Sunday, April 6, 2014

All Those Holidays Sound Alike

You Don’t Have to be Jewish to….


Congress takes its Easter/Passover recess at the end of this week. 

Some non-Jews confuse Passover, which celebrates the Moses-led Jewish exodus from Egypt, with Yom Kippur, the holiest of Jewish holidays where Jews fast, go to temple, make amends and atone for their sins. 

That confusion could be great for us suffering citizens and truly serve our nation well this year. 

With their dubious record of any success, Christian and Jewish Senators and Members, alike-- even those (quietly) professing no religion—should rush right home and atone for their public and professional sins.

In fact, even before they go home, they should run to their offices, drop to their knees, and seek forgiveness for failing to serve this nation as faithfully and honorably as it deserves. 

If it makes them feel better and helps them get over, they still can have the traditional Passover matzo, which isn’t a treat associated with atoning and Yom Kippur.


Fundraising: “Laissez les bons temps rouler”


Now that the targets of their fundraising campaigns no longer can argue, “I’ve maxed out” (___ __ you very much, SCOTUS!), our Washington solons in both parties will revel in new opportunities to shakedown their “financial supporters.”

The funders, who now can’t hide, will give more and reciprocally demand action on their priorities. Congress will talk out of both sides of its mouth and do little that’s good but a lot that isn’t.

Our public officials, all, will grandly explain why that resulting legislative activity is necessary or desirable “to insure ……. (Fill in your favorite hackneyed justification.)!” 

As always, Members of Congress will fence with the truth.

What’s Doing With F&F?

The next big F&F thing, unless it comes off its tracks, is a Senate Banking Committee markup of the CorkerWarnerJohnsonCrapo (CWJC) bill set for April 29. 

In my first 2014 blog written three months ago, I predicted that Chairman Tim Johnson (D-SD) and his ranking Republican Mike Crapo (R-Idaho) would be able to report mortgage reform legislation from their committee, with the requisite votes (12 is a pure majority, but who knows how many of the 23 members will be present to vote that day). 

Reportedly, CWJC has 10 hard supporters, requiring two more to report a bill to the Senate floor. But Johnson and Crapo reportedly want to get at least five or more additional committee backers to show broad support, which they believe increases the proposal’s bipartisan floor appeal.  


A small group of Democrats want more assisted housing, both rental and single and multifamily for lower income families, and the Republican would prefer less. 

Right now, save some quiet words from Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass), nobody on the committee seems to care about the massive power infusion the bill holds for the nation’s big banks. 

Some of the big homebuilders care; certainly the smaller community banks and mortgage lenders care; and the behemoth National Association of Realtors (NAR) should care, because if the banks get stronger it will be harder for them to defend the NAR’s statutory protection which keeps banks out of their business.
Just saying, NAR, and in keeping with our seasonal theme, I'll remind you that even Jericho’s walls came down. 

Not sure how canny Senate Majority Leader Harry Reid (D-Nev.) will react to all of this, but he can’t stop the Senate GOP campaigns--running against his vulnerable Democrat incumbents--from labeling this bill as anything but grotesque deficit spending and a bank giveaway, with its multi-trillion dollar federal budget price tag and Uncle Sam standing behind all of it (even what’s left after they atomize Fannie and Freddie). 

If that line sells back home, look out Senate Democrats in November, if you voted for this bill.  

That means the Leader may not cave to a floor vote and not have his Senators walk the plank, which says nothing about the Republican-control House agenda which would remove the federal government totally from mortgage finance system, as per the “Hensarling bill.” 

The latter, which rids the nation’s mortgage finance system of any real federal presence, barely emerged from the House Banking Committee, limping to the House leadership offices to be held in abeyance for months. (Translation: The top House guys ain’t wild about their own bill, either.) 

In the meantime, a purported senior citizens Koch brothers surrogate (is it pronounced “Coke” or “Cock,” since I heard it both ways?) has started a $1.7 million media campaign in the states of certain key US Senators urging defeat of the CWJC bill. 

Gives new meaning to the phrase, “Things go better with……!”

(Yes, I admit it, I am parodying their name!) 

