Elvis writes:
Last?
Elvis | 08.07.08 - 9:53 am | #

Paul writes:
It certainly does put things in a different light. Was anyone honest in the mortgage industry? No.
Paul | 08.07.08 - 9:59 am | #

Superduperdave writes:
Tanta: So he said this and the other guy said that...

But what about his going along with "The Mission" when anyone with any sense (or who at least had been listening to you and CR), knew that it was going to end in tears? Is this the Kenneth Lay defense, i.e., the CEO was too dumb to understand what was happening? Or the good German defense, i.e., I was only carrying out Congress's orders? Something else?

At the end of the day, didn't Syron preside over this disaster and collect rather a fat paycheck in the process, fully aware of the likely consequences -- ginormous losses and almost certainly a de facto taxpayer takeover?
Superduperdave | 08.07.08 - 10:03 am | #

Anonymous writes:
bottom line:

This is Syron's mess. CEO=Accountability. Blaming someone no longer employed is just so easy.

"not my fault"...even though he's been there long enough to have made systemic changes-he choose not to.

Rubbish.

Ciao
MS
Anonymous | 08.07.08 - 10:04 am | #

barkingtribe writes:
If Gross is right and equity is vapor, thank you mr and ms john q public, one can only imagine what really goes on behind closed doors in the hallowed halls of GSE's.
barkingtribe | 08.07.08 - 10:04 am | #

Phil writes:
the whiners are just jealous they didn't get multi-million dollar bonuses.

scapegoat all you want, we got the money!

Phil Gramm, Republican for hire.
Phil | 08.07.08 - 10:04 am | #

mp writes:
I guess this is what happens when there's too much money and no controls.

Last night I read that Indiana revoked 40% of their mortgage broker licenses and Florida has/had 4,000 felons with licenses.

Jesus. It just goes on and on.

Agent Conjure Bag, by the way, offers a solution to this problem and will be available on the 18th.
mp | 08.07.08 - 10:05 am | #

energyecon writes:
Looks like those bear fangs will be seeing double duty!
energyecon | 08.07.08 - 10:06 am | #

safe_as_apartments writes:
Is Conjure Bag at the Olympics or something?
safe_as_apartments | 08.07.08 - 10:07 am | #

Tanta writes:
Was anyone honest in the mortgage industry?

Well, as long as we can have situations in which ending a dishonest practice just gets you accused of being dishonest, we'll never know, will we?

It's the age-old problem in corporations: the last person to have his hands on a problem gets blamed for it. That kind of thinking just encourages management to never recognize a problem or deal with it, because it's better to kick the can down the road into someone else's watch.

The fact is, I don't think that Syron and I would agree about everything all the time. But I have always believed that he is a man of great integrity, and so while we can disagree about things, that doesn't mean he's corrupt.

What I learned in the last few days from our influx of hysterical anti-GSE commenters is that some people simply cannot accept the possibility of differences of opinion between equally honorable people. They have to believe that if someone made what now appears to them to be "the wrong choice," it must be because that person was corrupt.

None of which is ever going to encourage any CEO to make hard choices.
Tanta | Homepage | 08.07.08 - 10:09 am | #

Broker writes:
I can hardly wait for the 3rd version.
Broker | 08.07.08 - 10:10 am | #

Tanta writes:
But what about his going along with "The Mission" when anyone with any sense (or who at least had been listening to you and CR), knew that it was going to end in tears?

Well, when the mission in question is the law of the land--when your affordable housing goals are set by Congress--what can you do except "go along with them"?

Are you seriously suggesting that Syron should have simply ignored a legal mandate because he thought it might not end well? Are you generally in favor of large corporations deciding which laws they want to follow, or just in Freddie's case?
Tanta | Homepage | 08.07.08 - 10:12 am | #

laocoon writes:
Perhaps the answer to the mission conflict is to turn the profit making arm of Fan & Fred into publicly traded financial institutions and leave the government to a more traditional role of provide direct subsidies and other help to provide affordable housing. That would leave the politics in the political arena.
laocoon | 08.07.08 - 10:14 am | #

CathyG writes:
"In Syron's version of the story, Andrukonis was advocating that Freddie continue this practice in the name of reducing the risk to Freddie Mac."

I don't actually see that in the story. Andrukonis was warning, correctly as it turns out, about the risks to Freddie Mac and to the country of taking on the low-income loans that were being generated at that time. The article doesn't say that his proposed solution was to continue to game the system.

Is there a way to do both? To help lower income households get into affordable housing while mitigating default risk? Habitat seems to have had some success at this. Maybe that's a model we can learn from. Freddie Mac must have once been able to do this successfully - it's been around a long time and hasn't suffered dangerously high defaults until recently.

I just don't buy the proposition that it's impossible to balance risk with the social goals Freddie Mac was chartered to meet.
CathyG | 08.07.08 - 10:15 am | #

mp writes:
"I can hardly wait for the 3rd version."

Agent Conjure Bag is willing to provide you with the complete version on audio or video tape of all the players, interrupted only by agonizing screams and pleas for mercy.

However, the price of truth is high. Are The People willing to pay?
mp | 08.07.08 - 10:16 am | #

FRED writes:
How in the world does the market rally on a pending home sales index put out by NAR? Absurd
FRED | 08.07.08 - 10:17 am | #

Jett Rink writes:
One guy found a way to make it look like they were making creative loans, the other guy made creative loans. Either way, there was/is a lot of fiction to be dealt with now.
Jett Rink | 08.07.08 - 10:19 am | #

Phil writes:
Syron couldn't do anything. We had already stacked the deck.

Gramm-Leach-Bliley Act which repealed the Glass-Steagall Act
Commodity Futures Modernization Act of 2000 which gave us the Enron loop hole

I chaired the U.S. Senate Committee on Banking, Housing, and Urban Affairs.

vote for McCain and keep the party going!!!
Phil | 08.07.08 - 10:21 am | #

jus me writes:
It does not seems odd that Mr A and Mr S stories differ. It does not seem odd that Mr A or Mr S may be right or wrong, or that both are partially right and wrong, or that each remember things a little convienently.

What does seem odd is that Ms T is taking so much interest in exonerating a gentleman who already has connections, a loud bullhorn in the MSM, and a paid PR staff with a response time that would make a presidential campaign proud.

Frankly I had never heard of Mr A or Mr S until Ms T started writing about them a couple days ago. Nothing seems to be at stake except the reputation of Mr S and Mr A. I have no idea why Ms T continues to write about them.
jus me | 08.07.08 - 10:21 am | #

mp writes:
"How in the world does the market rally on a pending home sales index put out by NAR?"

Conjure says, "Market rally or Nuremberg Rally, it's all the same rally."
mp | 08.07.08 - 10:21 am | #

Broker writes:
mp, I have tears in my eyes. Thank God I wasn't drinking coffe.
Broker | 08.07.08 - 10:21 am | #

OriginalFrank writes:
"If Syron's version is anywhere near the truth, we have yet more evidence that no good deed ever does go unpunished."

In my book, going back to accepting originated loans to high-risk borrowers was not a good deed. If he were really interested in good deeds, he would have revised the origination (i.e., Loan Prospector) standards so that only moder risk borrowers qualified.

That he did not, but blindly accepted the higher risk mortgages back into Freddie's portfolio, shows that he was acting as a political hack, not a genuine caretaker of what has turned out to be a public institution.
OriginalFrank | 08.07.08 - 10:21 am | #

Anonymous writes:
So if you disagree you're "hysterical"
but if you agree then you have "integrity".

Have you not seen enough bullshit in this industry to at least allow you to read between the lines??

Apparently not. They all benefited from looking away and KNOWING that they would be backstopped.

There is no "integrity" left in upper management at ANY of the GSE's.

The more you canonize these people the more it makes you one of them.

Plausible denial is not a strategy however you are allowing for it to be.

Ciao
MS
Anonymous | 08.07.08 - 10:22 am | #

Bob_in_MA writes:
If Syron's version is anywhere near the truth, we have yet more evidence that no good deed ever does go unpunished.

