaw in the whole idea of a GSE. You would get absolutely no argument from me about that, by the way.
But scapegoating Freddie's CEO isn't going to give anybody a clearer picture of what the real issues are. And anybody who thought the GSEs were doin' just sooper until Syron "admitted" that he didn't fix them is, well, nutz.
Tanta - Syron saying that if his foresight was better he could have improved things is an admission that FRE's mission is critically flawed?
Syron said:
But frankly, if I had perfect foresight, I would never have taken this job in the first place.
Not sure if that implies critical flawness.. but.. it is an interesting statement.
Little mention is made about F&F lobbying congress. They're in the loop and their reward is Paulson's gonna buy their stock--with congressional approval. Either you're public or your private, the twain is a dysfunctional hybrid.
It is a bit too easy to say that folks have recourse through libel actions. Libel actions are no guarantee the right and the good will prevail.
The first barrier against misinformation should not be the courts. Recourse to the courts means that social and professional standards have been in adequate to keep all the critters in their own pastures.
ok, first-up disclaimer, i work in the evil msm
every day i go into work and if there ain't an olympics opening ceremony to put on the front page i have to come up with something else people might be happy to salivate over enough to pay a buck to cover the cost of the dead trees and ink
my less than CEO wage is paid by advertisers who can be persuaded that, after the salivation, readers will notice the ads and rush off and fatten advertisers' bottom line
guess what, as this little kiwi's economy is one month's numbers away from being officially in recession, the wallets are snapping shut
on a slow news day we are gonna beat up to hell any sort of story that will get readers salivating, and if Tanta salivates so much the better, (we have been spared reporting it's hot in summer ... with cute pix...) (and she's got us seeing a lot more meat on the bone)
we're losing readers steadily and you may have noticed steady staff reductions (our turn coming up, about 3 in a shop of 10)
complaining about less than stellar reporting is fine, but be aware newspapers are heading back to the roots
when they hit 4-8 pages once a week, mostly advertising you can skip the GD and call 1870s depression territory ahead of whitney and roubini...
well operating the GSE's as a hedge fund and having a CEO KNOWINGLY aware of it and then throwing up his hands, as if none of it was his fault, is a tad bit precious for me.
He knew the risks and took no action to curb the practice. Now if he rec'd tha "tap on the shoulder" that Michael Perry got earlier this year then he's really not his own man....just like Bernancke.
Tanta you should know better.....especially in this case.
Ciao
MS
I missed this little gem in the first reading:
Some outsiders are surprised to learn that among the candidates [for Freddie CEO] the company is considering is Alan Schwartz, who headed Bear Stearns as it collapsed.
He is going to have one hell of a CV.
But scapegoating Freddie's CEO isn't going to give anybody a clearer picture of what the real issues are.
Isn't the real issue simply that people in positions of power in the finance industry like Syron ignored the entirely predictable catastrophe that would occur if we gave people loans at income ratios they've never been able to pay off before? Or did this not occur on his watch?
Everyone wants to make this really complex, but the real issue is so simple that nobody seems to want to admit it.
I guess it just incriminates too many people. Too much blood on too many hands.
The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution... Bankers are more dangerous than standing armies... [and] If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered. - Thomas Jefferso
Our fraile zombie financial system is coming back to life today! How wonderful. The Fed has cover to drop rates today.
Can we get a CR post so I can go OT without getting banned, TIA.
I will call this the Empty Strawman Axiom Application.
Call it whatever you want to.
I call it the Rashomon Effect.
It is everybody's job to evaluate the plausibility of claims made in the newspaper. Mileage will always vary on that, of course. Some people are more skeptical than others.
You do notice, don't you, that everyone here is free to speculate about my possible motives and I do not forbid them from doing that? I don't of course agree with everyone here, but skepticism about your sources is a good idea. I encourage a good argument about the subject.
The NY Times is telling the gospel truth compared to the federal government. I'll keep my subscription.
This is getting rather silly Tanta.
Perhaps your criticism of the NYTs is fair. But the point of the article is to bring criticism to the head of a GSE.
In case you hadn't noticed, Congress is not holding meetings discussing the bailout of the nation's flawed reporters at the expense of billions of taxpayer dollars. China and Japan aren't pressuring us to rescue their investment in sound reporting.
Your passion for holding some reporter to task (on a housing centric blog) at the apparent expense of any passion against someone who ignored many non-anonymous critics like Greenspan himself while he took millions to do what apparently any idiot could have done is really bizzare.
Gary - as an NYT H8ter, you'll probably enjoy this.
Personally, I like to read it online for free. You hear that, Bill Keller? Eat that! Eat it!
There was an earlier comment about signal-to-noise.
There are going to be many books written about what happened at Fannie and Freddie. Only then will we have a snowball's chance in hell of understanding what really happened.
And by the time we do understand, it won't matter any more. It will be history.
Tanta:
Sorry, but this sort of rant no longer seems to advance the purpose and authority of Calculated Risk.
"Let's Kill Gretchen" was amusing at first, but you're beginning to sink into the mire of confusion that you criticize. More of that is the last thing I need.
Tendentious journalism is nothing new, especially in the so-called newspaper of record. Wasn't CR born in reaction to that unreliability? Bashing the competition is the last refuge of a lame reporter -- and I can say that, having been on both sides of the gambit.
The danger of the NYT is that people believe it is a liberal paper. It is part of the establishment power structure, and it always has been.
That was spot-on, though bob_in_MA made a...resonant quip.
I've certainly found myself getting a little unjustly hyperbolic in the service of snark.
But how many CEOs of financial companies the size of Freddie Mac made a mere $7.5 MM a year in this period?
Oy!
Well, maybe Tanta will find happiness in a second career as an executive compensation consultant. Yuck.
But I remember a few years ago Tanta telling us what a great economist F.D.(derivative) Raines (ex CEO of Fannie) was
Ah, Rashomon.
You must have been hallucinating, love. I defy anyone to find a post from a few years ago in which I called Raines any kind of an economist, let alone a good one.
