Thanks for that information. Very helpful.

CDOs are south of a 50 price even with Ambac/MBIA insurance. Draw your own conclusion.

Did you read my post? It was about Lockhart getting upset at Cuomo. Nowhere did I say that Cuomo should not investigate, not did I say that Lockhart was trying to get Cuomo not to investigate.

And I did not say “sound mortgage paper.” I said “relatively sound mortgage paper.” Per my comment above, the GSEs are widely believed to be government guaranteed, and even thought the backing is not formal, the belief that they are guaranteed appears both to have a solid legal and practical foundation.

Lockhart has reason to object to Cuomo casting doubt about GSE paper in public is a way that is not accurate. Per the initial post, most of the public does not have the attention span to appreciate that there may be problems with the mortgages the GSEs hold (you’d have to be a moron to believe otherwise) versus imply, as Cuomo did, that it has the same risk as privately originated paper.

And in this shaky market, the last thing we need is misplaced fear. There is more than enough well founded fear going around.

And having read Tanta’s post, I have to beg to differ with her on her interpretation of Lockhart’s letter. She effectively accuses him of covering for agency bad behavior when he said that the GSEs had no economic incentive to buy mortgages with inflated appraisals.

In fact, if you read the transcript of this PBS interview, Lockhart is very serious about the need to clean up Freddie and Fannie, and pretty candid about the mess. He came in only mid-2006 (I’ve had trouble getting the date he took charge, but he was only acting director as of June 2006). Recall that the really frothy period of subprime lending was third-fourth quarter 2005 through 2006. He is working to draw a very big line between the GSE’s past practices and their current policies and practices.

Nevertheless, turning around Freddie and Fannie is like turning a supertanker. I imagine that inertially the bad practices continued in the beginning of his tenure and probably haven’t been fully rooted out.

So that is a long was of saying Lockhart may also be touchy about Freddie’s and Fannie’s anti fraud practices being seen to be deficient. They most certainly were deficient, with intent, in the past. They may still be deficient, but to Lockhart’s point, not with intent. He is really trying to make a root and branch change in the place, and appears to be getting traction.

And one more point: as the head of a regulatory agency, even a guy who is a relatively straight shooter still has to adhere to party line.

What do they marinate them in, lies and deceit?

Speaking of the ratings agencies’ dilemma, look at this late to the show rating adjustment:

http://www.reuters.com/article/bondsNews/idUSL0954927220071109

formerlyknownasJS

This is her third mistake in a few recent articles. She got promoted at the FT, and it is beginning to look like her reporting is getting sloppy. This is a big shame, since she had been very early on to some of the developments in the credit markets, and far more detailed and specific too.