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Tuesday, September 02, 2008

They Could Call It Moronic

by Tanta on 9/02/2008 09:01:00 AM

Every time I observe that something or other is the dumbest thing I've ever heard of, something even dumber comes along. You'd think I'd have learned by now. But this is the dumbest thing I've ever heard of:

Here’s a bold idea: Fannie Mae and Freddie Mac should merge.
No; having Fannie Mae and Freddie Mac open a counter-cyclical side line of business mowing lawns on each other's REO would be a "bold" idea. This is just another Wall Street plan to solve all of our problems by laying off highly skilled employees with long institutional memories and a high degree of loyalty to their company in order to goose the damned share price. Oh, and it's easier to do that if you make these costly employees sound like fat cats:
Yes, the big benefits of a merger would come at the expense of some the 6,400 employees at Fannie and nearly 5,000 employees at Freddie. And frankly, that’s one reason, among many, such a scenario may not be palatable to folks in Washington — where, it should be noted, many of Fannie and Freddie employees work and live, some as the neighbors of politicians and their friends.
Yeah, right. All those mortgage quality control analysts and remittance accounting clerks live next door to a Senator and hobnob with the K-Street Boyz. Especially all the ones who work in the regional field offices.

Fannie and Freddie have, in fact, historically paid decent salaries for skilled workers, and their benefit packages tend to be excellent. They are known for having diverse workforces and for recruiting and promoting women. They even offer family leave and flexible work hours and child-care plans and pinko crap like that. Obviously someone needs to teach these people the real meaning of capitalism, which is that we do not deal with big, structural, complicated problems. We "downsize" and collect bonuses in the M&A houses:
By merging them, they would really become too big to fail. And sometimes size can be a strength.

A merger wouldn’t undo the mess that these two companies have made, nor does it erase the billions of dollars in potentially toxic loans they own or have guaranteed. Nor would it address the question of whether these companies deserve the implicit backing of the government in the future. . . .

But let’s get real: no matter what solution is chosen for Fannie and Freddie, pink slips are bound to be a part of any fix.
"Getting real" like this is what happened to the non-GSE part of the mortgage business over the last several years. Wall Street firms bought up mortgage companies, slashed back rooms and highly-paid experts, offshored collections and account management and swarmed all over the "wholesale" model that substituted "independent" brokers for origination employees whose long-term financial best interests were aligned with the company. The synergy, dude. It was really something.

And since that worked so well at outfits like Countrywide or the Street-owned firms, let's try it again on the GSEs? I have had a theory for a long time that the very subject of the GSEs just makes a whole lot of people utterly insane, pretty much regardless of what they do or what the context of the conversation is. Being a hybrid of a private corporation and a government agency, they will always be ideologically intolerable to purists on one or the other side of any of the more annoying political arguments of our time. But this kind of thing is beyond the usual sloganeering about private vs. government sectors and competition and monopoly and so on. This is just a naked appeal to the Street's desire to eliminate skilled jobs to enrich consultants and executives. If you thought they learned anything by the fiasco of the mortgage securitization machine--put any dumb old loan in the deal because someone's got a spreadsheet showing hockey sticks on it--think again.