Former Fed president Poole: NY tims oped 07/27
Fannie Mae and Freddie Mac are not essential to the mortgage market; if they were put out of business in an orderly fashion over 5 to 10 years, the market would pick up the business they abandon. Fannie and Freddie exist to provide guarantees for mortgage-backed securities trading in the market. The business is simply insurance....
In fact, there has already been a test case for how the mortgage market would function without Fannie and Freddie. After an accounting scandal in 2005, regulators severely constrained their activities. The nations total residential mortgage debt outstanding rose by $1.176 trillion in that year, even though Fannies and Freddies stakes rose by only $169 billion, just 14.4 percent of the total. In essence, the market barely noticed that the two agencies private competitors were providing 85 percent of the increase in mortgage debt in 2005.
Now for reality, instead of NYT, Poole and all the Wall Street crooks dog whistles
The private competitors of Fannie and Freddie, during 2004-2006, i.e. when Fannie/Freddie were crimped - ran a huge racket. There was a collapse in mortgage underwriting standards. They gave mortgages to lots of truly unqualified borrowers.
This shady environment, along with the exponential growth of structured financial products, SIVs and other off-balance sheet gimmicks that was enabled by the openly corrupt misrepresentation of risk by banks, IBs and the large financial services firms who peddled these toxic junk to naive investors, has brought us into the current financial doomsday scenario.
GSE's indeed If anything, the shift away from the GSEs to the private markets led to the bubble in the real estate markets. The GSE's just got caught up in that bubble bursting.
Open thread please
brewster -
The private competitors of Fannie and Freddie, during 2004-2006, i.e. when Fannie/Freddie were crimped - ran a huge racket...
...GSE's indeed If anything, the shift away from the GSEs to the private markets led to the bubble in the real estate markets. The GSE's just got caught up in that bubble bursting.
Say it again! Amen Brother!!! That is the truth.
Let me get this straight - you hate Alphonso Jackson, but love Syron?
I say they are both scum! $7 million a year and he has no responsibiliy for the downside, but is worthy of the $7 million upside...Tanta were you on the FRE executive compensation committee?
Your brain at this moment is composed of brigades of tiny Bolivian soldiers. They are tired and muddy from their long march through the night. There are holes in their boots and they are hungry. They need to be fed. They need a new post by CR.
Encouraging people to speculate about your motives is not the same as disclosing them openly.
The article implies that Syron was responsible for lowering underwriting standards and the lowering of underwriting standards is what put the company at risk. I think this is seriously missing the point. Underwriting standards at non GSEs lenders dropped to a ridiculous level. They ran themselves out of business and the GSEs have been left holding the bag. If Syron had been as irresponsible as the article implies we'd be in a much more dire situatio
Any CEO or top-executive is the daily recipient of information, complaints, and advice covering each extreme end of tail risk and everything in-between.
On any given day, one can find at least someone who suggested virtually any given outcome.
The NYT is using the same method here which it's used to beat up on President Bush these past few years - find anyone who wrote a memo back in the day and say "Look He Was Warned About This!" (while he may deserve the criticism, the "Smoking Gun Memo" method is a disingenuous device).
"They need a new post by CR."
They sure as hell don't need a Conjure Bag post because he'd just make everyone cry.
Come off it, guys. I'm hardly in the executive compensation racket.
I don't think anybody deserves $7.5MM a year for anything, personally.
But I didn't realize there were so many other socialists on this thread. I thought the rest of you guys were capitalists.
Socialist.
"I don't think anybody deserves $7.5MM a year for anything, personally."
I do. I deserve every damned penny.
tanta is the NY Times reputation killer, La_La_la.
p.s. Good Job, they deserve it
.
FNM and FRE are socialists entities, IMO. Change the compensation to governement scale.
"Come off it, guys. I'm hardly in the executive compensation racket.
"
how do we know that?
"But I didn't realize there were so many other socialists on this thread."
It wouldn't surprise me if half of these guys were closet dotcommunists.
Another "amen" for brewster. The GSEs make a convenient punching bag for those same crooks on the way down, however. Deflects attention.
"Yeah sure I saw that reporter stand up and confront Bush about what led up to the war.....but did you see the suit he was wearing?!, and please, the way he mumbled the question and mispronounced Sadam's name? Terrible.
"Yes, well your an expert on war strategy...what do you think about the subject matter that the reporter, perhaps ineptly. brought up?"
"Well yeah, Bush screwed up...but really that reporter was such an idiot, how dare he even set foot in the press room....did you see that guy!! Man, we have some serious problems here with reporters."
Encouraging people to speculate about your motives is not the same as disclosing them openly.
How true. Let me rectify that.
My motive is to try to make people more skeptical about what they read.
I also have no position in FRE, long or short. But you have no way of verifying that claim so I never bother to make it.
is it just me or is Tanta becoming angry?
It used to be that most of the stuff Tanta posted was new, interesting information. She was educating people with her uber-nerds, analyzed various nooks of the housing business, etc.
Recently it seems every other post by Tanta is just a wall of text with no other purpose but to point out that some particular journalist is a piece of poop.
But should we care? I already assumed that 99.7% of all journalists are bad and mostly ignorable. I don't need every single one pointed out to me. I would much rather appreciate if you shared with me the names of those remaining 0.03% of the journalists that are good.
If any of you remember, is this guy Syron the same guy who used F-Word in investors conference call and was caught accidently by an open microphone?
The GSEs make a convenient punching bag for those same crooks on the way down, however. Deflects attention.
Those crooks have hated the GSEs forever - first for demonstrating that such a market existed, and then for taking up too much of the market share. They want a monopoly on the revenue stream, for themselves, nothing more, nothing less.
The single worthwhile thing I learned in Graduate School (history) is that all wars, indeed all history, are driven by the desire to control resources - to skim a revenue stream.
Tanta, it is not how much one deserves. It is about how much market dictates. Unfortunately market of Exec. compensation is inefficient a little, since the compensation is rarely linked to performance.
