Last
Week, Lots of Major GSE News
Senate
Crashes, While Watt Soars
As I predicted in my previous blog, the Senate Banking
Committee last Thursday did report the CorkerWarnerJohnsonCrapo (CWJC) bill on
an underwhelming 13-9 vote, with one supportive
“Aye” tendered by retiring conservative Senator Tom Coburn (R-Okla) casting
his vote for his friend Mike Crapo (R-Idaho) not so much on content. ( I misidentified Coburn as Sen. John Cornwyn of Texas in the original blog.)
The narrow bipartisan approval likely was insufficient to
show Majority leader Harry Reid (D-Nev)--or Minority Leader Mitch McConnell (R-KY)--the
kind of popular appeal which merits Senate legislative floor consideration.
Compass
Point’s Isaac Boltansky wrote an excellent
post-action report looking at some of the contentious GSE matters. (Also, note how possible future committee
Chairmen voted.)
See Huff Post’s article
on the same matter.
Watt-age Rising (not
his years)!
Ironically, two days before the Senate Banking swung and
missed killing F&F in its time at bat, Mel Watt Fannie’s and Freddie’s new
oversight Director at the Federal Housing Finance Agency (FHFA), hit a solid double and easily could made
third base with his maiden policy speech at DC Brookings Institution.
Watt reaffirmed his support Fannie’s and Freddie’s
traditional role, keeping them working until there was reliable evidence of a
viable alternative, and his commitment to increase mortgage affordability controlling keep F&F fees and charges (contrary
to his predecessor’s agenda).
His speech, whether by design or not, marked Watt as a
key player on GSE policy (which I am certain PO’d certain White House and
Treasury officials, who saw Watt as the policy-shaky new kid on the block and not
their equals).
Given Watt’s impressive debut performance, in the media’s
eye, he might have vaulted over Treasury’s Mike Stegman and HUD’s Sean Donovan (who’s
reportedly headed over to run OMB) as the Admin’s point person on GSE policy. (Grunt level, grumble, grumble!)
The well coifed Nick Timiraos (I know his barber!)
covered the Watt speech for the WSJ and wrote the story linked below.
Tie Richard Bove down and douse him with cold water. If Bove was any
more jacked up and delighted over Mel Watt’s speech portent, public safety officials might have to breathalyze Bove and
cite him for writing under the influence!!! (See
below.)
And
Along came DeMarco….
On the same day that Watt spoke at Brookings, the man who
held the job until the Senate approved Watt, Ed DeMarco, came out to argue that
F&F should be throttled, shut down, and otherwise ignored because they made
market mistakes and “failed,” in DeMarco view.
Wow, what a contrast, the new guy (Watt) holding out
housing and mortgage finance hope and the former guy (DeMarco) spewing
unhappiness and possibly venom. I look for Mr. D to wind up working for one of the
DC conservative think tanks or a Southwestern financial firm hustling mortgage
assets and businesses.
Here’s Timiraos’ story on DeMarco.
This article can also be accessed
if you copy and paste the entire address below
into
your web browser.
|
Mel,
Have a DeMarco Opinion?
Because of the sharp contrast in the Watt and DeMarco
messages, I called Director Watt (“Hey, Mel.
it’s me. Bill) to ask if he had any
response to what DeMarco said, since it clashed so much with Watt’s references.
Mr. Watt, statesman that he is, told me that he
appreciated the situation in which Demarco found himself and knew that DeMarco
was sensitive after President Obama replaced him with Watt. So, with great
understanding and some obvious compassion for a “fallen government veteran,”
Watt told me that I could attribute the following statement to him:
“Ed,
tough noogies; natty, natty boo, boo and nah, nah, nah, nah, nah!”
(No,
I didn’t call Watt and he didn’t say that, just a little Maloni effort at Washington
DC humor.)
In
This Corner, Weighing……
Also last week, in a somewhat related matter, the Washington
Post’s Dina Elboghdady, penned this article about Wayne Hornsby, the ex-FHFA
Chief Operation Officer facing charges over threats to Ed DeMarco’s safety/life.
Conservatorship
Director Watt also delivered certainty on and outstanding
question about F&F’s federal “conservatorship.”
In answering questions, Watt declared FHFA has the authority to make “conservatorship”
changes. He didn’t offer any he would make or promise to do so, but
established that principle.
Now, Watt wouldn’t be heading the FHFA unless the Obama
White House politically blessed and appointed him and the new Director likely
isn’t taking any dramatic steps which the White House and Treasury pols and
quants don’t prior approve.
But, it was refreshing to have clarity on a matter which
concerns many, not just those plaintiffs suing the Treasury over the “Third
amendment” or other F&F issues.
