*Sgt. Schultz And The GSEs*
**By Phil Hall**
***Fans of old-time television may recall the character of Sgt. Schultz, the bumbling prisoner-of-war camp guard played by John Banner on the long-running sitcom “Hogan’s Heroes.” Whenever he was confronted with the possibility of subversive chicanery, Sgt. Schultz would pop his eyes, grit his teeth, and declare, “I hear nothing! I see nothing! I know nothing!”
****I am reminded of Sgt. Schultz following the recent fifth anniversary of the federal conservatorship of Fannie Mae and Freddie Mac. When it comes to getting a coherent explanation on how the government-sponsored enterprises (GSEs) wound up losing every penny they ever generated, everyone in Washington is acting like Sgt. Schultz.
****The crash of the GSEs seemed to come out of nowhere. Even as late as the summer of 2008, the GSE executives and their apologists – including Fed Chairman Ben Bernanke and former Rep. Barney Frank – were happily ensuring everyone that the GSEs were fiscally sound. So how did they get their facts so miserably wrong?
****Nor has there been any explanation on why Edward DeMarco, the acting director of the Federal Housing Finance Agency (FHFA), ordered the delisting the GSEs’ common and preferred stock from the New York Stock Exchange (NYSE) on June 16, 2010. After all, the NYSE never asked for such an action to be taken, and similar actions were not taken on other entities that required massive federal assistance following the 2008 crash.
****For the past three years, political activist and occasional presidential candidate Ralph Nader has been seeking an explanation for the FHFA’s delisting of the GSEs’ stock. In May, Nader renewed his calls in a letter to Treasury Secretary Jack Lew.
****“Regardless of the final outcome of the deliberations on the structure of these GSEs, Fannie and Freddie common shareholders deserve a chance to recover some of the value of their stock,” Nader wrote in his letter, which he later made public via his website. “The common shareholders have been in a financial limbo far too long. It is unfair to punish the common shareholders who have held their Fannie and Freddie stock, in the hopes of recouping some of their losses. Fannie Mae and Freddie Mac should be relisted on the NYSE and their conservatorships should, over time, be terminated.”
****If Lew answered Nader, this response has not been made public. Most likely, Lew did what other federal officials have done regarding Nader’s inquiries – he took a cue from Sgt. Schultz and pretended to know nothing.
****Perhaps Nader is not the most credible public figure to launch a campaign for answers – after all, plenty of people are still sore at him for allegedly costing Al Gore the 2000 presidential election. But the question of what went wrong at the GSEs is deserving of a response.
****Indeed, many shareholders found their investments reduced to near-nothingness thanks to the outrageous lies about the GSEs’ health and to DeMarco’s unilateral decision to have the GSEs’ delisted from the NYSE. Even another GSE, the extraordinarily well-run Farmer Mac, nearly crashed because it invested heavily in Fannie Mae shares – an unprecedented situation where one GSE nearly ruined another!
****The Treasury is not alone in refusing to take up this controversy. The Department of Justice, the Securities and Exchange Commission, the Federal Reserve, the White House and Congress are also pretending that nothing is amiss. Nor is the mainstream media even the least bit curious on what transpired.
****I am not certain where the Washington elite and their media apologists learned how to do their jobs, but I suspect they were inspired by watching Sgt. Schultz on “Hogan’s Heroes.” After all, when faced with some obvious catastrophes, these fools seem to be repeating the sergeant’s mantra: “I hear nothing! I see nothing! I know nothing!”
Phil Hall has been (among other things) a United Nations-based radio journalist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Also, as you will discover, he is not shy about stating his views.