I wonder, would government regulations that give the power to shareholders to manage exec. compensation make the situation better?
Duh, I take it back, given "Gheat" Track Record of latest government regulations we need less of those and not more.
I say, more power to HEDGE FUNDS and Corporate riders, cause it seem only they can motivate exec. to be more efficient.
"My motive is to try to make people more skeptical about what they read."
Yes, well, nevermind making people more skeptical about what CEO's are doing, and could have or should have done, to taxpayer backed GSE's that will cost billions and put at risk the entire world financial system....let us put priority on the new more harmful problem of hit piece journalism.
"it seems"
"I would much rather appreciate if you shared with me the names of those remaining 0.03% of the journalists that are good."
That works for me. It would help boost the signal-to-noise ratio.
Scott & brewster,
You are incorrect, gentlemen.
A) If the fear is systemic risk and the possible tax liabilities if the Federal government needs to nullify it, then having larger, oligopolistic quasi-public institutions is the problem. Had the same bubble been inflated in RE but passed through a larger number of smaller unambiguously private institutions, the Feds would be capable of letting more of them go to the wall without fearing what happens to everyone else. As it stands, even semi-large private institutions like BSC get backed. The only way to prevent "too big to fail" is to not favor some participants over others and thereby juice their growth.
B) If the fear is of bubbles, you're barking up the wrong tree. Markets are prone to bubbles and this one would likely have inflated with or without FRE and FNM around.
Well, I think between Dick Syron and Kate Moss, he did more to earn his $7.5 million.
But I'm some here would argue that the economy would be better today had Kate been running Freddie and Dick just did gram lines and strutted around in knickers.
common guys, give Tanta a break. At least she is TRYING to be objective.
I think it's important that you make it nonetheless. Do you work for anyone currently who does have such a position? Or for anyone whose book needs talking? I ask this as your biggest fan, but also, as an occasional Times writer, someone whom you lose when you score easy points on the paper.
Beat reporting --which I've never done --is a seriously tricky art. You scrutinize and write about the very same people you depend upon for access. The railers against the "msm" would burn their sources in a day, then never get close to the action at all. The very worst people in the world --the very worst people in the world --who have the highest concentration of power --the highest concentration of power --would love nothing more than for the Times to vaporize, in accordance with Brad Delong's (NOt Tanta's, I understand) deepest wish. If that's true, then God. Bless. The New. York. Times.
It is human tendency to draw connections between things that are unrelated:
Crazy Sprinkler Lady
Why must Syron be evil for all the FRE problems to make sense? If anything, he's guilty of hubris; but nobody has ever had success by talking about what they don't know.
wawawa - no, that was Al Lord.
BG writes:
"B) If the fear is of bubbles, you're barking up the wrong tree. Markets are prone to bubbles and this one would likely have inflated with or without FRE and FNM around."
makes sense,
now let's limit naked shorts of everything and extend us a rally till december and 6+ unemployment sinks in the people minds.
"passed through a larger number of smaller unambiguously private institutions,"
They wouldn't stay "smaller" for long - the wonders of capitalism would ensure the weaker players are bought up or driven out by the stronger. In a short period of time you have a "small number of large" institutions. Then they become "too big to fail."
k harris,
Sorry, I did identify the posts in question as the only two recent posts regarding CRE, but here are links to help you find them.
Calculated Risk: Moody's: Delinquencies Rise Slightly for CRE Loans
Calculated Risk: FT: Fears Growing Concerning CMBS Defaults
CR also utilizes a great feature letting you search on subjects, as such: Calculated Risk: CRE
Just on the face, both CRE posts due far worse than the NYT's article by including snippets from the original article that do not represent the overall conclusion of the article, and the second CRE article mixes conclusions about 10-year Fixed-Rate CMBS loans, with 3-year floating-rate C&D loans.
It's just a typical case of a very intelligent person, well-versed in one area, exuding overconfidence and blundering in another area related on the periphery.
BG -
A) If the fear is systemic risk and the possible tax liabilities if the Federal government needs to nullify it, then having larger, oligopolistic quasi-public institutions is the problem. Had the same bubble been inflated in RE but passed through a larger number of smaller unambiguously private institutions, the Feds would be capable of letting more of them go to the wall without fearing what happens to everyone else. As it stands, even semi-large private institutions like BSC get backed. The only way to prevent "too big to fail" is to not favor some participants over others and thereby juice their growth.
Horseshit - Bear Stearns anyone?
The only differences between these "Private" "free market" "competitors" and the quasi-private FNM, FRE and GNM, SLM are:
GS - another "private" institution - nearly has control of our Treasury.
If we really actually allowed some of these big private institutions to fail, your argument might hold some water. If we had anything vaguely approaching an FTC or Anti-trust dept. at Justice, to prevent being held hostage to olipolies, you might have a point.
Because we do not, and have not ever, really prevented oligopolists to paint us into a corner, then why the hell shouldn't we give ourselves shadow competitors - gov't owned oligopolies.
So I guess you don't remember praising Baby-Face Alphonso either, my dear Tanta? (before he got himself in a little bit of trouble)
P.S. And BTW working for FHA is not exactly the same thing as working for a private mortgage investor.
P.P.S. And yes, I know I am a racist, a crazy brain-washed Russian, etc, etc.
Tanta. Sidekick of the Masked Man. Female, therefore la Tanta, not El Tonto.
Question: Why did Tonto, allegedly a Native American call the Masked Man, the Lone Ranger, Quemo Sabe? Was Tonto also in disquise. Was he really an undocumented worker. What was his agenda? And the silver bullets? Was the Lone Ranger really Bunker Hunt trying to pump and dump lead futures?
I smell a coverup.
tranches of lunacy,
Now you're talking about antitrust policy. Also, please note that even today we get waves of new bank formation every few years, which implies that there's money to be made where the big boyz fear to tread. If FRE and FNM managed to capture the vast majority of the business despite apparently taking on too much risk (at least recently), doesn't that imply that the quasi-guarantee was the prop allowing them to do so? Could any fully private company have gotten as leveraged as the GSEs?