Some brave spirits—ooh, ooh, ooh, me teacher--believe CWJC isn’t needed and something far less drastic, earth turning, and more workable could be fashioned if GSE scalps weren’t a predicate to producing a bill.

Unfortunately, those who think this way don’t have 12 Senate Banking Committee votes behind us.

Is the MBA Playing “Whacka Mole?”

The hardest working man in DC’s mortgage finance world has to be David Stevens. Seemingly, he is everywhere endorsing everything and opining on all related matters.
But, David, there’s working hard and working smart. 

Stevens is on record supporting every “get rid of Fannie/Freddie” proposal and is heavily invested in the CWJC proposal to shut down Fannie and Freddie and launch a new federal agency which would provide more income for his members and those owned by large banks.

One would think that slowing down F&F and their heavy earnings would make Steven’s heart twitter with glee. 

But last week, he was tub thumping for Fannie and Freddie to reduce their internal lenders fees and charges to allow more Americans to finance housing through the F&F operations (oh, and increase business/income for his guys/girls). 

Mr. Stevens, if Fannie and Freddie acquiesced (with Mel Watt's permission), wouldn’t that greater mortgage business volume just boost their earnings, as in “cut prices and make it up on volume,” and add to their Administration-appeal making it tougher to get some people off that federal teat and abolish the former GSEs? 

Memo to David Stevens: Slow down, tilt with one windmill at a time, hold off the glowing praise for every legislator/regulator who touches a F&F reform issue, and check over your shoulder to see what your members think. You get too far ahead of your dues payers and you might find yourself in an executive position at a fast food restaurant, practicing...
“Do you want eggs with those biscuits, honey?”

Two Examples of “The Devil is in…” 

Let me share two current, “live” examples of why congressional statute has to be read line by line and understood in its entirety. 

Josh Rosner, whose work I blog-highlighted before (and once blog-low lighted), apparently emailed various Hill people and pointed out specifically why the boastful language of CWJC advocates may not be accurate and may represent an even larger giveaway to the “you know who” gigantic financial institutions. 

Specifically Rosner wrote:

 “Beyond the section which allows the suspension of private first loss in uncertain economic environments (see page 331*), even in normal times the first loss is weak: Section 302 (4)(A)(ii) allows the FMIC to approve

credit risk-sharing-mechanisms that ‘do not represent the first loss position with respect to single-family covered securities.’

“Section 302 4 (B) also supports a diminution of first-loss: ‘Nothing in this paragraph shall be construed to limit an  approved guarantor from engaging in other forms of risk-sharing or risk mitigation using mechanisms that have not been considered or approved by the Corporation.’ ” 

Most Hill observers expect—if CWJC ever becomes law—that only the largest of financial institutions, banks and some “SIFIs” (strategically important financial institutions) would be approved as “guarantors,” under the bill’s provisions. (“Stan: What do you think Ollie, certainly no self-dealing or screwing the Feds opportunities in there? ;-) 

The other example of devilish details involve some missing ones. 

One of the smartest mortgage finance people I know, very detailed, very into the structure and operational aspects of mortgage and securities matters, emailed me last week, asking if I knew of anyone who had done a rigorous review of the new Maxine Waters (D-Cal.) ranking Democrat on House Banking, mortgage reform bill—which would do away with Fannie and Freddie—and substitute

a lender-owned mortgage cooperative to put Uncle Sam’s guaranty (as per FMIC) on mortgage backed securities? 

When I pushed him as to why his question, he said that he looked carefully at the entire bill and there were significant missing operational pieces or just assumptions that some future entity or regulator would fill in the gaps. 

So, sometimes it’s what’s not in proposed federal legislation and sometimes, it’s what’s actually in there which disturbs.


What Others are Saying

A Federal judge accepts Fairholme’s “discovery” schedule. 


Fed Bank President Tells Japanese, “Pox on both the US House and Senate and the White House for…..”



And I'll close with two Fannie Mae/Freddie Mac stories.



Maloni, 4-6-2014



Duncan MacLeod said...

Thanks -
Atonement from the politicians- I know you were a romantic.

Kidding aside- various groups are forming, but despite words like coalition, the movement is still fractured and political Jaguars Like Koch are trying to usurp the GSE message for their own anti-gvt agenda-
the GSE is for the working middle class- not the rich not the poor.
There really are not many Champions for us.
Thank you for our efforts

Anonymous said...

