Readers continue to send e-mails that contain
death threats constructive criticism of an errant bloviation that appeared on this blog or brain-injury-inflicting thought-provoking questions concerning a topic about which I don't give a damn haven't yet blogged.
called me a dumb-ass for took issue with a recent post in which I agreed with the contention of a former RTC employee that the only people who were bailed out by the FSLIC and FDIC during the S&L "bailout" of the late 1980s and early 1990s were insured depositors. Hank stated that it was his understanding that many uninsured depositors were also "covered" in the bailouts, and that many, if not most, of them got their money back. I don't have the figures at hand and I would rather shove a hot poker through my left ear drum than don't have the time to research the issue, but I think that Hank is correct. If I recall correctly (given the fact that my alcohol-soaked brain fires on only two cylinders), most of the S&L bailouts of that period were variations of a purchase and assumption transaction structure in which all deposits of the failed institution, insured and uninsured alike, were transferred to a purchasing institution (in many cases, a new one created by an investor group), along with a portion of the assets. Therefore, the uninsured depositors got their "bets" covered right along with the insured depositors. It doesn't negate my point that the "millionaires" who owned the bank were "wiped out," not "bailed out," but it does mean that true "market discipline" was not imposed on all the players.
I should never have been so hasty as to quickly agree with a former RTC employee. At least, I should have waited until I'd
come down off the cocaine I'd ingested given the topic some more consideration. Of course, if I actually thought about what I wrote, I'd never have time to write. After all, I bill by the hour, and time spent blogging is "down time."
Another reader, Mary Kay Gaver, wrote to ask me what I thought about FNMA's 0.25% Adverse Market Delivery Charge, and other risk-based pricing changes, that take effect for deliveries of "prime loans" after March 1, 2008. Freddie Mac has announced that it's following suit. She thought that the fees seemed like "a bit of bail out of FNMA being funded by new borrowers and a charge being imposed by FNMA for folks seeking to refinance out of adjustable rate loans." I know that the National Association of Home Builders also believes that the fees are a de facto recapitalization of FNMA and FHLMC caused by the failure of Congress to legislate OFHEO reform, and that's a plausible accusation. However, I think it has more to do with what blogger Dan Green called "corners getting cut" in prime mortgage loan underwriting. He used the term not in its usual context (taking a shortcut around prudent underwriting), but to mean snipping away the looseness of previous underwriting standards, tightening underwriting, and pricing loan rates and fees on the basis of "perceived" risk.
In other words, they're scared of the unknown, and they're trying to charge for the "perceived" risk when their perception is telling them "I'll be damned if I know how bad things will be!" In fact, they may be underpricing the risk if the bears are right about how bad this recession that is coming is going to be. The acid test of motivation will come when conditions turn upward again in residential real estate markets, and how quickly FNMA and FHLMC then roll back these fees and pricing adjustments. If they cling to the fees like a needy lover who simply won't let you have one damn night out bowling with The Dude, Walter and Donny, you'll know that these quasi-public entities are nothing more than egg-sucking dogs. Until then, we'll merely consider them "fraidy cats."
Finally, reader Brooks Talley supplemented his comment with an e-mail poking fun at my post on the heart-burning topic of "baking" law. His taunts about my typo brought raucous laughter from my wife, so all's well that ends well. The "baking" reference did remind me of the "deep thoughts" of evangelist Franklin Graham:
"When you die, if you get a choice between going to regular heaven or pie heaven, choose pie heaven. It might be a trick, but if it's not, mmmmmmm, boy."
---Franklin Graham, as told to Jack Handy