No, not at all. Your assumption seems to be that if renting the loans was a sham, then buying them outright was a good deed. That's a perfect example of a fallacy.

I would posit that the good deed would have been to stand up point out that helping people with marginal credit to get over extended buying an over-valued asset is not in the public's interest.

According to his self-serving version Syron was merely an idiot who went along to get along. Could be. But so what?
Bob_in_MA | 08.07.08 - 10:23 am | #

Shnaps writes:
CathyG -

By "this practice", Andrukonis is referring to the "practice" of playing year-end hot-potato with the affordable housing pools - not the "practice" of buying up affordable housing loans in general.


Habitat (for Humanity?, I assume) doesn't take on any default risk. What 'model' of theirs are you referring to?
Shnaps | Homepage | 08.07.08 - 10:23 am | #

Tanta writes:
I just don't buy the proposition that it's impossible to balance risk with the social goals Freddie Mac was chartered to meet.

I don't buy that proposition either. But then I don't think the problems Freddie has today are solely or even mostly a matter of the "goal" loans they bought or didn't buy.

But you don't have to buy into certain claims about affordable housing loans in general in order to see the problem here with these "round-trip" transactions. And I do think this article is claiming that Andrukonis was part of the "round-trip" mentality at Freddie. My guess is it would have been clearer if the Globe reporter had a clearer understanding of the issue.
Tanta | Homepage | 08.07.08 - 10:25 am | #

12th Percentile writes:
If Syron is a man of great integrity, can someone please point to where he warned his stockholders of the impending trouble prior to it being revealed by others.

And, if not, then while he may have integrity, he isn't competent. His resume would indicate he is competent. Which leads me to my conclusion about his integrity or lack thereof.

"None of which is ever going to encourage any CEO to make hard choices."

If you have to be "encouraged" to make the hard choices, I would say you don't get to put your name on the List of Those With Integrity.

I don't recall the uproar over people criticizing Bear Stearns execs. Or any of many other companies that tanked and then the CEO blamed short sellers, bloggers, the weather, etc. Why are those of us who don't trust Styron "anti gse"?

He was running the ship. The ship sank. Blame a missing memo if you want. Say whatever you want. Integrity is not yours to claim.
12th Percentile | 08.07.08 - 10:26 am | #

burnside writes:
I don't know if even David Andrukonis views are properly characterized in these reports. It's clear enough there were differences of opinion. Were accusations made explicitly by anyone other than media?

2004 was a difficult time to act under that particular mandate - and would have challenged anyone, not just Syron.
burnside | 08.07.08 - 10:26 am | #

Tanta writes:
No, not at all. Your assumption seems to be that if renting the loans was a sham, then buying them outright was a good deed.

No.

I am not taking a position on whether Congressionally-mandated affordable housing goals for the GSEs are/were a good idea or not.

I am saying that if the law is there, it is better to follow it--to invest real money in the affordable housing market and absorb the risk--than to pretend to follow it.
Tanta | Homepage | 08.07.08 - 10:29 am | #

Broker writes:
Guys, if you can't believe NAR, whom can you believe? I think that's pure and simple blasphemy.
Broker | 08.07.08 - 10:30 am | #

DonKei writes:
Freddie Mac was/is being used by Congressmen to buy votes, plain and simple, and would get squeezed if it refused to go along.

Neither of these guys, Syron or Andrukonis, were evil. This is not a morality play. Both were doing the best they could in the circumstances in which they found the company and themselves, with its bewildering array of disparate and disputatious competing constituencies.

The evil was in its construct. It was born a government entity, but was shunted off the books to be used to funnel government largesse (i.e.,buy votes), while pretending to be beholden to shareholders, while also pretending to care about regular old carry-trade loan funding.

You can serve only one master. Syron chose Congress. Andrukonis chose shareholders and, somewhat, taxpayers. Syron was his boss, so he got to decide, and Andrukonis got the boot. It was less about personalities than it was about circumstances and perceived priorities. It was most assuredly not about morals.
DonKei | Homepage | 08.07.08 - 10:30 am | #

cd writes:
Ot-
Mr.market is very irrational this morning, more so than normal.. bizarro world is back...
cd | 08.07.08 - 10:31 am | #

mp writes:
"The evil was in its construct."

Conjure says, "It would be so easy to find out, when would you like me to start?"
mp | 08.07.08 - 10:32 am | #

CathyG writes:
Until Andrukonis responds it probably won't be clear what his preferred solution was. If he was actually in favor of the round-trip loan rental game, then he deserves all the approbation he gets.

Habitat seems to succeed in helping low income people get into and stay in homes. Having seen personally the hard work their customers put into building their own and others' homes, I think that has a lot to do with it.

I believe that sacrifice increases commitment. I believe that's part of why Habitat's families generally succeed in keeping their homes and I believe it's a big reason why people who put 20% down on their houses lose them much less frequently than those with little or no down.

Whether you've invested sweat, time, money, or all three, into your home, once you've made that investment you're much more likely to make the additional sacrifices and practice the self-discipline necessary to protect your investment.
CathyG | 08.07.08 - 10:36 am | #

YLSP writes:
I know this is all spinned left and right, but firing your Chief Risk Officer because you disagree with him is a stupid move. But again... it's all based on the Chief Risk Officer's word... so in the big pictures who cares... bring on Conjure!

- Currently eating cherries
YLSP | 08.07.08 - 10:38 am | #

Geoff writes:
Why does Freddie's own web site say Syron started in Dec 2003?

http://www.freddiemac.com/bios/e...exec/ syron.html
Geoff | 08.07.08 - 10:40 am | #

4shzl writes:
our influx of hysterical anti-GSE commenters

Repetitive, defensive, and argumentative -- so why not throw in a few ad hominem characterizations as well?

Maybe Tanta needs a time out.
4shzl | 08.07.08 - 10:41 am | #

lunatic fringe writes:
None of which is ever going to encourage any CEO to make hard choices.

In this case, since it was obviously a no win situation, I think the "hard choice" would have been to resign and fore go those millions in compensation or at least warn that we were in a housing bubble and Freddie was being forced to buy bad loans. Neither of those happened as far as I know.

I think Syron made bad choices. While the newspapers may not be critical of him for the right reasons, I'm not really bent out of shape that they are giving him a hard time.
lunatic fringe | 08.07.08 - 10:41 am | #

Tanta writes:
Maybe Tanta needs a time out.

No, I think the people who immediately accused me of "talking my book" and "being in love with Syron" and "being a compensation consultant" need a time out.

You get no points for saying that someone who defends her position is being "defensive." Not when you're throwing around words like ad hominem.
Tanta | Homepage | 08.07.08 - 10:47 am | #

Gavshire Hathaway writes:
I know some children that believe in Santa Clause. They also have integrity, and they're not stupid (for kids). But they are so damn gullible!! So maybe Syron was gullible, kind of like a kid. And rather than presents he got millions and millions and millions. That would make me want to believe too!

Is this what you're saying Tanta?
Gavshire Hathaway | 08.07.08 - 10:50 am | #

Dirk van Dijk writes:
One thing that FRE could have done if it was being pressured by congress to keep expanding its balance sheet to meet the affordable housing goals is cut back on dividends and share repurchases durring th period. Thius would have substantially cut the leverage at the firm. Yeah it would ahve been a much stoggier firm with a lower ROE, but would have been in a musch stronger position to weather the downturn. The earlier accounting scandals also gave it a perfect cover to do so. I continue to think that a big share of this should be laid at the feet of congress. Especially as things were starrting to turn down, congress looked around and the GSE's looked like convienient lifeboats for the mortgage and housing industry. Of course when a lifeboat is designed to carry 25 people and you try to put 125 on it because the mother ship is sinking, you end up with 125 dead, instead of 25 survivors and 100 dead.
Dirk van Dijk | 08.07.08 - 10:51 am | #

Geoff writes:
Im going with superduperdave and 12th %ile...it's one or the other, idiot, or lying hack. After looking up Syron's background on the Freddie site, he has enough experience in economics to know that housing was heading for diaster. When he took the job in late 2003 or 2004, whomever is to be believed on that, he knew of big problems at Freddie. He could probably see that housing was in a mania phase as well.

