Monday, November 24, 2014

Soaring President and Slumming Cabinet Secretaries

Bold Prez & Dumb and Dumber
The Administration was at its schizophrenic zenith last week, and admirable high and a mindless low.

A bold President Obama—facing political obstinacy--announced his totally appropriate  executive order to try and fix our broken immigration system and open our nation’s door to some, not all, of many illegal immigrants and their families.

IMO, the President’s action was necessary because earlier a less conservative Congress refused to approve immigration reform and with GOP control in the House and Senate, juiced by even more Righties, there was little hope of immigration progress. 

The President calculated that a new Congress will not approach immigration in a more thoughtful and moderate way in 2015, so he used his inherent authority to start this ball rolling forward in a constructive and humane way, inviting Congress still to write its own legislation. (Although I think he did with a tone which suggested they also attempt something that is anatomically impossible.) 

The President ignored the GOP threat not to go forward without them and Republicans now will try and make him pay (for doing something on immigration Senate R’s approved a while OK, but who is checking)? 

Given how poorly the GOP Congress has treated Obama, what was there for him to lose? 

He stepped across their line, knocked the brick from their shoulder and told them (paraphrasing), “I want to move forward.” You still can legislate, he told them, “Pass your own immigration bill.” 

We now will hear a list of Obama retaliatory actions the GOP plans to take, which legislation they will hold up or encumber, ditto on Obama appointments, funding, government closure (oh no not that, again), rananna, rananna. 

It hurt them the last time, it will hurt them again, since that kind of behavior detracts from what they claim is their goal to show leadership and responsible governing.

The Star and his Non-Stars 

As Obama shined standing astride his lofty peak, two politically tone deaf minions were fast digging valleys and chopping away at the principle their boss wants to establish, his right to unilateral moves via regulation. 

BHO’s stellar initiative was dragged down by twin  naïve and dud calls by HUD Secretary Julian Castro and Treasury Secretary Jack Lew, both asking the R Congress to please legislate, again, on mortgage finance reform.

Dumb and Dumber—staring victory in the face—chose to ask Jeb Hensarling (R-Tex.) and his colleagues to write a new mortgage finance bill which I guess they hoped would look different than Jeb’s last one. That initial Hensarling effort, which barely crept out of the HBC, took the federal government out of the conventional mortgage business and gave all of that mortgage activity and the fate of those consumers to the commercial banks.

Everyone knows bank and their subs are honest, caring institutions, thoughtful about matching families to the right mortgage loans for them, at affordable rates using transparent and understandable marketing and closing terms and costs. ;-) (That’s the symbol for “sarcasm.”) 

Did nobody at the WH or the DNC, SDCC, or DCCC tell the Administration dunderheads they won the GSE fight, since nobody on the Hill, seriously, was talking about new F&F legislation in 2015?  Nobody really wants to open up that political can of worms which fizzled on all of its sponsors earlier this year and create mortgage uncertainty—and voter backlash--in the buildup to a presidential election?

Who Diapers These Guys? 

Did anyone suggest the WH had a clear path to produce far more affordable housing for middle income families, using its recognized executive authority, and didn’t need to start a congressional knife fight, especially when they were armed with a dull plastic knife?  

To underscore that point, earlier in the week, the new SBC ranking minority Senator  Sherrod Brown (D-Ohio) called for a new start and fresh review of what in the US mortgage finance system needs fixing , rejecting the old CWJC legislation (which dies with the current Congress),  while expressing skepticism about the need for such a dramatic makeover. 

Even more explicitly, the retiring SBC Chairman, Senator Tim Johnson (D-SD), urged Mel Watt, when Watt testified before him on Wednesday, to encourage the WH to move forward using executive authority and rulemaking to change the F&F conservatorship rules. 

Letters from community groups and other housing advocates were sent to Watt/Obama urging the same thing. 

Many observers suggested Congress, not desiring another fight over F&F, was resigned to let this Administration work on the edges of conservatorship and expand the F&F credit box, increasing eligibility and affordability. 

No, We Don’t Want This Win; Instead. We…..

But Castro and Lew—obeying who knows what political instincts (Lew has shown few, while in office, and Castro may be too new to display any)—opted to ask for Hill help.

Maloni to world: “Never ask for advice or help anyone to whom you have to listen!”

Castro and Lew to Congress: “Let’s sit together and produce the F&F successor.” That’s like inviting cannibals to your home for barbecue and only having four hamburgers for your 20 ravenous guests.

Just what the nation needs another politically naïve HUD Secretary. Lew, once a Tip O’Neil protégé, seems to have lost whatever Tip taught him about Democrat constituencies. 

I hoped someone spanked those two misbehaving kids. 

Would Julian Castro pin his political future on any mortgage reform bill the House GOP might pass? Would he advise all of those D 2016 congressional candidates to do the same? 

Or does he think he is smarter, more agile, and a more wizardly negotiator than those Hill conservatives? 

With what does the HUD Secretary have to negotiate? Better yet, Castro first should answer, “What do congressional Republicans want from HUD other than to have it rapidly disappear?” 


What WH D's Look Out for U.S. Mortgagors? 

Does any current Cabinet official think the traditional Democrat constituencies or the new citizens President Obama wants to help settle in this country are best served by Jeb Hensarling and his posse?

