While Rome Burns
Just when we thought we’d nearly exhausted our cauldron of simmering banking outrages, along comes Fannie Mae and Freddie Mac to pour gasoline on the fire.
The two government-backed mortgage giants with the cutesy acronyms have had a starring role in every act of the endless tragedy that is the global financial crisis. For brevity’s sake, we’ll refer to them here as the Effing Twins.
In the overture to the epic collapse of the housing market in 2007-2008, the Effing Twins inflated the galactic sub-prime mortgage bubble by fecklessly delivering the dream of homeownership to thousands of deadbeats and house-flipping speculators. Can’t put any money down? No problem! Can’t make a monthly payment for two years? Step right up!
When the dream of universal homeownership turned into the nightmare of the Great Recession, the Effing Twins stepped right up to the government’s cash window and received a $150-billion transfusion of emergency bailout bucks.
For a few brief months at the beginning of 2009, hopes were raised that a package of financial industry reforms then moving through Congress would mandate the dismantling of the Effing Twins. After all, who would want to repeat the catastrophe of the fiscal collapse?
You already know the answer, but we’ll say it anyway: three years after the bottom dropped out, the Effing Twins not only are still in the mortgage business — they are the mortgage business. With the major banks too busy processing foreclosures and toting up the profits from a bonanza of free money from the Fed, the Effing Twins are “the only games in mortgage town.” So says a report in Sunday’s Business section of The New York Times.
The fact that the Effing Twins still roam the housing landscape like George Romero’s zombies is difficult to swallow. Unfortunately, the primary focus of the Times‘ Sunday story is guaranteed to induce vomiting:
Last week, 3,000 luminaries convened at the Hyatt Regency in Chicago for the 98th annual convention of the Mortgage Bankers Association. The price of a ducat to this black-tie affair went for $1,000.
Among the glitterati in attendance was Chicago Mayor Rahm Emanuel, former White House chief of staff and a former-former (as in “please don’t tell anyone”) director of Freddie Mac, who was serenaded by the living members of the ’70s rock band Chicago. In what may have been a subconscious nod to the bipartisan nature of the sub-prime mortgage calamity, guest speakers included Jeb Bush and President Obama’s chief political guru, David Axelrod.
Get your barf bags ready: Freddie Mac paid $80,000 to be listed as a “platinum” sponsor of the shindig. Fannie, apparently the more demure of the Twins, laid out $60,000 to be a “gold” sponsor.
If you haven’t guessed by now where the money came from for this largesse, check the lint in your pants pockets. It gets worse (cover your shoes with a towel):
The Effing Twins also bought 87 tickets to the convention. In addition to their CEOs, who were conference headliners, Freddie sent 15 vice presidents and 14 directors from various units to the soiree in the Windy City; the Fannie contingent included 12 vice presidents, 12 unit directors and three people listed as “event managers.”
Presumably, the event managers made sure ample champagne and caviar was on hand to sate the Effing Twins’ seat-mates on the dais, which included top execs from Lender Processing Services of Florida and the Mortgage Electronic Registration System (MERS). According to the Times report, the former notoriously made mortgage “robo-signing” a household word, while the latter made a hash of the nation’s real estate records.
Rep. Randy Neugebauer of Texas, head of the oversight and investigative subcommittee of the House Financial Services Committee, said he was “disturbed” by the “business as usual” chutzpah displayed by Fannie and Freddie at the Chicago gathering.
“They don’t act like companies that have had a huge infusion of taxpayer money,” Neugebauer told the Times. “Why do they feel the need to go out and spend the money for networking when they have all of the mortgage market in its entirety?”
Why, indeed? While Rep. Neugebauer and his colleagues in Congress ponder this existential question, we’d like to offer a helpful suggestion that perhaps can transform this Effing debacle into what is now popularly referred to as “a teachable moment.”
Since Fannie and Freddie are bigger than ever, we think they need a new joint headquarters. Befitting a cash-strapped nation filled with empty houses, the most appropriate new home for the mortgage giants should be a vacant government facility — preferably a place that used to be bustling with residents but has in recent years been abandoned.
We’ve got the perfect place in mind.
As an added bonus, we want to step right up and invite the Mortgage Bankers Association to hold its 99th annual convention there next year, with Fannie and Freddie as Titanium sponsors and co-hosts.
Our new home for the Effing Twins is a well-known “gated community” in California with a spectacular view of the Pacific.
In fact, we’ll toss in free tickets for the MBA membership, every Effing executive at Fannie and Freddie and all of their friends on Wall Street. These tickets will be good for the next 99 years. We’ll even fly out there and hold the door open for them at next year’s convention, gratefully telling every Effing one of them: “Welcome to your new home.”
Welcome to Alcatraz.