What was his solution? Pretty much nothing. Risk in the institution rose all the way to the financial crisis of July 07 and then even a few days longer.

What goal was he trying to promote? Had he integrity, he'd have said I can't preside over an institution whose goals are going to come at a huge price to taxpayers. That he took $38 million to disregard this, makes it pretty clear that either he had become senile (unlikely) or that he just didnt care who picked up the tab for the mess in the end.

It's the old incompetent or lying a-hole question, that just happens to have come up say, a zillowion times in the last eight years. And you know these people are all top of their class (well maybe not Alberto) and it's not likely that it's incompetence. So what is it?
Geoff | 08.07.08 - 10:51 am | #

jim writes:
Well it's a mess and will probably degenerate into a "he said she said" morass of confusion that can't be sorted out. That's what happens when things go sour: the rug is removed and all the trash beneath is revealed.
Fanny and Freddy should be nationalized. If they are kept and really cleaned up they might be sold to the public again at some future date.
jim | 08.07.08 - 10:55 am | #

Fair Economist writes:
I'm not seeing any comment on the fact that somewhere down the line Andrukonis' warning, supposedly on the limited issue of low-income loans (which wouldn't sink Freddie) has been morphed into a general warning about loaning on overvalued houses (which could sink Freddie). Somebody has majorly distorted his warning, and I'm inclined to believe Freddie on this one because "you loan too much to poor people" is a far more believable criticism from a financial executive in 2004 than "house prices are too high".
Fair Economist | 08.07.08 - 10:55 am | #

wally writes:
Are the 'affordable housing loans' among the ones with higher default rates? The article does not say that and I would not assume it... depending upon which affordable housing program they came from, they could be city or county subsidized (and maybe even guaranteed) and could have been well 'vetted' and may have been limited to a reasonable loan-to-income ratio.
Somebody seems to be blowing smoke in this story and I'm not yet sure who it is.
wally | 08.07.08 - 10:57 am | #

Tanta writes:
but firing your Chief Risk Officer because you disagree with him is a stupid move

Even if your CRO is advocating minimizing risk by maximizing sham transactions?

Why would you not fire the CRO if that is true? If that is the case, it's not just a "we disagree" matter. It's a "you are advocating an Enron-style transaction which has no economic purpose other than to make our numbers look good" and for that you are fired, because you are simply substituting one risk for another risk.

Syron was hired in 2003 precisely to get rid of the Enronistas at Freddie Mac. Surely you aren't saying that any firing by Syron should "look bad" now? He was expected to fire a bunch of people. I think it would have "looked worse" if he hadn't.
Tanta | Homepage | 08.07.08 - 10:58 am | #

sk writes:
This goes on and on. So, by ending the gaming going on( nobody is saying that the gaming was illegal are they?) he followed the affordable law to the spirit, not just the letter - to call this a "good deed that did not go unpunished" is unwarranted.

If the professionals were telling him that gaming it was the best way to handle it - he should have seen that this housing was no longer "affordable" - the underlying purpose of an "affordable housing goal" was not being met and meeting that underlying purpose in the TRUE spirit of the law required him to publicly discuss this, to get it changed - if he couldn't then he should have resigned in protest.

Discussing this in public would also have met the spirit of the securities laws.

He didn't resign then - he isn't resigning now.

-K
sk | 08.07.08 - 11:01 am | #

Geoff writes:
Three goals : liquidity, stability, and affordability.

Right from the start these goals are in conflict. And the more you get them out of balance (way too much liquidity, for example)the more horrendous the failure. Funny in the end, they raced the engine past the redline in a liquidity effort, took affordability down the drain first, then when things became unstable, it all blows up and now we have illiquidity on top of it.

How could you screw this up more?
Geoff | 08.07.08 - 11:04 am | #

Anonymous writes:
"You get no points for saying that someone who defends her position is being "defensive."

And you loose points for labeling anyone who disagrees as "hysterical"

Honestly...how you can defend the continued looting of the system and then pinning it squarely on an employee who attempted to warn about the systemic collapse to come is just too precious.

Go outside and get some air....you are defending an idiot who seemingly offers up the "what me worry" attitude when the obvious is reported.

I sense a "ritholz" in the making....

Ciao
MS
Anonymous | 08.07.08 - 11:04 am | #

RacerX writes:
It's amazing how quickly the tide can turn. The GSEs stepped in and filled a liquidity void in 2007 when the securitization market froze up. A year later they're being pilloried for that action. It's easy to portray Syron as a Pontius Pilate here blaming congress for the purchase of risky loans while collecting generous compensation for doing so. This overlooks the panic and stress of the market at the time. I'm not convinced what Syron did was the wrong move.
RacerX | 08.07.08 - 11:04 am | #

Hit the Bid writes:
A good friend who trades pass-throughs asked a great question...what happens to GNMA?FNMA swaps if the treasury buys? DO they go to zero( or close to it)?

This is obviously the thinking behind Gross's position in Agencies. Seriously though, when the guarantee becomes explicit, why is there any need for a spread?
Hit the Bid | 08.07.08 - 11:05 am | #

Hit the Bid writes:
Sorry WHEN the treasury buys the GSEs
Hit the Bid | 08.07.08 - 11:05 am | #

Tanta writes:
Is this what you're saying Tanta?

Nope.

How many of you folks who are so critical of Syron here actually believed in 2003-2004 that it was "obvious" that housing prices nationally were headed for a big crash and that Freddie Mac would "go under"? Where did you publically make those predictions? Do you have a link?

How much of this is just the superiority of hindsight? Syron looks "gullible" to you because he didn't think housing prices were heading for a crash in 2004?
Tanta | Homepage | 08.07.08 - 11:06 am | #

Geoff writes:
I can assure you that my clients were warned in mid 2004 officially. And they got ample heads up prior to that, that the economy was being juiced and would not sustain its recovery.
Geoff | 08.07.08 - 11:07 am | #

Geoff writes:
I can also tell you that I quit a job in early 2004 largely about disagreements about the future trajectory of housing and retail.
Geoff | 08.07.08 - 11:09 am | #

Hit the Bid writes:
Get off Tanta's back everybody...this is ridiculous.
Hit the Bid | 08.07.08 - 11:10 am | #

Tanta writes:
Well, Geoff, then you're way smarter than I was. I did not predict in 2004 that we would see national home price declines starting in 2007. I didn't start being convinced of that until 2006. I did become convinced back in 2005 that certain high-price markets would start to see serious declines, but those were mostly markets that the GSEs had limited exposure to at the time.
Tanta | Homepage | 08.07.08 - 11:11 am | #

jus me writes:
Geoff makes a good point that he had the integrity to QUIT, not that he's a prophet.
jus me | 08.07.08 - 11:15 am | #

sk writes:
Forget us, the chief risk officer at Freddie was saying that

"the loans Freddie was buying risked the financial position and reputation of the company and the country" as per the Times.


Of course I was saying it was heading for a crash - as we sold in LA and moved to CO, I suggested rental, looked at the new fangled Housing Futures on the case-shiller index to hedge - every individual circumstance is different - in our case, by downsizing in price and size the house, by company paid various housing sale/buy subsidies, my wife could still make the case that a new buy, despite expected losses, was the right thing to do.

-K
sk | 08.07.08 - 11:16 am | #

Geoff writes:
No one really got the timing right. In our brief the argument was that if prices don't level off soon, or come down slightly, for each day that it keeps going up, the problems are going to be exponentially bigger. We were laughed at for a quite a while, but the argument was the same. My personal opinion was that I could not believe that prices had gone as high as they already had without major correction, even in 2004. But then again, I didnt have access to the information on the loan structures that were being divvied out at the time. Once it became clear that loans were being made that had nothing to do with ability to be paid, and that they were being made in the priciest markets in the country, well, that was when we were officially doomed. But that wasnt until a year later.
Geoff | 08.07.08 - 11:17 am | #

YLSP writes:
Syron was hired in 2003 precisely to get rid of the Enronistas at Freddie Mac. Surely you aren't saying that any firing by Syron should "look bad" now? He was expected to fire a bunch of people. I think it would have "looked worse" if he hadn't.