It also provides a location to send their “conservatorship” remedial suggestions.
Here’s an Inside Mortgage Finance story highlighting
that part of Watt’s pronouncements.
|
By Paul Muolo, Brandon Ivey,
Charles Wisniowski
During the Q&A session at the Brookings
Institution on Tuesday, Federal Housing Finance Agency Director Mel
Watt confirmed that the agency has the power to end the conservatorships
of Fannie Mae and Freddie Mac. But he noted that he has not
contemplated what an end to the conservatorships might look like. It’s safe
to say that all those hedge funds that have been speculating in GSE shares –
both common and preferred – were listening closely to Watt’s every word...
|
What
Some May Be Missing
It’s a simple position for me to take but hard to
understand, if you never worked in a financial
institution or for a financial
regulator
When it comes to mortgage finance, one of the reasons I
support a Fannie Mae revitalization or reprivatization, where Fannie or some
other significant financial investor
acts as overseer, is because I don’t trust the nation’s large banks to
behave.
U.S. financial institutions have shown themselves capable
and willing of rampaging through all sorts of federal regulatory constraints
and, frankly, are faster, more nimble than the bureaucrats, and always will
take risks to make money, which is their primary reason to exist.
It matters not how august the federal regulatory
officials are (see Board of Governors of
the Federal Reserve System or the United
States Treasury), banks will undermine them, sometimes knowingly or
unknowingly with the assistance of the very agency personnel they are subverting.
But, here is my metaphorical explanation of why mortgage lenders
(most controlled by the large banks) won’t easily prevail if they tried to scam
when selling loans to Fannie or seeking Fannie’s MBS securities.
If
your watchdog is bigger and meaner than the bank dogs--and motivated because one
of his body parts is at risk his, i.e. “his skin is in the game” (think
Fannie’s money)--that nasty dog will do a far more ruthlessly efficient job, than any pretend federal watchdog who barks only after the bank dogs
violate the “no peeing in the house and drinking from the toilet bowl” rules.
And, yes boys and girls, it is all about the money. Maybe
if the federal government shared those stiff, after-the-fact, bank fines with
their employees who snoop about sniffing bankers’ activities, the Feds would be
more effective at insuring the nation’s citizenry won’t have their carpets
soiled so much by regulated financial institutions.
To earn/generate more revenue is why banks manipulate and
cheat.
The
Ongoing Story of Maloni
and
the W Post Editorial Board
Once upon a time……
Again, last week on the even of the Senate Banking vote, the Washington Post editorialized against those opposing the
CWJC legislation, continuing the paper’s crusade against Fannie and Freddie.
Predictably, I sent a letter to the editor, which naturally
was ignored, but appears below.
Today's Post editorial--dumping on the continuation of Fannie and
Freddie--misses the sunshine and spreads just the doom and gloom your editor’s
see.
First, in less than three years, F&F have repaid all of the
$187.5 billion the government infused in them and added what is now a $23
Billion and growing surplus.
Next, opposition to the Senate bill to undo Fannie and Freddie was
opposed pretty broadly not just from the from the "left"-- to which
the Post gives credit--but also from the right, i.e. see opposition from Cato,
AEI, Heritage, Club for Growth and many conservative others. In addition, the
Urban League, Ralph Nader, the Independent Bankers Association (ICBA), the
National Association of Federal Credit Unions (NAFCU), the Credit Union
National Association (CUNA) and others objected to this plan which basically
shifted control of the nation's mortgage markets to the large commercial banks.
(Please read some of the opponents’ detailed objections.)
The big National Association of Realtors (NAR) also expressed
concerns about the bill's costs and negative impact on mortgage affordability.
It's important to note, which the Post also seems to avoid, that
Fannie and Freddie--unlike any other entity which received federal financial
kelp--were banned from lobbying as part of the 2008 takeover and the myth of
F&F lobbying opposition should be buried, too.
The Corker-Warner-Johnson-Crapo Senate bill is bad legislation
and would extend huge federal rewards to the large bank lenders which
helped drive the US 2008 financial disaster (far more than F&F did, just
compare the relative losses of the principals), has no certainty for mortgage
financing for low and moderate income families, and proposes a Rube Goldberg
regulatory regime, none of which yet exists. No wonder people opposed it.
The Senate bill would take years to implement putting a new
regulator in charge while F&F got unwound and the banks got to use their
new federal mortgage securities federal guarantee. A recipe for disaster if one
looks closely at bank behavior in the past few years.
The housing finance sector of our economy, which is about 20% of
GNP, deserves far better.
