Utterly Mind Boggling

If you thought the lack of loan activity was more about bank stinginess as opposed to lack of demand (I've argued the latter of late), you ain't seen nothin yet...

The Federal Housing Finance Authority (FHFA), Fannie Mae's and Freddie Mac's overseer, is suing 17 major banks for damages involving $200 billion in mortgage backed securities purchased by the aforementioned Govt Sponsored Enterprises...

This is utterly mind boggling, in that the Fed, in an effort to inspire lending, has bloated its balance sheet (liquifying banks) and promised zero short-rates as far as the eye can see (not to mention, on the fiscal side, TARP)... In that $multi-billion settlements involving so-called robo-signing are about to hit the banks' balance sheets... In that the onerous Dodd-Frank Bill substantially increases their compliance burdens... And, in that you'd think Fannie and Freddie, being mortgage securitizers themselves, might be held to task for their failings of risk analysis... Again - Mind Boggling!!

If you've doubted to any degree the notion that government is our economy's biggest single problem, now you know better!!

That said, given all the headwinds facing the banks, given that analysts tell us the market won't come back without financials leading the way, and given that a weak economy come election time will kill the incumbents, I suspect political advisers will be pushing their masters to push the FHFA to push for settlement asap...

If this was in anyway politically inspired (I honestly don't know that the FHFA didn't act independent of The Whitehouse), I'm afraid it was a monster of a miscalculation...