Well, the truth is I don't have all the background on why he was hired or not. Are there articles from that vintage which back up what you are saying regarding getting rid of the Enronistas? Because I did a quick and easy Google to see if there were any news article regarding the CRO firing and couldn't find any.
YLSP | 08.07.08 - 11:17 am | #

Geoff writes:
And btw, Tanta, I can assure you that I'm not smarter than you. However, I did spend an inordinate amount of time worrying about real estate markets back in the first few years of this decade.
Geoff | 08.07.08 - 11:19 am | #

Geoff writes:
and I stayed at a Holiday Inn Express once...
Geoff | 08.07.08 - 11:20 am | #

Currently Smoking Cannabis writes:
"But Freddie had to balance the risks against affordable housing goals,"

But to meet afordable housing goals, Freddie had to engage in activities that helped push house prices higher, and thus more unaffordable? And the more their numbers indicated that Freddie was dedicated to affordable housing, the more housing was allowed to balloon artificially?

Am I way off the mark or is this as crazy as it sounds?

Sort of like imposing rent controls to keep housing cheap, if it is. Gives you something to tell the people you are doing for their benefit, while achieving the exact opposite.

But maybe I'm just faded.
Currently Smoking Cannabis | 08.07.08 - 11:20 am | #

jim writes:
Hashing over past sins won't make them go away, nor, in fact, will it teach people very much. What would teach people a lot is for Fanny and Freddie to go to zero in the market, the stockholders be wiped out (not the bond holders), and for the two to be nationalized. That would be a lesson that would stick. I recommend it.
jim | 08.07.08 - 11:23 am | #

sk writes:

But to meet afordable housing goals, Freddie had to engage in activities that helped push house prices higher, and thus more unaffordable? And the more their numbers indicated that Freddie was dedicated to affordable housing, the more housing was allowed to balloon artificially?

Am I way off the mark or is this as crazy as it sounds?
...
Currently Smoking Cannabis


Its quite correct. You shouldn't have bogarded that joint and passed the dutchie to Syron and others - we wouldn't be in the mess we are in now.

Its YOUR fault - not Syron's.

-K
sk | 08.07.08 - 11:23 am | #

Anonymous writes:
Tanta has become comfortably numb...

The Nazi's were just acting "under orders" too.....

Ciao
MS
Anonymous | 08.07.08 - 11:24 am | #

Currently Smoking Cannabis writes:
Schu: That's a shitty reference, dude. It minimizes the crimes of those maniacs and paints these crooks with an inappropriate brush. I'm a little surprised to see this from a poster like you.
Currently Smoking Cannabis | 08.07.08 - 11:26 am | #

Tanta writes:
Because I did a quick and easy Google to see if there were any news article regarding the CRO firing and couldn't find any.

That's because this particular firing wasn't public news at the time, as far as I know.

My impression is that Freddie never confirmed that the man was involuntarity terminated until just recently, when he made these accusations to the NYT.

You probably want to look at SEC filings if you want to see how Freddie disclosed key manager changes in the period following Syron's hiring.
Tanta | Homepage | 08.07.08 - 11:27 am | #

Tanta writes:
So MS finally proves Godwin's Law.

Now I am the moral equivalent of those who defended the Nazis?

Tell me why "hysterical" is a inappropriate characterization of that kind of comment.
Tanta | Homepage | 08.07.08 - 11:31 am | #

DonKei writes:
"Sort of like imposing rent controls to keep housing cheap, if it is. Gives you something to tell the people you are doing for their benefit, while achieving the exact opposite."

Of course, all government programs achieve exactly the opposite of their stated intent. If it's affordable housing you want, then you juice up the housing market with basically better-than-free money such that houses, instead of money, become unaffordable.

It's why smoking dope is so much less a mindfuck than worrying about the idiots in Washington are doing.
DonKei | Homepage | 08.07.08 - 11:31 am | #

jim writes:
Dodge and Cox sank about 600 million into Fanny in the quarter ended 6/30. The lowest price during that period was 20 and most of the time Fanny was quite a bit above that. So D&C have lost at best about half their investment. If they were to lose all of it, that would be a lesson they might remember. Pay attention to the management of the companies you own, etc.
jim | 08.07.08 - 11:33 am | #

Tanta writes:
But to meet afordable housing goals, Freddie had to engage in activities that helped push house prices higher, and thus more unaffordable?

I miss the old days, when comment threads would get into arguments about how the OFHEO index understates price declines, because it uses only GSE loans and those are only a tiny part of the bubble markets.
Tanta | Homepage | 08.07.08 - 11:35 am | #

jim writes:
I think this "downturn" is going to leave a lot of money "managers" battered and bruised and some very bloody, not to mention their customers. This is a good thing. People need to be reminded of risk when they forget it.
jim | 08.07.08 - 11:36 am | #

DonKei writes:
There is absolutely nothing about the housing mess that is comparable to the slaughter of several million people just because of their religion.

It seems we have, in addition to monetary inflation, where a dollar hardly buys anything anymore, also language inflation where words dribble away their impact and meanings until everyone sounds hysterical.

The housing market is a mess, of our own creation. It is not a disaster, in any sort of the traditional sense of the word. It is certainly not a holocaust, no matter how many cats have to be given up for adoption because their owners have to move.

Get a grip.
DonKei | Homepage | 08.07.08 - 11:36 am | #

Currently Smoking Cannabis writes:
It can't be my fault. I knew in 2004-5, when the neighborhood I live in was priced at levels only a well-paid exec or surgeon could afford. Nobody who made the kind of scratch needed to legitimately pay those prices would ever live in my tract. They'd rent a condo in a more respectable 'hood instead. When the cable installer "paid" $600k for a 1500 sq ft house, the smell of dookie was overwhelming. When he had enough money to live like a rap star on top of it, I began to wonder if everyone except us was selling cocaine or robbing banks on the weekend.
Currently Smoking Cannabis | 08.07.08 - 11:37 am | #

Mish writes:
Excuse me but exactly what was the "good deed"?

Mish
Mish | Homepage | 08.07.08 - 11:39 am | #

Anonymous writes:
Is Syron from Boston?
Anonymous | 08.07.08 - 11:40 am | #

Currently Smoking Cannabis writes:
DonKei writes:
Of course, all government programs achieve exactly the opposite of their stated intent.

The ADA is the poster child for this. I can't tell you how many times I heard (in whispers), "No way, dude... that oldster/cripple/whatever is a lawsuit waiting to happen. Find a legit way to avoid those people."

Some help. The ADA made businesses try like heck to avoid cripples.
Currently Smoking Cannabis | 08.07.08 - 11:41 am | #

Geoff writes:
Nazis...sigh. All aboard the next comment thread express~!
Geoff | 08.07.08 - 11:42 am | #

jim writes:
If I recall correctly Warren B. owned quite a bit of Fanny at one time not too long ago. And he got completely out. We may not all be as well informed or wise as WB, but I suspect when he dumps a stock, people should pay attention. (He likes to hold them "forever" if possible.)
jim | 08.07.08 - 11:42 am | #

Tanta writes:
Excuse me but exactly what was the "good deed"?

Refusing to engage in sham transactions with no economic purpose.
Tanta | Homepage | 08.07.08 - 11:43 am | #

Shnaps writes:
Mish writes:Excuse me but exactly what was the "good deed"?

Syron ending the practice of "renting loans" to meet the affordable housing goals.
Shnaps | Homepage | 08.07.08 - 11:43 am | #

foolonthehill writes:
Tanta:
Long ago I read a play by Ibsen "An Enemy of the People" which in part is about individual responsibility. Mr Syron may have tried to turn things around quietly. But he did not go public did he? Did he more quietly go to his oversight committee and give them the heads up?? etc.
I see him at best as not a 24/7 whore as he rests on the Sabbath.

