Sunday, July 21, 2013

Odds and Ends





“Restore Fannie Mae” is A-OK;
 Hensarling’s Legislation Ain’t

Back from California and “granddad” land; brain still catching up with body from those quick round trips. Upon landing in San Diego, we had some excitement, when a flight attendant announced, “Everyone, please, remain in your seats. We have a medical emergency and the EMTs will come aboard to deal with it.”

Passengers glanced around for heart attack victims or very pregnant women and found none. The attendant then asked “passengers John Smith and Ed Jones (my made up names) to come to the front of the aircraft.” When Jones and Smith went forward the two men promptly were arrested by police, handcuffed and stuffed into two cruisers, according to my observant granddaughter sitting next to the window. 

Since we were in southern California, I looked to see if I could see CHIPS “Ponch,” Jon, or Detective Joe Friday and his partner, but no such luck with TV cop sightings. 

GSE News 

·       A blog and a half ago, I touted the “Restore Fannie Mae” website, misstating that it was the creation of the Gibson Dunn law firm, which had filed one of four prominent shareholder lawsuits against the Treasury for its 2008 Fannie/Freddie takeover. 

I corrected the record/myself/my blog, when I found out that the man behind the website is Thomas Stoddard, with whom I’ve now had a chance to speak at length. 

I feel confident enough in our discussion to highlight and support what he is doing (and also made some suggestions about how best to raise to raise site operational money without creating the impression that funds raised might go to his own pockets). 

Thomas’s heart and head are in the right place re the F&F issues and I encourage people to frequent his website and enjoy the content. (In ways, it’s superior to some old man’s blog yammering about the historical dissing of Fannie Mae.)

Here, again, is the link to Goddard’s work.

·       This past week, Secretary Jack Lew greatly disappointed in his disjointed CNBC interview, implying that F&F still are financial basket cases, waiting to come apart.

This is the email I sent CNBC host Steve Liesman after his Lew interview.

I liked it (the Lew interview) but the Secretary, neatly and by design, overlooked a few elements. 

Fannie and Freddie largely have "repaid" the Treasury for taxpayer funds invested and what little remains will be returned within a year or sooner. They both did so, paying double the interest rate on dividends (10% versus 5%) which TARP- assisted banks paid). 

For the past five years, the entities also oversaw the nation's primary and secondary mortgage markets because the only viable alternative--the nation's large banks--failed to step up and replace the two as mortgage investors (the guys at the end of the line who holds the financial liability).

The Secretary implied that F&F still were train wrecks waiting to happen, but he quietly overlooked that in the past five years, both have grown capital, raised fees, only put pristine loans on their books, and have had their "affordable housing missions," i.e., large percentage of their annual business for low, moderate and middle income families in underserved areas," take away. Many of the preceding facts are due to their current regulation. 

Nobody that I know--including myself, an active blogger on the subject--is asking for any change in F&F's regulatory regime, just that the two be allowed to compete as any other mortgage investor without any special ties to the federal government and after they have totally returned all amounts "borrowed" from Treasury.

In other words, they should treated like every other TARP-assisted financial institution. 

(I would be happy to discuss this issue further--on or off camera--with you or your producer.)


Hensarling’s GSE Bill and Other Things 

In last week’s hearing, many conservative “usual suspects” paid homage to Financial Services Committee Chairman Jeb Hensarling’s (R-Tex) newest bill to do away with Fannie and Freddie. 

Let me go way out on a limb and suggest the Chairman’s bill won’t pass the Congress in God’s lifetime! 

At a similar, same day, non-congressional dog and pony show to support the “bipartisan” Bob Corker (R-Tenn)-Mark Warner (D-Va) bill, both Senators dumped on the Hensarling approach, while tub thumping their own. It was Senator Mark Warner’s turn to claim that C-W would “end private gain and public loss” in the mortgage market. 

Warner’s naivety knows few bounds since his legislation paves the way with major new large bank federal subsidies for the behemoths to take control of the US primary and secondary mortgage markets, while he blathers that his bill will bring “private capital” back to the market. 

Read and understand your bill, Senator Warner! 

I challenge Warner and his staff, just as I have others, to show when/how—before their 2008 Bushwhacking—the federal government ever picked up Fannie & Freddie losses allowing the companies to benefit. 

The 2008 “conservatorship” debacle saw F&F stocks drop below a dollar a share and the companies expropriated by the Treasury, an action currently being challenged in court in several law suits. 

Neither of these guys has yet to show me they understand mortgage finance or that their bill is anything but one gigantic troll for campaign bucks with a proposal they describe as “subject to change and improvement!” That‘s and inside-the-Beltway green light for, “If you don’t like it, but pledge us enough campaign support, we likely can accommodate your needs.” 


I heard that Jeb Hensarling may have some opposition in his Texas Primary. The Chairman might want to make sure that all of the money he anticipates from the financial services and housing groups doesn’t leak to his opponent because of Hensarling’s extreme positioning— rhymes with “Tea Party”--on important issues.

Links to Other Fannie and Freddie Commentary


·     Nationally syndicated real estate columnist Ken Harney tells why he thinks talk of the F&F legislative demise is premature. 

·       NPR’s Rene Montagne looked at the Corker-Warner bill and examined some of its implications including the major benefits it provides to the large commercial banks.

·       NYU Law professor Richard Epstein produced a superb review of the new legislative interest in F&F as well as the shareholder lawsuits filed against the Treasury. (This article was recommended to me, on the same day, by blog reader Robert Mae and Thomas Goddard. Good choice, men!) 

·       And finally, a thoughtful piece from my friend and former colleague, Rob Zimmer, who now represents a group of community lenders, reminding Congress and others that we are facing a rising interest rate environment—a macro condition in which few of them have made policy--and what that means for all of their mortgage machinations, not just replacing Fannie Mae and Freddie Mac.


Maloni, 7-21-2013



Robert Mae said...

Nice links, Bill. Only comment I have is Zimmer will be wrong for a good, long while because there's no impetus for rising rates. There is one for lowering rates, though.

Deflation, as in, too many broke folks.

Bill Maloni said...

Hey, Zimmer's been wrong before and I suspect that he would be the first to admit it (as I have I), but--not to put words in his mouth--what I suspect that he was observing is that the congressional proposals now being discussed broadly on the Hill and in the media don't dwell enough on a rising rate environment since too few of the principals or media have lived/worked in that mode.

For instance, when I worked at the Fed--for Paul Volcker--he kept rates in the high teens to choke inflation (demand) out of the system.

We have 4.5% 30 year rates and people are running to ARMs, which I think is silly. Take the 4.5% and lock it in.

Robert Mae said...

On a $300k note the savings on an ARM is about $150/mo. I wonder how many choose the ARM route to squeeze those last dollars in?

Given that we're referring to Americans, I'd guess more than a few...

Bill Maloni said...

It's understandable, but regrettable, that so many Americans (consumers and policy makers) have a short term perspective.

Quick tangent. For the life of me, I can't understand why the Congress can't agree on a major public works project that will produce jobs and needed improvements to ailing infrastructure.

Those roads and bridges--marginally repaired--aren't getting any safer or better.

Robert Mae said...

Agreed and I'll add a kicker: Improving infrastructure may be the only thing govt does that adds net value to our GDP. Although our FED would argue otherwise.


Bill Maloni said...

You are right again on the "dopes" part.

This domestic unhappiness showing up in recent polls is some combination of congressional and Obama disdain, which means it will be 2016-2017 before there's a hope for a dramatic improvement---and that's not an ideological preference.

But the GOP better not drag out the 7 dwarfs or the tri-corner hat folks or their candidate won't come close to Hillary.