DrChaos,
now let's limit naked shorts of everything and extend us a rally till december and 6+ unemployment sinks in the people minds
Cripes, I hope not. I've got a bunch of SKF Sept calls. :^)
Broker -
praising Baby-Face Alphonso & Tanta telling us what a great economist F.D.(derivative) Raines is
I remember that post now! That was the the same one where Tanta also recounted her abduction by those aliens. I think it got purged from the Interwebz by the CIA, though. bummer.
BG I posted data from the FDIC a few weeks ago... I'll have to dig up again. But the trend is unambiguous over the last 15 years. Fewer banks. Instead, we have larger banks with more branches.
"Cripes, I hope not. I've got a bunch of SKF Sept calls. :^)
BG"
Tell me about it, 5% of my portfolio is in WaMu (WM) & CMA shorts.
)
I know, I know the other 90% is in treasuries and foreign bonds, so much for preaching Diversification. (the latest is still your best bet, given good market conditions
Also posted at Big Picture, who liked the NYTimes article:
It is easy to blame Syron now, in hindsight, and to portray him as an aggressive risk-taker.
How soon we forget! Fannie and Freddie had a Congressional mandate to operate in these areas. It was government policy, acting through a quasi-government-guaranteed-yet-nominally-private entity, which set the goals and defined the mission.
Don't want to make large loans to debt-burdened marginal consumers? Tough. That was the gig, back then, and Congress made sure of it.
I don't know whether Syron is a sinner or a saint, or neither, but it makes no sense at all to analyze FRE without noting that Congress was always driving that bus. If it went into the ditch, call your Reps. Oh, wait, you can't ... they just left for a 5 week vacation on your dime.
And with that, I move on.
Scott,
Apart from the fact that I did, in fact, mention Bear in my post (hint: BSC), I don't think you get what happened to it. It was not "too big to fail". It did fail. The vast majority of equity holders got killed. It is not precisely a shining beacon for those hoping to take risks and have the government bail them out. Dimon will probably make out like a bandit, but that, in effect, is a function of his running a shop that was at least marginally more conservative than Bear (not that that's saying much.)
Do you work for anyone currently who does have such a position? Or for anyone whose book needs talking? I ask this as your biggest fan, but also, as an occasional Times writer, someone whom you lose when you score easy points on the paper.
Great questions. That's kind of why I wanted to know if any of the "dozens" of anonymous sources this article is based on have a book that needs talking.
But even more than that, I wanted to know whether any of these people just plain old have an axe to grind.
The answers to your question, in my case, are "no" and "no."
Credibility is a whole lot more than a question of the content of one's investment portfolio. I stake mine on the factual accuracy of what I write when I am writing about factual matters. When I am expressing opinions, I express the opinion I actually have even if it bugs some of my readers. I am well aware when I write these things that I will be accused of being a shill for Freddie Mac. So?
What I try not to do is indulge myself in the belief that since many powerful and nasty and grotesquely rich people wish I would shut up, that fact in itself makes me right or virtuous. Frankly, I think so much of the cluelessness of the press derives from this romantic view they have of themselves as attacked by all sides. And I think occasionally someone needs to throw a good bucket of cold water on that kind of posturing.
Some days that someone is me.
I couldn't agree more.
This kind of thing is entirely typical of the 'Blame Game' that we are so good at. First the herd goes charging off in some direction, heaping abuse, and scorn on the few that question the direction, then when the disaster happens, you pick out a few sacrificial victims and heap as much blame as you can on them.
That way most of the lawbreakers get off scott free. Those anonymous sources are circling the wagon, covering their asses.
Enron is a classic example. All of a sudden when it was all over, the only people who did anything wrong were fastow, and ken Lay, and even then we 'needed' to amend the law because it wasn't clear they had 'really' broken any laws. So all the people who created the con of "free energy markets" both in the california government and in the politcal/economic sphere weren't involved, all the traders working at desk who knew they were ripping people off, they weren't responsible, indeed the whole society which had been, and continues to buy this economic lie of 'free markets' aren't responsible. It's always 'them' someone else, never, our fault, never what we've done. Of course, since most people are quite content to go along with the herd, there is a certain truth to it. "I didn't do it, the herd did", sure bud, yeah, right, the 'herd'. You are just a passive victim, you didn't go running along with the herd, heaping abuse on those who wouldnt, watching while the criminality occured, participating in your own little, not much of a pay off way, sure bud, right.
ON the other hand the idea that because someone was sane in 1982 implies that they are still sane now, I'm afraid the evidence is quite clearly against that proposition. There are lots of spectacular examples, but Fred Barnes, and Bob Woodward spring to mind...
"tranches of lunacy"
I don't think it is the Bank Size that is harmful. What really came out to be a poison pill is deregulation in the late 90's.
So I guess you don't remember praising Baby-Face Alphonso either, my dear Tanta?
No, I don't remember that. Link, please.
Tanta:
I was mildly surprised that you did not mention the lobbying power that F&F invested in. I am no fan of Sen DeMint. But he attempts to modify the F&F guarantee so that they could use Federal funds to lobby congress were totally swept away.
So straight out do you Tanta not believe that F&F used their lobbying power to manipulate the perception of public guarantee to enrich their shareholders??
And as a bonus round was there in the F&F enabling legislation any implication of such federal guarantee? Or was it a result of F&F PR again designed to enrich their shareholders??
And am I paranoid in assuming that the PR-spun fantasy was used in a collusion between F&F on the one hand and the Treasury on the other to use this now "Reality" without real foundation to sell F&F debt to China etal? Again to the benefit of FF shareholders (In an individual we would now be calling this fantasy cum reality a psychotic delusion)
And when it became time that the delusion was confronted with reality,the power of this F&F lobby/Paulson blitzkrieg was such that it rushed through Congress with only DeMint putting up any resistance to ensure the delusion became the reality
got to get back to work,
nice day to yo all!
The NYT will be around long after this blog has faded away - mark my words.