I have gone on about the hyp of the implicit guarantee.
Now if there was not such a guarantee, then F&F were basically private companies with their responsibility centered around their stockholders. But if there were such a guarantee (As we have found out is thee perceived reality) then Syron held a dual responsibility to his stockholders and to the Public.
It is this latter responsibility that
I fear he shirked. At this point his testicles un-descended.
Sice you do know the field so well, let me ask you. If Syron had told the truth to the public early on, might the results been different?
foolonthehill | 08.07.08 - 11:44 am | #

Alistair writes:
Is Syron from Boston?

In essence, yes. Grew up in Watertown (an inner suburb of Boston), went to BC, worked for Dukakis. It's all in the article if you care to read it.

(It's somewhat ironic that Syron chose to give his side of the story to the Boston Globe, which is owned by... you guessed it, the New York Times.)
Alistair | 08.07.08 - 11:45 am | #

Currently Smoking Cannabis writes:
Excuse me but exactly what was the "good deed"?

Spending hours and hours writing expository posts to help other folks understand their current situation outside of the mainstream propaganda machine.

By the way, Sheila is watching you. A blogger wing of Gitmo is not out of the question. (I'll sneak you cigarettes and porn, Tanta.)
Currently Smoking Cannabis | 08.07.08 - 11:46 am | #

Tanta writes:
foolonthehill, I just don't understand your question.

Freddie Mac has been a GSE since the day it was chartered.

Everyone who has ever purchased shares in a GSE either knew it was a GSE or is unforgiveably ignorant.

A GSE always has two masters, and always gets certain breaks from the Feds in exchange for certain mandates.

That is what people were buying.

If you bought shares of a GSE thinking it would always and everywhere maximize profits whenever that might conflict with government mandates, you were dumb.

Am I missing the point of your question?
Tanta | Homepage | 08.07.08 - 11:48 am | #

Anonymous writes:
Fool got to the chewy center.

Even if Syron is such a swell guy...it was his solemn responsibility to yell fire. He doesn't seem to have done so.

It's inexcusable.

Being charge of a huge responsibility isn't fun, and it isn't glamorous...and it's almost always thankless....such is life.
Anonymous | 08.07.08 - 11:49 am | #

Anonymous writes:
Is Tanta from Boston?

Is she trying to defend the home team or what?
Anonymous | 08.07.08 - 11:50 am | #

Anonymous writes:
You know Tanta if you took the rose glasses off you'd see this for what it truly is. As far as you posting about goodwin's law...get over yourself.

You hadn't responded to anything I posted before and now all of a sudden I'm the squeaky wheel? It works both ways.

It's nothing more than a parable and the outcome of which is the exact same thing. But it sure got you riled didn't it?

It's virtually the same defense as nuremburg and we all know how that worked out....the consequences, in this situation, is measured in dollars and not humans. Down the road it will be no different.

"Tell me why "hysterical" is a inappropriate characterization of that kind of comment."

Because you had painted the people who disagreed with that "brush" far before I made my comment.

Taking the high road at this point jut makes your original argument laughable.

Sure got your attention though.

Ciao
MS
Anonymous | 08.07.08 - 11:50 am | #

Anonymous writes:
Not much meat left on this bone, may have to hit it on a rock and get the marrow.
Anonymous | 08.07.08 - 11:52 am | #

Anonymous writes:
Tanta-

If you are unwilling to see that the defense offered up by Syron is merely that he was "just doing his job" then yes you are just as guilty for defending it as such.

So anyone who just does a job "under orders" is allowed a free pass??

Try again..

Ciao
MS
Anonymous | 08.07.08 - 11:54 am | #

Currently Smoking Cannabis writes:
Anonymous writes:
Not much meat left on this bone, may have to hit it on a rock and get the marrow.

Interesting choice. This practice is often thought responsible for the development of larger brains and the evolution of H. sapiens from grunting apes to awesome tool makers.
Currently Smoking Cannabis | 08.07.08 - 11:55 am | #

ErikR writes:
It is not necessary to predict in 2004 a coming housing crash to have realized that FNM and FRE were much too highly leveraged at the time. High leverage means that you are less likely to weather the coming hard times, which WILL come, it is just a question of when. Prudence dictates keeping leverage low enough that whatever comes, you are likely to get through it with enough capital.

Tanta is arguing a straw man.
ErikR | 08.07.08 - 11:58 am | #

woodyusa writes:
Syron was hired to clean the place up, he collected 38 million in compensation and still has another 700k options for his troubles. He was doing what he was told to do by the powers that be.

Google "Syron and Perp Walk" if you want a good laugh Syron gave a speach on ethics back in 2002 and used the term.
woodyusa | 08.07.08 - 11:58 am | #

Anonymous writes:
http://asensio.com/ PoliticalAdvo...Name=Commentary

A little something on Syron's track record and "integrity" while at his pre-Freddie gig (Chairman of the American Stock Exchange).
Anonymous | 08.07.08 - 12:00 pm | #

Currently Smoking Cannabis writes:
So Tanta is now like a Nazi sympathizer? And you really think this is a reasonable parallel?

Absurd. I feel a little dirty even responding.
Currently Smoking Cannabis | 08.07.08 - 12:06 pm | #

Gavshire Hathaway writes:
Tanta,

I worked in strategy consulting in 2004, and in that year I did a project to assess the size of the housing bubble and the likely timing of the collapse. Though much of the work was proprietary, I referenced numerous documents from Wall Street analysts showing that housing WAS in fact a bubble. It was COMMON KNOWLEDGE on Wall Street. The only real question was how long it would take before it popped. The "smart money" wanted to know what predictive metrics they should look at to know in advance that the wheels were falling off. This because they couldn't afford to miss the party in homebuilder stocks (which they were long in).

Syron in my opinion was either drinking far too much koolaide, or was excessively greedy and waited too long to bail. The third option is that he willfully led his company into the abyss, but I'll take your word that he's better than that.

So while I respect your side of the argument, I politely disagree.
Gavshire Hathaway | 08.07.08 - 12:07 pm | #

Anonymous writes:
CSC-

Again missing the point.....you need to lay off the buds for a bit.

See my last comment.....

Ciao
MS
Anonymous | 08.07.08 - 12:07 pm | #

Currently Smoking Cannabis writes:
I understand you. But watering down one of the most heinous crimes in history has got to stop at some point. It's a tactic usually reserved for talk radio and those who have no real leg to stand on.

You, sir, have an argument. Resorting to Nazi comparisons is unnecessary, overstated, and diminishes your otherwise legitimate criticism.
Currently Smoking Cannabis | 08.07.08 - 12:10 pm | #

Anonymous writes:
It is an extreme example however how is just "doing your job" a reasonable defense??

This is too much of a touchy subject within the financial community. We can speculate all we want on other crimes and even label people "wet backs" or whatever else is used (I'm married to a Puerto Rican so does that give me a "free pass" to call them spics? Certainly not.

The example was used to prove a point....it 'ain't pretty however the continuing mantra of these ACCOUNTABLE people are that they are not.

Defending it is lunacy...

Ciao
MS
Anonymous | 08.07.08 - 12:18 pm | #

Fair Economist writes:
OK. Yesterday CR posted some tables (which are particularly convincing if made into charts, as I did) which showed that Freddie was fairly responsible in its lending up to 2007. Their leverage was plenty adequate for their traditional role. Some reasonable people thought they would be able to stand up to a bubble before that bad loan burst. It's still possible they were right.

Freddie and Fannie were not seriously undercapitalized for what they were supposed to do - guarantee low-risk loans for commodity housing.
Fair Economist | 08.07.08 - 12:18 pm | #

Anonymous writes:
I think this says it best from you:

"But watering down one of the most heinous crimes in history has got to stop at some point"

Which one are you talking about? ;-)

I hope you see the irony in that.

