Let’s Start the F&F Bidding at $25 Billion,
Can I get $35B, OK now $45B, OK $60B….
In a conference call I did this week for a fledgling DC company, Capitol Forum, I explained to listeners why I was “more optimistic than I’ve been in months” about the possibilities that the future would include some form of Fannie and Freddie, working within the nation’s mortgage finance system as privately owned companies.
I cited Fannie and Freddie’s earnings and the fact that both soon (Freddie already has) will cross the point where they would have paid back more to the Treasury than they received; the occasional positive comments being made about the two systemically; Tim Howard’s forthcoming book (available now to those who ordered it on Amazon), and the book’s likely impact on policy makers, opinion leaders, and the media. (Link to the call is below.)
Last, I discussed the possibility of a court decision favoring the plaintiffs in the major “Takings” lawsuits.
Had we waited a day to do that call, I would have included the story which broke publicly today—but has been know privately by many of us—about a group of hedge fund investors which would like to take over F&F, recapitalize them, and run them going forward.
I wonder what old “30-1” former venture capitalist Sen. Mark Warner (D-Va.) thinks about these smart financial people seeing huge value in the business operations that he and his colleague Bob Corker (R-Tenn.) would trash and replace with a new federal agency, carrying its own financial burden and what’s left of Fannie’s and Freddie’s onto the federal budget?
I wonder what Jeb Hensarling (R-Tex) thinks? He’s anti-federal houser who was so PO’d over F&F earnings talk that he put out a press release saying Fannie and Freddie could not repay the Treasury and other unsavory things. (Source, Inside Mortgage Finance.) This is the same Committee Chair who can’t get a majority House Republicans to endorse his do away with F&F legislation.
Hey Congress guys, fresh eyes and management hands on the business, new private capital, and a new paradigm, what’s not to like here?
That’s’ what both sides of the aisle and Hill claim you want.
Yes, this suggestion has been around and been pitched to many in government and media, but it seems to me that it has a far better hope for success than some of the ideas being pushed--ever so slowly indicating little real dedication and commitment--by certain Hill denizens who like the media attention but have trouble thinking outside of a matchbox.
Congress can’t escape the logical consequences of what you are proposing to write into law.
And About Big Banks, Dudley Says…..
One thing I know is that a certain, thoughtful, handsome, blogger–who celebrates his birthday today--has been saying this very thing for years, especially lately while Congress wrestles with giving the primary and secondary mortgage markets away to the nation’s largest banks. (Do any of them read the news and financial pages?)
Suddenly a major bank regulator is saying what I (and others) have said and, possibly, the observation’s wisdom and validity will get through some hard congressional heads.
What Do These Things Have in Common?
--The Federal Housing Finance Agency (FHFA) requires Fannie Mae and Freddie Mac to boost the guarantee fees they charge lenders (who in turn pass it on to borrowers); G fees have more than doubled since 2008, from @25 basis points to slightly more than 50 basis points. (100 BP in a percentage point).
--The FHFA discussing forcing down the maximum sixe mortgage Fannie and Freddie can securitize (a move being opposed by most housing and lender groups).
--The FHFA busy spending F&F’s money (also known as taxpayers' money) on an unnecessary “common platform” exercise—which presumably will produce something different from the Fannie and Freddie underwriting platforms, both of which are regularly tuned and updated to stay ahead of the technology curve.
The answer? Buehler, Buehler…..?
The answer is that all are designed by FHFA Director Ed DeMarco to channel business away from Fannie and Freddie and into the hands of others (shhhh, read TBTF banks) which will package the loans into their own securities, throw their own guarantees on them, and then sell them.
I am sorry, but didn’t we just try this exercise about seven or eight years ago?
Let’s see, the banks still are the same, but larger and more integrated, and still far more nimble than their regulators.
The regulators still are the same, still slow to see any bank wrongdoing.
The rating agencies still are around and the “hear, see, speak no evil Congress” still does whatever it does.
Why suddenly does anyone think the banks won’t turn to form and seeks ways around whatever operating rules the regulators establish? It’s in the DNA and history.
What Are You Thinking, Ed?
Is it then unfair for me to suggest, as I have, that Director DeMarco has something in his heart and mind—not consistent with the soul of a conservator—actively trying to get rid of Fannie and Freddie or neuter them while he has the opportunity and the regulatory authority?
Where has he crossed the line between trying to conserve the companies for their re-entry into the nation’s mortgage market and instead become their jailer/executioner?
I think that’s a fair question.
(Oh, for those asking—in the wake of the Mel Watt Senate action which failed to get the needed 60 votes, only garnering 56—unless he chooses to move on, Mr. DeMarco only can be removed for misfeasance or malfeasance.)