Bill the point about how legislators are focused on affordable housing while ignoring the fact that this rolls the red carpet out for big banks and pulls the rug out from the American public is most notable. What the F are these morons thinking? There has been NO offer of middle ground with any legislative proposal yet to speak of which gives me reason to think it will be "all or none". None will win in the end.

Bill Maloni said...

Duncan--That why--when working at Fannie--we used the phrase "situational allies," because it was tough keeping a coalition together that could agree on a few moving parts, let alone every single issue we encountered.

We'd trumpet our agreement, soft peddle our differences and try not to call any attention to that latter fact.

But the details become important.
Different interests opposing different provisions create congressional awareness.

My hope is that the coming group and constituent visits to DC which some are generating--along with more attention to holes in CWJC--will cause some in Congress to reconsider what they would have you believe is set in CWJC concrete.

Anon-If there is an April 29 markup, I'll bet there will be additional or more defined, assisted housing (and I have no idea the detail) or what good is it being a D on a Dem controlled committee if you can't support your principles (if not principals!).

But, as I've written, the more J-C go in that direction, the less happy the GOP is and they may walk away from the bill, especially when they start hearing, directly, from some of those talking shareholder issues and, possibly, concentration of big bank power.

Like so much, when schedules are set, 4-29 might get pushed back if the sounds coming from the committee membership and the Senate leadership are not harmonic.

Anonymous said...

Bill....noticed Sen. Sherrod Brown commented that GSE reform won't make it through (source Bloomberg) the Senate this year and called for simplier (nd more politically palatable) changes to be made. First off, have you heard anything about this, and secondly, what's the 'politically palatable' part refer to in your opinion?


Bill Maloni said...

GW----Yes, I did because it is significant and I circulated it today for that reason, to a small list I maintain of key players and analysts.

(BTW, I did the same with today's Ralph Nader letter, sent to J and C, today. It too is significant but for a different reason, which I'll mention.)

Brown said two things (paraphrasing), "could get out of the committee but won't happen this year," more because of how disparate the CWJC and Ensnarling bills are (forget Waters for a moment).

And, he also made that very pregnant comment about F&F, which might begin to open some eyes to that possibility for all of the reasons I and others have been saying.

I consider Brown's statement quite significant; others have been saying similar things in lesser forum but he is the most prominent voice to date.

As most people know, if the Senate stays in Democrat hands, Brown could be the next Committee Chairman--but hat's a big "if."

The second thing--embedded in Nader's letter is more and detailed discussion about the bill's shortcoming and major big bank benefits.

As I have ben hoping, when the latter reality fully hits--and Nader does brings PR and attention--I think that will slow this train immeasurably.

I wouldn't be shocked if the 4-29 markup date slips and maybe for a while.

Again, as I've blog noted, there is a growing amount of Conservative opposition to CWJC and not from back benchers. Cato, Heritage, and AEI are pretty prominent in those circles and they all have turned thumbs down on CWJC.

Thanks for the opportunity to expound on these two very recent events.

Anonymous said...

So Bill,

Answer me this.

Why haven't Fannie and Freddie been released from conservatorship?

They are stable. They have profits. They have no risk of collapse. They have the full faith of stellar - super management lead by the FHFA.

What else do they need to escape their captors?

Anon 1. JM

Bill Maloni said...

JM--Surely you jest (and no I didn't call you "Shirley")?

This all is politics, not business or even housing dogma.

F&F are systemically very essential (or they would be long gone) but they have no prominent or consistent allies/advocates to fight the fight needed to have their shackles removed.

I'll have more in the blog I'll put out tonight, but we just are beginning to see recognition of their utility--especially when compared with the "Rube Goldberg" CWJC operations--and understanding where their opponents may have overstepped.

But that will be a long, long process and control in this town is moving right, big time, away from those who might want to keep F&F functioning and away from CWJC.

F&F both are useful but reviled, the question (as I've asked for months) is who in Washington will stand up and argue for their release?

Sen. Sherrod Brown (D-Ohio) may have been the first prominent voice last week to do so.