Ciao
MS
Anonymous | 08.07.08 - 12:22 pm | #

Currently Smoking Cannabis writes:
MS: I think your points are solid. The way you chose to present them was unwise and unfair IMO. It was also unnecessarily disrespectful, both to our hosts and to the people who suffered in the past.
Currently Smoking Cannabis | 08.07.08 - 12:22 pm | #

Currently Smoking Cannabis writes:
I do see the irony. And I do think this is a historic crime.

I do not think it is best compared to the mass slaughter of people. And I do not think that those who see it another way are as reprehensible as those who sanctioned the murder of millions.
Currently Smoking Cannabis | 08.07.08 - 12:25 pm | #

Norka West writes:
In all this back-and-forth about Mr. A versus Mr. S, no one has emphasized where the agree. The GSE was making loans to questionable borrowers. (I DO NOT CARE WHY!!!) I do care that neither Mr. A nor Mr. S bothered to adequately reserve for the inevitable bad debts. As such they are jointly responsible for issuing false and misleading financial statements. If they had issued true financial statements, we (investors, shareholders, regulators, taxpayers, etc.) could have known the real cost of their "affordable housing" mandate and made a considered judgment about the viability of the GSEs conflicting missions.
Norka West | 08.07.08 - 12:26 pm | #

Norka West writes:
Should read:

"where they agree"
Norka West | 08.07.08 - 12:27 pm | #

Anonymous writes:
When do we get to move over to fat old Fanny and give her a little ass spanking.
Anonymous | 08.07.08 - 12:30 pm | #

lama writes:
This is what I know (or think I know).
Thermo Electron was a failing enterprise when Syron took the President's position. Many people at Thermo thought Syron was being hired because he would be easy to control as he "owed" the old CEO/CFO brothers who listed on the AMEX.
Within 2 years, he had fired so many politicos, hacks and book cooking business managers that the company barely resembled itself.
I think that gave him a reputation of someone who would clean up a house in quick order. I think Freddie was a hothouse of nepotism with unlimited congressional intrusions into direction and perhaps operations. I think it may have been more than he could fully cope with.
I would encourage everyone to listen to an interview with Syron (any links to Youtube?) and decide if he sounds much like any of the other CEO who have become associated with the housing bubble (Mozillo, et al).

BTW, I in no way excuse the actions of the Nazis, Napoleon, nor the colonists during the King Phillip's War.
lama | 08.07.08 - 12:41 pm | #

Currently Smoking Cannabis writes:
Whoa. Dont often see King Philip's War referenced. "The Name of War" by Jill Lepore jacked my head up and fundamentally changed the way I see the world. Thanks for the flashback, lama.
Currently Smoking Cannabis | 08.07.08 - 12:46 pm | #

wally writes:
"The GSE was making loans to questionable borrowers."

OK. And the implication is that those were 'affordable' loans. But nowhere does it say so. Were they?
wally | 08.07.08 - 12:48 pm | #

Anonymous writes:
CSC-

Hence the irony of defending people for just "doing a job".

I disagree that these people are any different just because the end results are measured in dollars rather than human life.

It's the same mentality just that this prick (Syron) got to profit from looking the other way. The other criminals were either executed or lived a life on the run. They certainly (on a large scale) did not make millions of dollars being complicit. Syron was in his job long enough to make SYSTEMIC changes- I gather his compensation would have suffered greatly had he done so.

It was a far different crime however the defense is the same. That is my point.

But leave it to Tanta to look beyond that and label me "hysterical"....as if the people who disagreed with the original post were not labeled with that accusation far before I made my comments. Hypocritical to say the least. But I won't get into the irony of placing a label on people for simply disagreeing..then I'm sure I would get banned.

Ciao
MS
Anonymous | 08.07.08 - 12:54 pm | #

Norka West writes:
wally writes:
"The GSE was making loans to questionable borrowers."

OK. And the implication is that those were 'affordable' loans. But nowhere does it say so. Were they?

Who cares!

My point is that they did not reserve for losses adequately, which denied financial statement users vital information.

With that information, questions about the costs versus benefits of the GSEs disparate missions could be addressed and weighted. Without it, everyone chugs along the tracks until we get a multi-trillion dollar train wreck. Go, Casey Jones, go.
Norka West | 08.07.08 - 1:02 pm | #

Kneel before Zod writes:
Dude...the Nazis?
Kneel before Zod | 08.07.08 - 1:03 pm | #

Currently Smoking Cannabis writes:
MS: Criminals? Yes. In fact, not only do I not believe this was an accident, or even negligence, I think it was planned from the word go in some circles. I guess I'm a "Conspiracy Theorist." This was a planned crime to ruin the lives of millions for sheer greed. Many of these "respectable" people are classic psychopaths.

But the crimes they committed are not the same.

"I disagree that these people are any different just because the end results are measured in dollars rather than human life. "

Losing my 401k and losing a family member are very different things to me. Money and human life are drastically different in my view, and so destroying them is not morally equivalent in my mind. In fact, I don't view them as anywhere near each other. That's why I find the comparison so objectionable. I would kill to stop a murderer; I would not kill to stop a thief.

Your characterization of current events is very strong otherwise.
Currently Smoking Cannabis | 08.07.08 - 1:15 pm | #

Anonymous writes:
Ha. MS proved Godwin's Law. That comes with a free corollary too. Enjoy!
Anonymous | 08.07.08 - 1:16 pm | #

sdtfs writes:
But I won't get into the irony of placing a label on people for simply disagreeing..then I'm sure I would get banned.

I doubt it. And I don't think you really believe that.

I'm surprised by the heat generated by this topic; I suppose it's because Tanta has chosen to defend her view of Syron's integrity. I have no opinion on the matter, and I suppose that the reason for the vehemence of the argument is about differing views about GSEs rather than Mr Syron.
sdtfs | 08.07.08 - 1:22 pm | #

Anonymous writes:
"But the crimes they committed are not the same. "

You are absolutely correct......

The defense just seems to be more palatable since we are talking about money right??

"I would not kill to stop a thief"

That certainly depends on what it was they were "stealing". Can it be said that a thief would kill you to steal from you?

Get past the atrocity portion of that crime and you'll see the point.

Look I'm not trying to equate these two crimes I'm showing that the defenses for both are equal.

Why is it acceptable in a monetary value when it is not in a human value?

Looking the other way, in both cases, has and will have dire results.

Ciao
MS
Anonymous | 08.07.08 - 1:28 pm | #

Currently Smoking Cannabis writes:
It would be pretty interesting, though, if the FDA just beheaded one or two tomato farmers and piked their heads with a large sign that read, "Farmers: Be more careful with salmonella!" I don't know how many heads we could lop off for $100m, but it's got to be at least two heads. If it happens again...Nia Hao, Tomato Man!
Currently Smoking Cannabis | 08.07.08 - 1:35 pm | #

Anonymous writes:
Yes and Tanta proves it in the reverse.
Dig a little deeper and you'll see that what I posted was in defense of being labeled "hysterical" before any of the other comments that have been so objectionable to many here were made.

If you take the bait be prepared to have an argument. But I see how that works when the "integrity" of an individual gets defended for no reason. But disagreeing with it and you are "hysterical"....

This requires some thinking and I've seen not too much of it other than to instantly label someone based on what they think they read.

I'm not labeling you with that CSC because you have an argument....I respect you for that.

The others who simply lock onto the word "nazi" have some serious issues with critical thinking.

Ciao
MS
Anonymous | 08.07.08 - 1:35 pm | #

Currently Smoking Cannabis writes:
I agree it's the same "cop out" defense. It's chickenshit. Nazi use seems to be a reach for emotion, though, not relevancy. It sounds desperate, when you're not.

We are watching the destruction of the USA. Invoking those a-holes isn't necessary or helpful.
Currently Smoking Cannabis | 08.07.08 - 1:40 pm | #

Currently Smoking Cannabis writes:
And dude, in general, it's time to get a little more hysterical.
Currently Smoking Cannabis | 08.07.08 - 1:42 pm | #

Anonymous writes:
I'm with you on that CSC but I used an extreme example because I knew it would generate discussion...you seem to be one of a very few who understood that.