I really don't understand the point of Tanta's posts on stuff like this - FRE took massive risks that were clear to anyone in 2002 or so. Same as CFC and the others.
I think this blog got its following because people used the information to make informed investment decisions and to understand what was happening in the economy. That information was VERY helpful. But posts about how crappy the NYT may or may not be do nothing to really help people.
Tanta can't possibly be saying FRE did nothing wrong or that it is the company people thought it was just years ago. I mean I just don't get the point of all this noise.
SR
"What really came out to be a poison pill is deregulation in the late 90's."
I've dabbled in journalism in the past...
LOL. I've dabbled in plumbing in the past ... whenever the faucet leaked.
The only differences between these "Private" "free market" "competitors" and the quasi-private FNM, FRE and GNM, SLM are:
That legislative risk restraint was pretty effective, by the way--have you ever compared the performance of a Bear Stearns pool with the performance of a pool of GSE loans?
It's Murder on the Orient Express, and you are pissed off because some of the murders are saying "He did it?" ok....lock up the train car and burn it to the ground then. Happy now?
So straight out do you Tanta not believe that F&F used their lobbying power to manipulate the perception of public guarantee to enrich their shareholders??
No. I don't. I think they used their lobbyists to try to avoid getting more regulation from Congress. Just like most companies do.
I think they spent most of their PR efforts trying to convince people that they'd never need their "implicit guarantee."
And as a bonus round was there in the F&F enabling legislation any implication of such federal guarantee? Or was it a result of F&F PR again designed to enrich their shareholders??
Are you asking me about a factual matter?
Of course there are "implications of federal guarantee" in the enabling charters of the GSEs!
- FRE took massive risks that were clear to anyone in 2002 or so. Same as CFC and the others.
That there seem to be folks around who think Freddie's loans are somehow comparable to Countrywide's is reason enough for the original post, if you ask me.
Dear Tanta,
You seem very angry today. As someone who wrestles with anger issues, I understand. And as someone who appreciates and admires your work, I feel like I owe you. I think we should get together for a smoke. I have very high quality marijuana and a generous heart. I also have a wide selection of glass, including some hand blown pipes that are absolutely beautiful - perfect for a classy Ubernerd. Please consider my offer. I am in OC and respect your anonymity. Even if you are not a six-foot tall Asian lady with a nice back tattoo, the offer stands. Be well, friend.
Pax y Amor,
Currently Smoking Cannabis
Why villanize hit men? You degrade a hit man and then stand up as if your supporting a mob boss and then support the casino as not being involved in crime?
The answers to your question, in my case, are "no" and "no."
Your reply is a great case study.
If I were a reporter, I would not believe a word out of your mouth (or from your typing fingers). So naturally, I ask you for folks that can corroborate your story. The key is that none of the folks you name should be the ones that I use to corroborate your story.
Naturally, if I find a couple of dozen folks who have an axe to grind, all unrelated, then I probably have a good story. It's possible that they all have conspired to feed me a crappy story (cf WMD), but that's the best guess I have.
If we waited until everyone went on the record, there would be no fourth estate. And if you think that the only way to run a newspaper is to wait until everyone goes on the record, then by all means start a newspaper with that editorial policy; it will be a great hit, you'll make a ton of money and earn a place in the news pantheon. Honestly though, I think your reporters will go hungry before getting the story out.
This all strikes me as a bit of the "'tis better to fail conventially" defense. It's excuse making, but we're supposed to pity the fellow...lashing the helm leadership should never cost 38 million.
Yikes, what a thread! Everyone's panties in a twist about Tanta's attempt to get people to be a bit more discerning about what they read, coupled with people's obsession on here to knee-jerk their political bent without regard to reason or reality...instead of letting reality and reason drive the political bent.
I can tell you that I get many data points, memos, emails, reports, graphs, spreadsheets, and pretty powerpoint presentations all the time. Most of it gets grazed and filed. And kids, there is risk inherent in all corporate decisions. I get paid to take the risk and run with it, even when I'm wrong, which is more often than I'd like to be. This article is just a faux-reporting piece to sensationalize a bunch of out-of-context quotes and pissy ex oor current employees. And aimed to do what it did: rile all of you up.
Like it or not, the GSE's are, right now, keeping ANY mortgage market going. You're stuck with them and any capital infusions they might need from the government. So get used to it and stop whining. Instead, ask what can replace them, what should replace them, and how should we move forward. Really anything else is just wasted electrons on here and wasted brain functionality.
Now, which way is it? Were Freddie's operations clipped in response to accounting irregularities about the time of this memo, or was Syron expanding the operation or maintaining status quo at the very same time as some of you will have it?
I'm sure I don't understand how both can be accurate.
FLASH: Now We Know - There WAS A Threat - The Market Ticker
Remember when I said that I believed that Asian Central Banks had threatened Paulson regarding Freddie and Fannie?
.
Dr. Chaos, I think deregulation and consolidation were symbiotic factors... the former allowed some of the latter. And the larger instituitions then had more clout to push for futher deregulation. Rinse, repeat.
IMO, one of Denninger's best is his open letter to the president.
I wonder how that reading went.
You say that as if it's a good thing....
Ah, so you are a bend-over and quit your whining type....
I would guess you think the boston tea party was a bad idea too...
BG writes...
Apart from the fact that I did, in fact, mention Bear in my post (hint: BSC)
You are quite right, and I saw this after I'd already flown off the handle and posted...duly noted though.
I don't think you get what happened to it. It was not "too big to fail". It did fail. The vast majority of equity holders got killed.
Eh, not so much...yes, they got killed, as have most equity holders in FRE, FNM for quite some time. That's been a long slow bleed, and a bit less dramatic, but it's also far from clear that they will make out like bandits.
It is not precisely a shining beacon for those hoping to take risks and have the government bail them out.
No, it's not, but neither is FNM or FRE.
Dimon will probably make out like a bandit, but that, in effect, is a function of his running a shop that was at least marginally more conservative than Bear (not that that's saying much.)
