Thursday, May 2, 2013

New FHFA Director?

Mel Watt: Respectfully, “Tell the President Obama,
Take that job and shove it (onto somebody else)!”

They lied to you Mel.
Heading up the Federal Housing Finance Agency (FHFA) is not a cakewalk, it's not a sinecure, it's not controversy-light (just the opposite).
Yes, you are a bright guy, head of the Congressional Black Caucus and you worked on Dodd-Frank, plus sat in on about two million (boring) hearings about financial services and mortgage finance matters, but—unless I am gravely mistaken and you are the rare Congressman who knows and understands securities and mortgage matters--none of your prior experiences will ready you for being the titular head of the agency which oversees Fannie and Freddie.

Forget your industry “friends,” people whom you felt over the years with an open ear and votes in the Financial Services Committee and the House; they are not your allies any more.

How about that ringing endorsement the Mortgage Bankers Association just gave you? See it? Oh hard to find in David Stevens BS rhetoric wasn't it? It wasn't even “faint praise” and this is a guy who once was an Obama appointee. How often did MBA lobbyists come to you for help?

Remind your fellow CBC members of the MBA's actions.

(BTW, contrast that with the way the NAR came out for you right away and upfront. The Realtors didn't cavil or hedge their bets. If you get the job, remember them and the MBA.)

But that's the way of this town.

Thanks, But No Thanks BO

Tell the President, "Thanks but no thanks."

Nobody with your experience should sign up for this amount of grief and aggravation, unless you are being paid seven figures and given a cadre of knowledgeable and loyal assistants to help you carry the load, which you are not.

I know the Obama folks are telling you “piece of cake,” but Capitol Hill types already betting you don't have the 60 votes. They're counting noses and coming up short of GOP Senators who might buck their party vote and for you.”

I think I know why you want the job, I worked 11 years on Capitol Hill for a senior Democrat on the House Banking Committee (what it was called then), who retired after 20 years because the job got repetitive, boring, too much ass kissing and fund raising. And he was in the majority—a major subcommittee Chair--and had every reason to believe the D's would stay in control, which they did for another dozen years.

After a while, that work is tedious, filled with righteous assholes everywhere.  The job's public service gilt quickly wears off s off.

Running the regulatory agency which oversees Fannie and Freddie probably seems to you like a good and easy job.

It isn't.

Bloody and Venomous F&F History
The history—which cannot be avoided—and you inherit is bloody, ugly, and filled with emotional partisan back alley fights, and extends to the media and business and low income groups today. The House R's don't even mask their contempt, which is based more on Tea Party reasoning than knowledge.

I heard you say that most everyone wants to wind down F&F and bring in more “private capital.”

Well the Republicans do, but there is no such thing—as you should know—since those big banks get as many explicit and implicit federal benefits as did Fannie and Freddie. So don’t kid yourself.

As I've written, copiously, the banks don't want the job, unless you pay them to do it by guaranteeing the losses on failed mortgage back securities they issue.

I know you have big banks in North Carolina, but don't trust them, either (if it is not too late). By now, after 20 years, you should know what banks are about and it isn't consumers or even the voters in your district where the banks live.

It's money! And, for many years, all that drove the big banks and their F&F opposition was getting their hands of the mortgage giants' revenues.

If you have to learn on the job, assuming enough GOP Senators get bought off, you are going to encounter issues where everyone seems right or everyone seems wrong and your instincts tell you not to rely on FHFA people because you don't understand their personal agendas, which most of them have.

FHFA's Work Force

A lot of “evil critters” burrowed into the FHFA policy woodwork and protected themselves with a civil service prophylactic and you can't get rid of them. And I won't even hazard a guess at their IG's real agenda, except that eh wants a gaggle of more lawyers to investigate his own agency.
By many reports, although not on every issue, Ed DeMarco earned the respect of Fannie/Freddie officials as well as the Home Loan Banks execs, those orphans are yours, too.

The Admin truly dislikes DeMarco, ergo your appointment. But, he has a civil service right to return to the agency, somewhere.

Suggest to your Admin friends that they make Ed an offer he can't refuse, Ambassador to France or head of some national security agency, some place—other than FHFA--where he really wants to be.

Send Ed to Camp, Somewhere!

Having DeMarco rejoin FHFA invites trouble and confusion. People on the Hill calling him not you, generating odd staff alliances, people checking with him before carrying our your plans, poor communications and disarray (if not slow walking “your” agenda).