And since there are not very many examples other than life and money that would generate that emotive response I'm thinking that blindly defending the integrity of someone was the first mistake. Not realizing it when so many others did was the second (tanta).

Based on what I've read I'm certainly not the only one who feels this way.

Ciao
MS
Anonymous | 08.07.08 - 1:51 pm | #

Anonymous writes:
BTW I think Ms Tanta is coloring the wrong person with godwin's theory...she should be applying it to Mr Syron.....if she truly understands it in the first place.

Ciao
MS
Anonymous | 08.07.08 - 1:58 pm | #

foolonthehill writes:
Tanta (11:48)

I do think you missed my point.
!.
As I understand it the explicit financial guarantee for F&F was some $5bil.Am I wrong is assuming that this was the entire explicit F&F guarantee.

from Wikipedia
No actual guarantees

Fannie Mae receives no direct government funding or backing; Fannie Mae securities carry no government guarantee of being repaid. This is explicitly stated in the law that authorizes GSEs, on the securities themselves, and in many public communications issued by Fannie Mae.

Neither the certificates nor payments of principal and interest on the certificates are guaranteed by the United States government. The certificates do not constitute a debt or obligation of the United States or any of its agencies or instrumentalities other than Fannie Mae.

[edit] Assumed guarantees

There is a wide belief that FNMA securities are backed by some sort of implied federal guarantee, and a majority of investors believe that the government would prevent a disastrous default. Vernon L. Smith, 2002 Nobel Laureate in economics, has called FHLMC and FNMA "implicitly taxpayer-backed agencies."[10] The Economist has referred to "[t]he implicit government guarantee"[11] of FHLMC and FNMA. In testimony before the House and Senate Banking Committee in 2004, Alan Greenspan expressed the belief that Fannie Mae's (weak) financial position was the result of markets believing that the U.S. Government would never allow Fannie Mae (or Freddie Mac) to fail.[citation needed]

[edit] Federal subsidies

The FNMA receives no direct federal government aid. However, the corporation and the securities it issues are widely believed to be implicitly backed by the U.S. government. The Congressional Budget Office writes "there have been no federal appropriations for cash payments or guarantee subsidies. But in the place of federal funds the government provides considerable unpriced benefits to the enterprises... Government-sponsored enterprises are costly to the government and taxpayers... the benefit is currently worth $6.5 billion annually."[12]. Fannie Mae and Freddie Mac are required to hold less capital than normal financial institutions: e.g., it is allowed to sell mortgage-backed securities with only half as much capital backing them up as would be required of other financial institutions. Specifically, regulations exist through the FDIC Bank Holding Company Act that govern the solvency of financial institutions. The regulations require normal financial institutions to maintain a capital/asset ratio greater than or equal to 3%.[13] The GSEs, Fannie Mae and Freddie Mac, are exempt from this capital/asset ratio requirement and can, and often do, maintain a capital/asset ratio less than 3%. The additional leverage allows for greater returns in good times, but put the companies at greater risk in bad times, such as during the current subprime mortgage crisis. FNMA is also exempt from state and local taxes. In addition, FNMA and FHLMC are exempt from SEC filing requirements; however, both GSEs voluntarily file their SEC 10-K and 10-Q.

But assuming that there was an implicit guarantee, the Syron had a dual responsibility to his shareholders, but also to the PUBLIC.
Elsewise it would be free lunch which as we know there aint any.

It is this latter responsibility that I fear Syron completely ducked. Public institutions need be transparent, Quite firings are not enough'
It is this second area of responsibility that I feel is a blind spot for you.
foolonthehill | 08.07.08 - 2:02 pm | #

freddiemacer writes:
Syron is not corrupt. He is just arrogant and incompetent. I have to look through the posts from the other day but I do not recall many claiming he was corrupt.

Past FM employees tried to give him the benefit of their knowledge and experience and he did not care to listen or learn.

But the big mistakes were not made in 2004, they were made in amping up credit risk taken in 2006 and 2007. Really poor judgement and again Syron and crew did not care to take advantage of all the information out there that was available to them. They operate in a bubble and Patti Cook only spay attention only to what her heroes on Wall Street are doing. No on the real on the ground mortgage industry knowledge and little desire to acquire it.

Syron and company have done a miserable job, not sure what it would take for you to accept that.
freddiemacer | 08.07.08 - 2:03 pm | #

Paul writes:
For a Christian nation full of good church-going Republicans, we sure have a lot of corruption.
Paul | 08.07.08 - 2:16 pm | #

Broker writes:
Anonymous, Tanta is defending an ideea not a particular person. For some reason a lot of people think that the Gov. or a GSE can do a better job that the free market can. I had to come to the USA (from Russia) to realise that communism is a mental disorder. But I have to tell you, (and I hope to God I am wrong) they will win. You can't have a logical argument with these people. I do believe Tanta is an honest person. But from my experience,(30 years of communism) these people are the most dangerous of all.
Broker | 08.07.08 - 2:20 pm | #

Anonymous writes:
Russia was the perception of communism and in that form I agree it is a mental disorder, as practiced by them.

Communism in it's pure form (theoretically speaking) is not.

As to say we have a democracy here......

We certainly do not.

Ciao
MS
Anonymous | 08.07.08 - 2:29 pm | #

Currently Smoking Cannabis writes:
When someone works their ass off for my benefit, and I pay nothing to gain from it, it seems pretty off-the-wall to come in and curse them as evil. I disagree with both bloggers here sometimes, but let's have a little perspective on where we are and who's doing the work. A little respect, at least, for delivering the brain porn.

CR is wildly optimistic. But he isn't like a war criminal. He just doesn't know we're going straight to hell in a handbasket.
Currently Smoking Cannabis | 08.07.08 - 2:37 pm | #

Broker writes:
A democracy is not a perfect system. But believe me it is much better than anything else people have came up with so far. And among those, communism seemed to have been one of the worst experiments.
Broker | 08.07.08 - 2:42 pm | #

Doggy Dog World writes:
Why argue with a wall, CSC? MS was a garbage poster over at BP and now he's a garbage poster here. I just wish he'd stick his initials in the "name" field when making a post so I'd know to ignore it sooner as I scroll down.

GYOFB was an acronym made for MS. You can't debate with these people, because they don't argue in good faith.
Doggy Dog World | 08.07.08 - 2:44 pm | #

Currently Smoking Cannabis writes:
Broker writes:
A democracy is not a perfect system. But believe me it is much better than anything else people have came up with so far.

Dude, are you a 2500 year old Athenian?
Currently Smoking Cannabis | 08.07.08 - 2:48 pm | #

Broker writes:
CSC, I am only 2479 years old. But from what I was told by my father, the Athenian democracy wasn't perfect either.
Broker | 08.07.08 - 2:53 pm | #

Currently Smoking Cannabis writes:
Broker: Actually, I apologize for comparing you to an Athenian. I was not insinuating that you kept slaves or opposed women's suffrage.

But as a student of democracy, I have a tough time locating a good subject at the State level.
Currently Smoking Cannabis | 08.07.08 - 2:59 pm | #

Emma Anne writes:
Well. I'm sure sorry I read this comment thread. Nazis and Communists? Get a grip.

I'm afraid CR is going to have to move to more active moderation if the comments are to continue to be worthwhile. It seems to happen whenever a blog reaches a certain size.
Emma Anne | 08.07.08 - 3:01 pm | #

Russ writes:
The example was used to prove a point....it 'ain't pretty however the continuing mantra of these ACCOUNTABLE people are that they are not.

So what? You are missing the point - the CRO fired by Syron is using the "they wouldn't let me do my job" argument. If the CRO was allowed to continue the same "rental" transactions, FRE would be in the exact same position and possibly worse - there would come a time when FRE would try to sell those loans back and the "buyer" would say "no, thanks". FRE would be holding the bag and be begging for government support - just like today.

The point here is that Andrukonis blabbed to the NYT how he could have been Superman if Syron had allowed him to be - and BS was called on that. NONE of that speaks to Syron's virtue or lack thereof.
Russ | 08.07.08 - 3:03 pm | #

Currently Smoking Cannabis writes:
Emma: Thank you for taking the time to add something of substance to the discussion. You're right. There are too many people who just whine in their posts.