Eh, he will make out like a bandit, because we, the taxpayers, will underwrite $29B. of the costs - Dimon and the "Private Sector" will only have to handle $1B of it. Dimon and the "private sector" wouldn't be stepping in to ensure that BSC's critical market maker function was still there unless they had those guarantees. The GSEs are critical market makers in MBSes. I disagree there's much difference, unless, of course, you worked for BSC.
Truly allowing the chips to fall where they may, a requirement for a true free market - consequences which would have significant impact on market participant behavior - would, of course, have the boom/bust you mentioned, and would create Tsunami-like waves on the pond that would swamp and drown those of us who were prudent and minded our own business.
My point is this: the government's involvement is inevitable and necessary - at some level. Either the government will distort the market by preventing the oligopolies (and captured regulatory agencies will never do this - see what Raygun did to Anti-trust at Justice) or they will distort it by engaging in 'too big to fail' responses to 'natural disasters'.
I do agree fundamentally with the market structure you propose - lots of smaller institutions with much greater diversity (investment profiles, etc.) where true failure is permitted - that would be a capitalist ideal. There is no way any such thing will ever arise, at least not as long as we have LLCs.
Once you step away from the Randian koolade and admit the reality of inevitable gov't involvement, then the GSEs start to look like a reasonable compromise. The truth is, as bad as they are, if their somewhat limited guidelines - verifying income for example - had been in place industry wide, we'd never have inflated the bubble to the catostrophic degree the "private" institutions did. They still allow the private sector to get a taste of the action and they provide a huge market buffer.
I truly dig Schaedenfreude as much as the next moralizing vulture, but would we really be better off right now with the collapse of the private sector mortgage securitization system and no FRE/FNM?
We probably agree more than we disagree though.
If we waited until everyone went on the record, there would be no fourth estate
OK, now that's a straw man.
You are surely not saying that there are no limits to granting anonymity to sources?
Why would anyone grant anonymity to a source who is an "analyst"? Why would anyone grant anonymity to a source who is a "shareholder"?
And what kind of inside info do these people have, anyway?
All one of the named sources, Tavakoli, said was she thinks FRE needs new management. That's an opinion. To which she is entitled. You may or may not find her the sort of expert whose opinion in this matter has weight.
But doesn't that make you wonder what the other couple of dozen said? Either they had good hard dirt--which doesn't appear in the article, as far as I can see--or they had a bunch of opinions. I'm not even sure why these count as "sources" rather than just quote-bots.
ipodius writes: Instead, ask what can replace them, what should replace them, and how should we move forward.
FHLBs. FHLBs. Expand and adapt FHLB MPF programs.
I dabbled in harlotry in the past.
You guys want to throw good money (other people's productive savings) after bad, just save....what????....the overpriced-home mortgage lending business?
Why not give your kid's college savings to the local drug addict?
It's just as productive.
Tanta, what's your brief for this guy? He is an arrogant jackass that has run the company into the ground. I do not care how nice his past resume reads. I can say that he is extremely unpopular within the company, not just for financial results but his attitude from the beginning of his tenure. By the way he made $15MM+ last year in total comp so your numbers regarding that are wrong.
"I read that as Syron saying that he doesn't actually need a job, and he doesn't actually need this one, which even back in 2003 looked like the kind of swamp-draining that would probably not make anybody a hero whatever you did. But he took the job and he aligns his own reputation with doing what he thinks is the right thing for Freddie." -Tanta
Oh he's such a humanitarian...
please
KnotRP writes:
Why not give your kid's college savings to the local drug addict?
This is a great idea.
The GSE's were far from the worst actors in this whole tragic farce. Durring the worst of it, their market share plunged. Now part of that was for less than reasons of perfect foresight (i.e. their previous accounting problems). However, I'm not sure it would have been responsible for any company to let their market share drop to zero, particularly not one with a spicific public mission. The worst thing that has happened to the GSE's is that they have become sort of a dumping ground this year. The decision by Congress to lift the conforming limit was very ill considered in my judgement, but even there it looks like the GSE's have been somewhat reluctant to eexercize this new found authority. However, if you own or insure half of all the mortgages in the country and the country has a huge downturn directly tied to residential mortgages, well you are simply to big to hide. Are they over leveraged? You bet. That often happens when assets decline and liabilities stay the same, equity shrinks by more than assets and leverage explodes to the upside. Should they be prohibited from buying back stock and paying dividends right now, you bet. But the same is true for virtually every bank right now. Would I invest in any of them, not now, still far too much dilution to come. However, I am not about to join the mob with torches and pitchforks at their offices. To many other mobs I would be a part of first.
CSC - smoking is bad for you.
You need a new hobby.
Currently Baking Cannabis, maybe?
Can I haz a public mission to waste other people's hard earned money, plez?
Very good, Tanta.
One point: My disagreement is solely about use of anonymous sources. (I obviously agree with your point about a skeptical eye.)
JP: If we waited until everyone went on the record, there would be no fourth estate.
Tanta: [that's a straw man & ] You are surely not saying that there are no limits to granting anonymity to sources?
I am saying you have to get the story right, and you have to do it in a timely fashion. Since most folks with access to info need to pay bills, that can mean using anonymous sources. And if you get the story right, then I don't care whether the sources sign their names or not. Does that increase the error rate? You bet. Does it bring out stories faster? You bet.
Why would anyone grant anonymity to a source who is an "analyst"? Why would anyone grant anonymity to a source who is a "shareholder"?
If they have info that would endanger their jobs and future employability (because CEOs like to report only happy info and don't like it when disagreement spills into the media), then anonymity makes sense.
And what kind of inside info do these people have, anyway?
According to the article, FRE insiders believe that there needs to be a shake out. That's not a message that a CEO or the board wants from anyone other than themselves. (OT: I think the board deserves a rant all its own.)
And sometimes folks with major conflicts of interest are very useful to reporters. In the case of Deep Throat, Felt had a big conflict of interest: Some of the people he was eliminating were above him and in the way of his career path. But it was the corroboration that made that story publishable.