Yes, retooling F&F--with significant structural changes--would
occur more swiftly and more surely, with less cost, more certainty, and less
political bloviating.
Cabinet Shuffle, New HUD Secy?
Weekend news reports
have President Obama nominating San
Antonio Mayor Julian Castro as HUD Secretary, as current Secretary Sean
Donovan’s moves over to the Office of Management and Budget (OMB).
Castro’s twin brother,
Joaquin represents San Antonio in the US House. Both brothers are considered
rising Democratic political stars.
Now it’s Julian Castro’s
turn to try his hand at F&F politics.
What
Others Said and Wrote
I have never regretted labeling Tim Geithner, big
banking’s best Democrat friend in Washington, when President Obama named the
head of the New York Fed to be his Treasury Secretary. His actions bore that
out.
Gretchen Morgenson’s New York Times column reviewing
Geithner’s new book underscores that point.
***************************
Reuter’s did a story on Watt, speaking later in the week,
and expanding his Brookings views.
****************************
An article from the Center for Economic and Policy Research
pops the balloon of the CWJC advocates who claim—unlike the current situation with
Fannie and Freddie—their bill will removes the federal government from any mortgage
market loss obligations, by substituting private capital.
***************************
I just had to add this Huff Post review of the
coming Koch brothers’ biography. A brotherly croquet mallet to the head and
ceremonial sword in the back…and that was when they were kids??!!
“Bad boys, bad boys, whatcha gonna do…..!”
*******************************
Benghazi and medical fantasies, someone is afraid of
Hillary Clinton and guess who it is (Rove and Priebus are stalking horses)?
And, if you need reminded, Republicans play very
dirty even against one another.
http://www.cnn.com/2014/05/17/politics/mississippi-gop-primary-arrest/index.html?hpt=hp_t2
Maloni, 5-19-2014
(Remember, post any comments or questions below.)
(Remember, post any comments or questions below.)
10 comments:
Mel Watt threw his politician hat in the trash when he accepted a position where he could make a difference as a regulator. So far he has done a good job analyzing the situation. Now let's see if he can influence the blind to what he sees.
Anon-Yes, I agree. He's done a very good job in his early pronouncements.
But, they never doff for good their "politician's hats." In part, that's why they were/are chosen.
With Stegman so attached to he losing CWJC, Donovan taking on the big OMB budget and revenue issues (bet he'll like that F&F cash even more), and Castro a rookie coming in, we'll see it Watt flexes his policy/political muscles at all.
Watch Corker's youtube and the read comments
https://www.youtube.com/watch?v=PTlEkzkjih0&noredirect=1
Anon--Thanks for sending that video.
"Heh, heh, heh. I'm very happy with the bipartisan vote we'll get today and by the way, heh, heh, heh campaign contributions can be sent to......! I know you boys can't max out."
Did you notice his nose get longer as he spoke?
Joe Kernan gave him the best advice, telling Corker, "Get off Fannie and Freddie and get onto something important."
Doubt if he'll listen.
An undercapitalized duopoly. How'd we ever get there? Need reform to protect Treasury from another massive windfall. Corker for President!
Anon--
Well that's one perspective.
If you believe that the huge baggage contained in the CWJC bill is acceptable to you, with far more exposure then F&F projects now, even with your doomsday scenario, then vote for Corker or anyone else who agrees.
Do you think the banks--who benefit form CWJC--are not going to charge everything they can to make those loans, when F&F are gone?
And CWJC's new federal mortgage insurance securities guarantee is why the bill is also attractive to the banks.
If you lean conservative, you might want to check out the details--where and when they exist, because major parts of this bill are "on the come"--and see if they square with your standard outrage threshold.
Please let me know what you find.
Bill, I am posting again in response to a comment made, under capitalized-duopoly....
I apologize the comment was completely sarcastic and a ridicule of the YouTube link someone posted. I thought you might pick up on it when I said the bill was to protect Treasury from another massive windfall. It certainly won't protect the taxpayer because to do that, there is no bill needed. Future results may vary however, but I doubt it. The taxpayer is in good hands at the end of the day with Fannie Mae. Cheers.
Anon--Funny, I just spent a few hours today with an old friend who said, "You know you have a reputation for being very sarcastic?"
To which I plead, "Guilty."
And, if you are subtle some people won't get it and get upset (not me!).
So, on some of the comments I put on sports blogs where I encounter lots of crankies or bullheadedness, when I employ sarcasm, I attached what I am told is the "emoticon" for sarcasm, a smiley face with a crooked right eye, achieved by using the semi colon in lieu of the colon, like this.....
;-)
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