-Kettle Smoking Cannabis
Currently Smoking Cannabis | 08.07.08 - 3:08 pm | #

Elvis writes:
First?
Elvis | 08.07.08 - 3:29 pm | #

lama writes:
Moving risky assets off the books temporarily where there is a agreed upon buyback is fraud. If the CRO was doing that, he should have been fired.
At Thermo, I would not be surprised if Syron fired people for knowingly shipping defective products to boost year-end sales.
lama | 08.07.08 - 3:31 pm | #

gw writes:
Synron is not necessarily corrupt but he was uniquely positioned to know and to fix the situation.

He took over an organisation that had already started evasive actions to scale back the "affordable" housing business. If his account is true the Freddy Mac middle and upper management knew at that time that things were getting crazzy and the *risk adjusted* margin on the loans were too low.

He had the guts to stop the dealings unrelated to the original charter but he had not the guts to scale back the business by increasing the cost and reducing the availability of credit.

Instead he deliberately choose to fire the risk officer et. al. and increased the risks. Clearly they were going after the "wrong" kind of business but was the "right=mandated" business still feasible? If he ordered a solid fundamental analyis - then it was an error of judgement - otherwise it was a blunder.

As an outsider coming in at the time of crisis he *may* have had the power to slow the nonsense. Considering the troubles at Fannie Mae he could have turned to his masters and stopped the race to the bottom (subsidized Fannie and Freddie chased by private enterprises who got less and less of the conforming pie and got more and more desperate).

If he was motivated not by his official masters (shareholders) but also by the offical mandate - he should have considered also the ultimate bagholders.
gw | 08.07.08 - 4:31 pm | #

Yalt writes:
jus me writes:
Geoff makes a good point that he had the integrity to QUIT, not that he's a prophet.
jus me | 08.07.08 - 11:15 am | #

All of this hollering that Syron should have done the ethical thing and QUIT is pretty funny, coming as it does just a handful of posts after Tanta's That kind of thinking just encourages management to never recognize a problem or deal with it, because it's better to kick the can down the road into someone else's watch.

Just wanted to make the connection that I don't think was ever explicitly made....
Yalt | 08.07.08 - 4:38 pm | #

Yalt writes:
jim writes:
Hashing over past sins won't make them go away, nor, in fact, will it teach people very much. What would teach people a lot is for Fanny and Freddie to go to zero in the market, the stockholders be wiped out (not the bond holders), and for the two to be nationalized. That would be a lesson that would stick. I recommend it.
jim | 08.07.08 - 11:23 am | #

An odd sentiment, though on these comment boards it isn't uncommon.

Ordinarily, bankruptcy happens when a firm can't meet current obligations and wants protection from its creditors. Freddie's never, ever missed a single payment on its debt, as far as I know, and you want to wipe out common shareholders and require a bankruptcy just because you think someone needs to be taught a lesson????
Yalt | 08.07.08 - 4:45 pm | #

Tanta writes:
Moving risky assets off the books temporarily where there is a agreed upon buyback is fraud. If the CRO was doing that, he should have been fired.

What's bizarre about this case is that it's actually the reverse: the idea is to put risky assets onto your books, with a buyback agreement.

It isn't because you really want to expand your balance sheet. It's because you want to report year-end numbers that say you bought so many "affordable housing" loans. But the buy-back provision means that you didn't really buy such loans, you only "rented" them.

It's the kind of scam that would only happen in the regulated mortgage business. In fact, it's a perfect example of "regulatory fraud." The idea isn't to goose the balance sheet but to look like you are doing what the regulators say you have to, while not really doing it.

I am just so amazed that so many people can't seem to grasp what's wrong with that.

By the way, that kind of scam only worked because lenders get their own regulatory credit (via CRA rules) for originating "affordable housing" loans. They don't actually have to keep them in order to get credit. Now, if they did truly sell these loans to Freddie (to maturity), they could, you would think, devote that capital to doing another batch of affordable housing loans.

But no, they had met their "requirement" for the year, so they were perfectly willing to just "rent" the pools to Freddie for a quarter or so.
Tanta | Homepage | 08.07.08 - 5:07 pm | #

Richard Estes writes:
back when I was in law school, one of my professors described a challenging, ethically dubious situation, asking us as to how we would proceed, and one of the students said, "that's really hard!", or something to that effect

and my professor responded, "that's why they pay you the big bucks"

they paid Syron "the big bucks" to keep Freddie Mac solvent and profitable

he failed, and by the time this is all over, and the scope of the castastrophe becomes obvious, no one is going to have any empathy for him, because part of taking "the big bucks" is recognizing that you are going to take the blame for a lot of things, even if you had no control over them, because you are supposed to anticipate future perils and respond accordingly

and, if you think that the job is too difficult to do, as others here have said . . . you quit

none of which should be taken as a defense of the NYT article, which, I suspect, is at the service of a very different agenda than the quality of Syron's performance

as I said yesterday, who has the juice to get a story into the NYT based upon multiple anonymous sources, most, if not all, of whom are personally compromised in some way?

who? and to what end? that's what people ought to be thinking about, instead of getting engrossed in the Syron sideshow

here are some hints: could it be to deflect blame from political and financial figures that exploited Freddie and Fannie for their own ends?

could it be to discredit the notion of GSEs as generators of finance capital for the housing market?

could it be to provide a justification for billions, if not trillions, of bailout dollars for the global financial system, because the crisis was the result of the personal dereliction of duty by people like Syron, and not systemic, and therefore not one for which banks, brokerage houses and investors should be held responsible?

the NYT article should be considered propaganda, and examined as a clue towards revealing the propagandists and their motivations
Richard Estes | Homepage | 08.07.08 - 5:34 pm | #

Wolf writes:
So we have a situation where "affordable housing loans" are not affordable after all. The definition in the law is therefore deficient and the institution should have told shareholders and Congress.

Without warnings to shareholders, what should we think of the CEO?

Just wondering... Particularly since the internal warnings came in 2004.

What was that about the 2007 vintage? Worse than 2006? How do the successive default numbers compare since 2004?

Who is to blame?
Wolf | Homepage | 08.07.08 - 5:39 pm | #

freddiemacer writes:
Syron is a Boston guy. Seems like he got to get his affordable lending example into this Boston Herald story. Yes I agree that this example of renting affordable housing loans is a dubious practice. There were other pre Syron Freddie Mac practices such as emphasizing Multifamily to meet affordable housing goals that were also scorned by Dick Syron. A practice that he now publicly advocates returning to. Another point is that aside from the dubious approach, the main risk management takeaway is Freddie Mac is better off laying off this type of credit risk. This could have been accomplished using other, less deceptive, structures or at least used to inform your credit policy.

Frankly this exchange makes me think even less of Syron. The whole point to him seems to be to seize on a few of the more convenient facts to eviscerate this guy Andrukonis. My understanding was that commenting on the nature of the employment status (termination etc.) of past employees is against company policy. Apparently not when you criticize King Dick.
freddiemacer | 08.07.08 - 6:43 pm | #

freddiemacer writes:
Another thing is this is all part of the Syron narrative that the affordable housing goals made us to it. Frankly the whole FICO / LTV box was opened up in 2006 / 2007 and plenty of these bad loans met no affordable housing goal whatsoever. Whenever he says this crap, the journalists should call him on what proportion of the defaults are really coming from affordable housing goal loans. And they should also call him out on his 2007 and upcoming 2008 compensation - is he really planning to take $8.5 million more after all this. The all softballs all the time interviews he gets from Maria Bartiromo/CNBC make me sick.
freddiemacer | 08.07.08 - 6:51 pm | #

Bill writes:
I worked at Freddie Mac in 2004-2005 doing trade desk surveillance over the $600B+ portfolio. Based on my experiences with, and observations of, FRE's risk mgmt organization, I do not believe Mr. Andrukonis ... not even for a nanosecond.
Bill | 08.07.08 - 7:14 pm | #