Ah, so you are a bend-over and quit your whining type....I would guess you think the boston tea party was a bad idea too...
No. We in Boston love a good tea party. Remember, we started it all. But there is no evil crown here, just an elected government that (i might remind you) the majority put in.
But I am the sort that, if you came into my office to whine about a problem with no thoughtful analysis about the why and where we go from here, would show you the door. Any assh0le can whine, but it take talent to solve. And here we are with a problem and possible forward solutions. But for right now, the reality is without the GSE's the market would be totally frozen. And the effects of that would be widespread and uglier than some (not even certain monetary) government action.
Tanta, what's your brief for this guy? He is an arrogant jackass that has run the company into the ground.
My "brief for this guy" is that I disagree with you.
<
blockquote>"In a statement, Freddie Mac said executives were unable to verify that Mr. Andrukoniss memorandum existed. . . ."
So, we have an alleged warning made by someone who, as former Chief Risk Officer of a company that assumed too much risk, has compelling personal and professional reasons to try to absolve himself of responsibility.
btw, lest you think that I am an apologist for the GSEs think again. Personally I think that as soon as the crisis is abated, and private markets start to appear for mortgage securitization, they should be wound down and/or broken into pieces with NO implicit guarantee. Let the market sort it out. There are plenty of government programs without needed these two any more. But that's just my opinion. I realize that now isn't the time to talk about this, but is only the time to plan for what happens after the crisis passes.
ipodius - a republic is supposed to protect the minority from the majority. Not ask it to bend over for the majority.
And if mo' other people's money is your idea of talented problem solving, you are apparently ready for the executive suite.
Tanta - you seem to be basically vouching for this dude?...are you just trying to say he was promoted to captain after the iceberg was hit, or what?
I think you're now working a heads I win, heads I win argument. If reporters are cynical, they can be derided as awful, self-interested careerists. If they're "romanic," then they have an arrogant and deluded self-image.
I know a lot of journalists, and I think most of them are realists, as well as decent people; I would describe none of them as romantics. They work hard to find out things that are true; the ones I know, at least. Do I believe in covering for Judith Miller because she's on the team? God, no; a wretched woman, an awful journalist.
As to self-image issues --are blogs really going to fully police, much less replace, the "msm"? This to me is worse than romantic; it is juvenile fantasy. If you thought it was irritating (or oppressive) to have as conscientious an institution as the Times as the paper of record, avail yourself of a little history, and see whose place it took; and now imagine who will take its place. God help us.
There are buckets of cold water, and there are babies and bath water. Best to know the difference, before too many babies go down the drain.
It might be very useful to have an operation
that provides "identity escrow" or filtering.
The board would be public and would
be a source of credibility.
Maybe a free service, and subject
to sealed legal discovery.
Not unlike one of those crime tip lines that conceal identity,
but there would be some reliance on the source itself.
This would allow more revelation of wrongdoing.
Journalists have long served this function,
but not that well.
.
haloscan is eating comments again?
ipodius - a republic is supposed to protect the minority from the majority. It's most definately not whatever the "majority put in"....
Aw, c'mon, JP, the anonymous sources in the article about Syron are not in the same league as Deep Throat.
A good reporter doesn't grant a source anonymity just so the source can call someone a poopyhead.
Tech Ticker piece on the article
http://finance.yahoo.com/tech-ticker/article/44657/Freddie-Mac-Chief-Don't-Blame-Me?tickers=fre,fnm,mer,XLF,%5EDJI,%5EGSPC
mp writes:
"But I didn't realize there were so many other socialists on this thread."
It wouldn't surprise me if half of these guys were closet dotcommunists.
mp | 08.05.08 - 11:10 am | #
actually, closer to anarchism
but, to get to the main point, this is nothing new for the NYT, Jeff Gerth smeared Wen Ho Lee with a sensationalistic story, one in which his source was probably Bill Richardson, back in 1996 or 1997, resulting in Lee being incarcerated in solitary confinement for over a year, I think, and unable to communicate with his wife except in the presence of an FBI agent
Gerth still gets angry when you point out that he got played on that one, even though he never spent a day in jail (and, yes, Gerth wrote the Whitewater stories, too, the ones that pretty much only lead to Webster Hubbell getting fired because he illegally used client funds to buy lingerie for his girlfriend at a Dallas Victoria's Secret outlet)
then, Judith Miller, Michael Gordon and the WMDs in Iraq . . do we really to over that one again? and, then, Judith Miller and the Valerie Plame story, which, if I recall correctly, involved her protecting an anonymous source that, under the NYT own policies, would have been an inappropriate granting of anonymity
and, it's not just the NYT, as ABC News reported in October 2001 that FBI had discovered a link between the anthrax letters and Saddam Hussein, based upon anonymous sources, of course, and, now, ABC is refusing to reveal those sources, or even acknowledge their mistake, even though people who anonymous and deliberately supply false information aren't entitled to anonymity
so, the real question is, why now and why the NYT? this isn't about journalism, it's about power politics, cui bono? is it about destroying Fannie Mae and Freddie Mac? about pushing out Syron? who has the juice to get the NYT to pick up this story and run with it? and to what end?
The New York Times is a propaganda machine that slants its portrayal of the world by omitting info or by burying it in the middle of the paper.
They put the message they want you to believe up front - you have to read the inside pages and other sources to get a better picture of the truth.
The mission of the NYT is not to deliver information to readers, but to deliver readers to advertisers. You deliver fewer readers by constantly challenging their entitlement to blamelessness and ignorance of most of the world's problems. Plus the readers who crave that kind of challenge aren't as likely to run off to the Macy's 1-Day Sale after viewing the full-page ad anyhow.
Add to that the fact that most journalists chose their career at least partially because they aren't very good at math, and you have a near perfect feedback loop of pandering and ignorance among the NYT, its "journalists," and its readers.
But damn, what a great crossword puzzle they put out.
