Here is their conclusion on critical and important mortgage giant, FNMA:
The Commission concludes that the business model of Fannie Mae and Freddie Mac (the GSEs), as private-sector, publicly traded, profit-making companies with implicit government backing and a public mission, was fundamentally flawed.
But there is nothing in the report that supports that conclusion!
The only thing that they report is that Daniel Mudd, the guy in charge "particularly from 2005 on", said this. The jokes write themselves, right?
When interviewed by the FCIC, FHFA officials were very critical of Fannie’s management. John Kerr, the FHFA examiner (and an OCC veteran) in charge of Fannie examinations, minced no words. He labeled Fannie “the worst-run financial institution” he had seen in his 30 years as a bank regulator.
Even allow for significant overstatement, that has to be in the right direction, given the breakdown in underwriting discipline. (Of course, everyone may still be fighting lawsuits, so the truth may be hard to write, yet.)
Mr. Mudd is the guy who is disparaging, in the report, of the regulatory bodies, when questioned about them. But, seriously, you don't *need* a regulator to be a responsible business leader.
Let me illustrate:
"Dear Senator Hope-a-Lot:
Blah-blah-blah we love to work with you and make a great America. Please contact our lobby firm for a fishing trip for your family.
However, we have run risk analysis and we cannot add riskier loans to our portfolio, without significantly increasing our capital cushion, risk-based fees, or portfolio composition. (Changing portfolio composition involves less of other types of loan risks, a trade-off in goals).
Safety and soundness has to be the number one consideration for organizations with our level of risk exposure and responsibility. While we are eager to try several programs to expand lending, experience and prudence indicate that these new businesses must be developed slowly, until risk estimates are well seasoned.
As I write this, I understand that I won't get a $5 million dollar bonus or whatever for exercising sound financial and business judgement, but I believe that we must manage the guarantees with which we are entrusted with the highest care.
Sincerely,
Daniel Mudd, Republican CEO of FNMA"
What did "we" get instead? A dash for the cash? Who knows.
I would go further and submit that ANY professional who knows and understands the business of banking could write that letter without thinking twice.
