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Think Big Work Small’s Line by Line Response to The FDIC’s Accusations

On Feburary 7th Frank & Brian sat down to write and produce a video that outlined the absurdly lucrative and onesided “loss share” agreement the FDIC made with One West Bank.  They told the story from the perspective of an actual homeowner in Arizona.  In a nutshell it appeared to us that One West Bank would stand to benefit from a foreclosure or shortsale in stead of a loan modification. 

It also appeared that One West Bank inked a deal with the FDIC that would more or less guarantee them billion not only regardless of the portfolio’s performance but seemingly if it performed poorly.  In short the insanely rich get richer while the homeowner is little more than collateral damage in a game very few understand.  Apparently the video has resonated with people outside of the real estate industry as its now been viewed by countless people and been mentioned in both the written and viewed news outlets across the country.  Most interesting, the FDIC felt compelled to issue a response to these apparent misrepresentations.  All they can say is time has been the greatest ally to their credibility and somewhat demonstrative to the FDIC.  To view the video and the response from the FDIC please go to indymacvideo.com

Here’s what TBWS said:

At Think Big Work Small we can rightfully be accused of lots of thing like being more blunt than is sometimes “politically correct” and we admit it.  We will even freely admit to being ordinary citizens of ordinary intelligence and we definitely admit to making our fair share of mistakes but we will gladly own up to them when we do.   So, below is every accusation, pulled directly from the FDIC’s press release accusing us of “blatantly false claims”, and our response, apology, explanation or retraction to each of those accusations, one at a time. 

Let’s start with the “blatantly false claims” line even though it doesn’t technically qualify as an “accusation of falsehood”.  None of us at TBWS has ever, or will ever, make any claim to the public – close friends and spouses don’t count – we know to be false so, at a minimum, you can toss that “blatant” stuff right out the window.  Real is what you will always get from us (note that “real stupid” may, on occasion, fall under the heading of “real”) and we will gladly compare our “transparency” with anyone else’s, anytime they want.  So let’s get into our so-called “falsehoods”.

“The loss-share agreement is limited to 7% of the total assets that OneWest services” Not sure why the FDIC addressed this at all.  But pay close attention because if you think the FDIC’s press release is bland and boring you underestimate the spin talent that went in to this beauty.  Doesn’t this make it sound like the whole story is invalid because the loss share agreement only applies to 7% of the assets anyway?  Hell, that’s not even enough to cover sales tax, right?  Now notice, that it says “that OneWest services” and since 93% of the loans that OneWest services belong to somebody else, wouldn’t that mean that the loss share agreement covers 100% of OneWest’s loans.  Wasn’t that smooth, I mean seriously, that was pretty cool double speak and it didn’t address a single point in our original story.

“OneWest must first take more than $2.5 billion in losses before it can make a loss-share claim” – Okay, we get your point, but we never said they didn’t so we still haven’t gotten to any of the “falsehoods”.  Still, to be fair, we acknowledge that an awful lot of losses need to occur before OneWest gets rewarded with all the good stuff we highlighted in our story.  Then again, doesn’t this sound a lot like “even more incentive to generate “losses” which was at the very heart of our story in the first place?  Perhaps we should thank them for raising this point, which we missed entirely on our initial video.  

“OneWest has not been paid one penny by the FDIC in loss-share claims”  On this one they got us.  In our example we said “The FDIC cuts a check” which is obviously not the case, they’d have to hire full time check writers if that were the case.   We gave no thought or consideration to what monies were earned, paid, accrued, payable, deferred or transferred and should have chosen our words more carefully to reflect strictly what the loss share agreement entitled OneWest to.  Although, when we tie the last two statements together, it sure feels an awful lot like it goes along with the story’s theme of the deal “motivating the wrong behavior”.  It would certainly explain all the emails from appraisers saying that “these OneWest properties are being dumped so cheap that they are ruining the comparables for other REO (foreclosure) sales”.  Is there a mathematical incentive to find big “losses” in order to receive loss share dollars?  Hard to say anything for certain but it certainly appears that way, absent any clear explanations to the contrary.

“OneWest must have adhered to the Home Affordable Modification Program (HAMP)” We never said it didn’t.  In fact we never talk about HAMP at all in any story unless we are looking for comedy relief.  Maybe that’s what the FDIC was going for with their reference to HAMP.  HAMP, the program that nobody I know could ever qualify to benefit from anyway.  If we had mentioned HAMP though (which we didn’t), I think it would have been much more effective for the FDIC to have quoted some figures on how many homeowners have received HAMP compliant loan modifications from OneWest, and to then highlight, how much the average loan balance was reduced in all those really cool HAMP compliant note mods that OneWest had done.  That tact would have instantly silenced us, and any other detractors, wouldn’t it?  Show me that data and my apology will be on hands and knees.

“The FDIC has not requested to borrow money from the Treasury Department” Did I ever mention that precision semantics weren’t Frank’s strong suit and when Brian gets wound up about something like this, his blood pressure and spittle on the camera are bigger concerns than precision semantics.  The FDIC never, to our knowledge, “asked to draw” on their recently increased, $500 billion line of credit Treasury.  But this begs the question:  Was the increase to $500 billion “asked” for?  You can be the judge but to be perfectly clear, the FDIC never asked to draw the money.    It sounds silly to even put the word “ask” after FDIC in a sentence, like an oxymoron or something.  Since this was not clearly communicated, we blew it, we suck and we are sorry. 

“We continue to be funded by the banking industry through assessments, not by taxpayers” Maybe an English Professor would argue that our claim that “taxpayers” were ultimately going to pay for these practices is invalid because the FDIC is not paid for by taxpayers.  However, I don’t think you can find many ordinary working taxpayers who aren’t of the firm opinion that “we taxpayers ultimately foot the bill for everything our government does – everything!”  We aren’t making any accusations of wrong doing.  We aren’t making any accusations at all.  We are just making the observation that any program, policy, deal or practice that drives down home prices and prevents homeowners from being able to keep their homes is going to cost all taxpayers in the end, regardless of how the FDIC gets its funding

In summary, we acknowledge that our tone may have come off a bit adversarial but we want it to be clearly understood that we are in no way, shape or form adversaries of our government or its various governmental bodies.   We love our country and our government and consider ourselves fortunate beyond words to live in a country where we are allowed to voice our disagreement with policies, programs and decisions that we feel are not in the best interest of our country and economy.  It is our sincerest hope that the decisions being made by the FDIC in regards to failed, and failing, bank assets are responsible and that it is just our misinterpretation of them that has us so worked up. 

We’d like nothing more than for someone to make us believe that deals like OneWest’s are sanitary, well negotiated and prudent.  We spent countless hours researching this story and insuring that the premise we were presenting was intact.  The math used to calculate “losses” on short sales and foreclosures versus modified loans seems more than a little questionable, at best.   Optimistically we hope that the language of the agreements was simply too convoluted and confusing for us to interpret, and that the premise we presented was a misinterpretation, or at least, a well intentioned mistake by the FDIC.  Notwithstanding, the evidence as a whole seems to explain the effects felt by homeowners who are making an honest effort to stay in their homes, only to be met with unbending resistance, while real estate flies off the OneWest shelves via short sales and foreclosures, driving down the values of all home in the comparable vicinity.  If we’re wrong, we will publicly breathe a sigh of relief, and if we are right, then we thank the founding fathers that we are free, as concerned citizens, to do everything in our power to bring about some much needed change.