The Arrogance of Commercial Bankers and Investment Bankers is Endemic to Mortgage Bankers

Partying in Chicago on Taxpayer Money

When the government decided to partially get out of the mortgage guarantee and securitization business it spun off Fannie Mae and Freddie Mac as private companies.  But in a nice gesture it said that it would implicitly guarantee the debt of those companies, never thinking that they would have to be called upon to honor those guarantees.  After all, what could go wrong in the housing and mortgage business?

So now the government has taken over these two companies, the tune of a bailout of about $150 billion or so.  The companies, however, are continuing to act like the purpose of the businesses is the enrichment and enjoyment of its senior management.  Case in point: 

Last week, almost 3,000 people descended on the Hyatt Regency in Chicago for the 98th annual convention of the Mortgage Bankers Association.

The price of admission: about $1,000 a head. . . .The city of Chicago was no doubt grateful for the conventioneers’ dollars. Besides, MayorRahm Emanuel knows something about this industry: he used to be a director at the mortgage giant Freddie Mac.

. . . But it might seem jarring that Freddie, which was rescued by Washington and today exists at the pleasure of taxpayers, paid $80,000 to become a “platinum” sponsor of this shindig. Fannie Mae, that other ward of the state, paid $60,000 to become a “gold” sponsor.

But of course if you help sponsor a meeting you should also attend it

The C.E.O.’s of Fannie and Freddie were conference headliners and gave presentations. But Freddie also sent 15 vice presidents and 14 directors from various units. Fannie’s list included 12 vice presidents, 12 unit directors and three events managers.

Here is where the nation could use one of those Republican Congressman who attacks things like this, and that’s what we have

Representative Randy Neugebauer, the Texas Republican who heads the oversight and investigations subcommittee of the House Financial Services Committee, said he was disturbed by the turnout from Fannie and Freddie. . .“They don’t act like companies that have had a huge infusion of taxpayer money,” he told me. “Why do they feel the need to go out and spend the money for networking when they have all of the mortgage market in its entirety?”

Now this is a small issue in the scheme of things, but it is highly indicative of the attitudes of financial firms.  They see the taxpayers as stooges, someone to pick up the pieces and pick up the check after they have exploited the financial industry for everything they can get.  That is why they are so horrified by the idea of regulation, it just doesn’t fit in their view of the world.  In their minds taxpayers are supposed to be victims, and the financial industry would prefer they just settle into that role and leave the financial industry alone.