And if mo' other people's money is your idea of talented problem solving, you are apparently ready for the executive suite.
Knot, please point out where I advocated that in my posts. I pointed out reality. Change the things you can, and not the things you can't, you know? And here wisdom says some money is likely to flow in and there's not a damn thing to be done about it now.
Pointing out, ipodius> You're stuck with them and any capital infusions they might need from the government. So get used to it and stop whining
What do you think capital infusions are?
Or am I mud wrestling with a pig?
Tanta:Could you please detail your belief that F&F had "implicit federal guarantee" beyond the now really nominal amount of 5 billion actually mentioned in law. Hard to explain how that became guarantee of 800bil. Thats an extension of 160 times.
Time to Reform Fannie Mae and Freddie Mac
has a nice review of F&F PR tactics.
FF seems like High Slime to me
Why did Tanta leave this out in cherry picking?
The top people should be booted out, and replaced by executives who have the confidence of the markets, said Janet Tavakoli, a finance industry consultant and observer of both firms. Large Freddie Mac shareholders, speaking on the condition of anonymity, echoed those sentiments.
Nytimes.com down for anyone else?
Many of these well connected bozos are out of touch with reality.
what's new? Been paid big money to hear how great they are now they screw up and won't take the blame.
Anyone with half a pea brain could see that this economy housing market and credit market were absolutely insane and out of whack with fundamentals!
I do not buy the excuses. Fire the bum all the financial executive bums and TAKE BACK THE UNDESERVED COMPENSATION
The danger is that China - and the rest of the global economy - will slow down too quickly ...
My interest in Japanese history and WWII has led me recently to reading some Chinese history from the war and pre-war years. Combining that with knowledge of the subsequent Chinese history as current events in my own lifetime, and of the disintegration of the Soviet Union and East European communist regimes, leads me to believe that it won't be long before the stresses now being felt in China lead it, too, to disintegrate -- and perhaps to fall again into the same kind of chaos that reigned there in the 20th Century. (It won't make me happy.)
There are many good reasons to believe that the level of corruption in the Chinese system dwarfs that in ours. However much we are suffering from the financial frauds of the dot-com and housing bubble years, the Chinese will be suffering far more, and relative to their GDP, the sums ripped off by their fraudsters and crony capitalists must be many times those ripped off by ours.
If China falls into chaos and is unable to keep sending us nice stuff at subsidized exchange rates and then lending the money back to us, US interest rates and CPI will skyrocket, and the US will have no alternative but to raise taxes and/or cut spending enough to balance the budget. And we will have to start making ourselves a lot of the stuff we've been importing so cheaply; this may not be nearly as much fun as some people think (see dryfly's comment above).
"unlikely, but potentially catastrophic possibility of home price declines"
...funny how those of us in the technology industry, (engineers/analysts/programmers), with no background or ties to the financials, other then one day wanting to own a home and basic reasoning and analysis skills, though that home price declines were "inevitable and fast approaching".
Apologies for not wading through all the comments before posting this, but I have to side with Tanta on this one. Taxpayer money would never be at future risk if the GSEs had been properly capitalized in the first place. The GSEs did not even get a (competent) regulator until OFHEO (previously HUD). OFHEO did a bangup job considering how little money Congress gave them, but the GSEs played by the rules that were in effect at the time. So now we need to properly capitalize them because we know now that as serial bubble blowers we will have more occasions in the future when real estate will go down for extended periods. No free lunch there.
The mixed mission makes the GSEs the most difficult management challenge in the western world IMO. They run the largest derivative books in the world to hedge the interest rate risk of their both their held-for-investment and guaranteed mortgages.
The GSEs ran afoul of a confusing accounting change one year (lo and behold, there were no investigations by the Bush administration to determine if the money center banks were complying with the same rules) and their political enemies pounced. The banks were determined to widen spreads on mortgages (to increase their profits by increasing your and my borrowing costs) by dismembering the GSEs and fluffed up the accounting problems as a scandal.
Syron came in on the tail end of this. The GSEs are the good guys in all of this, no matter how much the banks try to influence the media. If the choice is to believe Tanta or to believe the banks, I will take Tanta every time.
Mr. Lindsey has a very large head.
tanta, you continue to defend (worship) the GSEs. They are a quicksand pit where taxpayer treasure will go in and executive bonuses come out. Busting them into little fragments and selling off the scraps should be the first priority of the newly appointed regulator (executor).
And will that make the problems go away? Will the implicit guarantee go to the new owners? Will there simply be several companies with lobbyists pressuring Congress for favors? Will there be any new standards for lenders or just another blowup a few years from now that the taxpayers have to clean up?
I love Tanta normally but this post is way over the limit. I think her hatred of the NYT have gotten the better of her -- I'm no fan of the Grey Lady but Freddie & Syron deserve all the opprobrium they get and more.
Also, isn't it ironic (as others have commented) for Tanta (writing under a pseudonym, and with no dearth of opinions) to get so worked up about (ahem) anonymous sources? C'mon now...
Ironic:
Your argument seems to have more to do with your opinion on the subject of the story rather than the means by which it was covered.
Tanta does not claim to be "The Blogger of Record" and her opinions are not quoted across the country as established truth. She also openly admits that she has opinions that color her content. The NYT purports to be an objective news source.
Since the NYT had "on the record" sources for this article, why not stick with them rather than padding the article's purported credibility with anonymous sources ?
Note how often NYT's attributed sources agree with the writer's obvious "theme" in any piece, and how they consistently use "man on the street" or anonymous source filler to build the impression of consensus around a story that, on the record, simply reflects one or two opinions.
These reporters could simply be contacting those whom they know to have a slant first (such as those who "suggested" the story to them) for attribution then making up the other "anonymous" sources. It's not like it hasn't happened before, and the NYT uses the anonymous source crutch more than most. Let the reader beware.
Given the NYT's shrinking financial fortunes, more and more people seem to prefer receiving their news with a an acknowledged bias rather than poorly feigned "objectivity." At the very least, it's less of an insult ot the reader's intelligence.