You think your House GOP “colleagues” on Financial Services—led by Jeb Hensarling (R-Tex)--
are horse's exteriors, now, wait until you testify before them?

Temporarily, you can hide your unfamiliarity on substantive issues and history for a few questions and refer back to your prepared statement, but it soon will catch up to you and if you come up short you'll feel embarrassed and angry. And, as in professional sports, your opponents will go for your injured and weak spots.

But, you soon will be responsible for trying to explain Fannie/Freddie/OFHEO/FHFA history which has been so distorted by political opportunism and filled with fear and mistrust, that you might mutter about the most expedient option –which might be the worst one-- entertain dissolving the two entities.

Then, immediately, your friends on the Left weigh in and you begin to hear from the housing industry groups who believe in what Fannie and Freddie do and don't think the large commercial banks can replace them.

Understand What the WH Really Wants, If It Knows

Near term, the Obama Administration doesn't want F&F to go away (let Hillary worry about that), because the two are poised to feed billions (as much as $300 B or more, over the next four years directly to the US Treasury and provide the Obama Administration with greater revenues and added resources to fight congressional budget fights.

Whatever clear and specific orders from President Obama (yes, FHFA is an “independent agency, but.....), you'll have to deal with Senate Republicans—who deeply supported Ed DeMarco and can gum up any legislative action or regulatory proposals, they chose.

Do you think your former GOP colleagues in the House, whom you have experienced up close and personal, can be part of any rational process to utilize Fannie and Freddie in a constructive manner?

I am sure you look forward to this challenge, but this new job—after all of the negative noise which already has started—might be one you'll want to leave or could make you unhappy and someone who needs stomach remedies daily.

Yay, Mel!!

BTW, if you really said to Ralph Nader what has been reported in the press, in his meeting with the CBC, God bless you, Mel Watt. Nader's arrogant egomaniac run for the Presidency in 2000 brought the world George W. Bush.

One last thing, in a bit of self promotion, read as many of my blogs from the past four years as you can.

They contain more political and mortgage industry truth and value than you will find in any WH briefing book.

Remember the post-2004 Fannie--after Frank Raines and Tim Howard were forced out by political hacks masquerading as your FHFA predecessors and different GOP blessed Fannie officials took charge—made huge subprime mortgage acquisition mistakes, but those errors didn’t happen when Raines ran the company, although many Fannie opponents will try and falsely conflate them.

Find out the truth for yourself. Understanding our mortgage finance history is crucial to plotting the nation’s future of mortgage finance system.

Maloni, 5-3-2013


Anonymous said...

Thank goodness, Bill, you have regained your vigor.
No more shillyshallying about.
Watt, after confirmation, must come up with a viable plan to regenerate F%F in a new guise. Primarily a "branding" exercise as the marketeers say.

Bill Maloni said...

Mel Watt didn't help himself with that "interview" answers he gave the WSJ's Nick Timiraos.

I don't know if Watt's handlers deserted him or the Congressman just winged it, but nominees should stay away from the media until they've had their hearings and have a basis and statement on which to stand.

MW's responses weren't confidence generators and may just have given the GOP more grist to challenge him.

As noted, it is not going to be easy for Congressman Watt, either the nomination process or the job, if he secures it.

But, I still can't see any legislative structural changes to the mortgage market until 2016, at the earliest, when a new President takes over.

Anonymous said...


My bet is that between now and then an advocate will rise from the ashes and ask what the treasury thinks it's doing.

1) Conservatorship
2) Full sweep
3) Off balance sheet nonsense
3) No plan

Each which could and should be challenged. These are private companies, damn it.

Bill Maloni said...

Fair enough.

A variation of that question also should be put to congressional Republicans, asking them what is their ideal primary and secondary mortgage market structure?

I'd welcome answers from both sides.

Those likely could come up if there is a Mel Watt nomination hearing.

Anonymous said...

I think Wallison speaks for them: 'Let them eat cake!'. j/k, I really don't think that's true.

Instead, I think most repubs would accept FnF's role bankrolling safe, fixed mortgages, and how that ultimately strengthens the nation, as long as HUD and other crazy liberal initiatives didn't come with the deal.

Bill Maloni said...

I tend to agree (my hesitancy is based on how much the AEI/CATO types would make support a test of "conservative courage).

I also think the pragmatic big banks like the mortgage risk transferance which F&F offer.