Parsing Paulsonspeak

The Hank and Ben Show went before Congress yesterday, ostensibly to talk about plans for the alleged modernized financial regulatory structure. But with former Federal Reserve Board governor Bill Poole having so recently thrown around the insolvency word, the evil twins Phony and Fraudy (© Barry Ritholtz) got their share of their attention:

Fannie Mae and Freddie Mac are also working through this challenging period...Their regulator has made clear that they are adequately capitalized.

Oral Statement by Secretary Henry M. Paulson Jr
House Committee on Financial Services
Jul. 10 2008

The regulator? That would be Orifice of Federal Housing Enterprise Oversight, or OFHEO, James B. Lockhart III, prop. Or, as Paulson has said repeatedly over recent months:

I think it is so important that we have a strong, credible, independent regulator for Fannie Mae and Freddie Mac. . .A strong regulator will really add to the confidence surrounding these organizations and the secondary mortgage market.

Paulson: oil demand/supply cause for price rise
Reuters May 22 2008

Two things:

1. None of the knuckle-dragging camera-mugging representatives addressed the question of why Paulson, or anybody else, should believe anything said by a regulator that makes the Commodity Futures Trading Commission look effective.
2. Paulson was, however, careful to say that “Their regulator has made clear...,” and not “I believe that they are adequately capitalized.”

Comments

[ajhough]

As I watched people jump into unregulated markets, finance the properties, refinance them, take money out, and tell me how they were getting rich, I knew it was all a lie. Of course, now we are all paying the price and will continue to pay. The "regulators" have been sleeping at the switch and we now will see more Enrons.

2008 Jul 12 08:10 AM

[fodi MD.]

If we used all the baloney coming from the treasury we would never have a food shortage!

2008 Jul 12 02:23 PM

[CaptBob]

Fannie Mae and Freddie Mac are also working through this challenging period...Their regulator has made clear that they are adequately capitalized.

You don't know how relieved I am to read this from Paulson---
I'm so relieved they're out of the lineup for a taxpayer bailout!!

2008 Jul 12 02:46 PM