Having failed to jawbone the price of the GSE’s common stocks to the asymptote, Hank Paulson is abandoning a key theme of this campaign season–hope–in favor of another: change. Out will go the boards and management of Fannie and Freddie, and presumably under will go the holders of their preferred and common securites. The precipitating event, we are told by the NYT, was the discovery by some Morgan Stanley green-eyeshade types that aggressive accounting at Freddie had masked the true depth of its woes.
This just in: the GSEs are cooking there books again, the sun came up this morning, and the swallows will return to Capistrano next March.
Good for Paulson. One can’t see how waiting any longer would help. But a piece of this whole puzzle which completely mystifies me is getting no discussion. To my utter disbelief, the chap who will stand astride the newly nationalized and combined GSE colossus will be none other than James Lockhart, the Director of the Federal Housing Finance Adminstration. The FHFA is the new and ostensibly more powerful regulator of the GSEs which succeeded the Office of Housing Enterprise Oversight as a part of the Housing and Economic Recovery Act of 2008 (also known as Paulson Uber-Alles.)
So who is James Lockhart? One would be tempted to cruise over to fhfa.gov to check out his official bio. Such temptation would not be rewarded, as THE FREAKING FHFA STILL DOESN’T HAVE A WEB SITE, even though as of today it will be in control of half the housing finance in America. Fortunately, OFHEO does have a web site, even though the agency itself no longer exists. Technically speaking. Follow?
On the non-existent OFHEO’s web site, I did get some clarity about why the FHFA may have been delayed in getting its act together in cyberspace. It seems that although the agency was created on July 30, it didn’t get around to sending its “Notice of Establishment” to the Federal Register until last Thursday. The FHFA celebrated that salutary act by issuing a press release, for which it likewise borrowed OFHEO’s web site. Also on the OFHEO website is the statement Lockhart made this morning, in which he declared himself Supreme Potentate of Mortgage Finance. Mercifully for the rest of us, he named two viceroys who look like real players (Herb Allison of Merrill and TIAA-CREF and David Moffet of U.S. Bancorp) to be the CEOs of Fannie and Freddie, respectively.
But back to the Lockhart question. His official bio is solid enough, if not exactly awe-inspiring: #2 official at Social Security, head of Pension Benefit Guranty Board under Bush 41, career in financial services.
But in his current role, he’s been a disaster. The title of a prior post, “Haplessness, Thy Name is OFHEO,” pretty much says it all. The guy commanded an agency with 232 people, on whom he spent an average of $267,000 per year. He did nothing but bitch and complain about how powerless he was, while writing this piece of self-congratulatory horse puckey in the OFHEO 2007 annual report:
This year, OFHEO set for itself eight annual performance goals to reach these strategic goals and four annual performance goals to support its resource management strategy. To measure results in achieving goals, there were 34 performance measures for fiscal year 2007, 97 percent of which were achieved or substantially achieved.