Aggressively using inherent regulatory authority to make Fannie and Freddie work better and more flexibly--which virtually every housing finance and real estate industry association wants --will add more to the “Obama Legacy,” than a GOP blessed bank dominated mortgage finance system where the "bigs make all of the rules? 

Are there any adult pols still willing to label themselves Democrats watching these Cabinet guys, because someone should? 

It Ain’t Rocket Science GSE Supporters,
Consider Your Home Plumbing System

Always seeking to educate and illuminate, I share these ideas with those who believe the nation’s future mortgage finance system should have a major doses of F&F in it. (If it works, use it.) 

I’m happy to report that most American consumers and voters—when forced to think about it—do not care what  critics (mistakenly) claim is GSE history? 

They instead think in terms of today and now, when contemplating a mortgage. 

They think about being respected, treated fairly, not getting lender-gamed or manipulated, getting affordable mortgage finance options, and priced equitably and efficiently. 

Small analogy. 

At home, when you draw water from your faucets (I mean those who don’t rely on bottled H20), how much do you ponder, systemically, the blueprint of your house’s plumbing system, connected to the municipal underground piping that gets fed by the locality’s water system?? 

Not often, I suspect.

You want clean water, pouring out of the pipes and taps, devoid of germs, and priced well. 

Fannie and Freddie opponents face an uphill fight to replace two institutions and their market operation which most people like. 

The uphill fight can be made even steeper and more difficult, if F&F advocates keep a few things in mind about the water system.  

If your water system (nee mortgage finance system) works well but has been improved with six years of solid product and systemic regulation--and what you have is safely meeting your water (mortgagor) needs--why scramble to turn it upside down, when the chaos inducing change easily could screw up the water delivery, make it more costly, and far more confusing and unreliable?

The current mortgage finance system works and is being adjusted to work better and support more mortgagors.

There was a reason that behemoth CWJC proposals, filled with uncertainly and confusion proposal, tanked.

Keep those safe water thoughts things in mind.!

What Others Are Saying 

Seth Bornstein writing for Yahoo discusses a new Swiss study which claims banks and their culture encourage smarmy and underhanded behavior.


Oh, Fed, Treasury, OCC and DoJ, say it isn’t so. What a shock! Now someone will claim there is “gambling at Rick’s!”

I guess some of us weren’t imaging things when I—and others—wrote about soft regulations and regulators. 


Me to a Prominent Financial Services Reporter

I exchanged emails last week with a reporter who covers GSE matters for a major publication and chided F&F bank critics (see Financial Services Roundtable and the American Bankers Association) for their myopia. 

First off, the banks—which claim they are “private”-- are into denial, since every segment of the national financial services network is backed by the federal government, none more than the banks with the FDIC insurance behind and attracting most of their working capital. Their benefits and subsidies go far beyond that with the paternal regulatory regime most banks enjoy. (See previous link and shame on the Fed, Treasury, OCC, FDIC and others.)   

Here’s what else I told the writer. 

I am used to "fast and loose" when it comes to F&F and it's not exclusive to any political party. Most Hill denizens have no idea what they are doing or saying, how the mortgage finance system works, or how massive and disruptive the impact would be on the transitional change contained in something akin to CWJC, even if the changes could be agreed upon. Who really needs that? 

Forget one's ideology or political choice, we've created this massive banking system, with a largely compliant regulatory system (the fines mean nothing); trillions of federal dollars supporting it; and institutions can't/won't create a mortgage market absent additional trillions in new federal MBS loss insurance?

What good are those banks?

That’s why I keep saying, just maintain the mortgage system we have--which works fine from a mortgagor perspective--and work at the margins to keep it transparent, efficient and cost-effective.

Gretchen Morgenson, in her NYT column, reports on the Fed’s plans to study itself. Hmm, physician heal thyself?


Sen. Sherrod Brown (D-Ohio) on the desirability of a fresh start for a mortgage system review. 

Bloomberg’s Clea Benson writes about Sen. Tim Johnson (D-SD) urging Obama Administration to alter conservatorship via executive authority. 


Julian Castro stepping in it.


 Jack Lew follows and steps in it, too, as per Joe Light in the WSJ.

Washington Post (I hope) Embarrassed, Again?

The W Post last Saturday listed Fannie and Freddie as two of the highest stock performers for the previous week. Will the Post tell us how those “federal agencies—the ones with stock symbols and trading common and preferred stocks, managed to do that? Probably not soon, since I still am waiting for the paper to print its first report that Fannie Mae executives were found not to have engaged in securities fraud, two years ago when that federal court decision came down.


GOP Corner

House GOP wants fewer scientists and less science on Science Panel.

Congressional Republicans Battle Each Other


Maloni, 11-24-1014








Anonymous said...

My favorite post to date.

Bill Maloni said...


Thanks, maybe I was reverse-motivated by my weekend from Hell, as my wife's car got stolen and out new oil heater exploded, two days after receiving its annual maintenance check and "a new valve?" Did I mention confronting and trying to help an alcoholic motorist---whose car was sitting on the media strip--as we walked home from the nearby restaurant after dealing with police and the purloined Fiat 500 convertible?

Mr fid l sticks said...

As always thanks for all the good stuff ......
This may very well be the theory of everything just replace the word banker with journalist, congress person or ???

Bankers have tendency to lie for financial gain, say scientists

By Clive Cookson — Swiss researchers have come up with what they say is compelling scientific evidence that bankers lie for financial gain. The team at the University of Zurich used game playing experiments to show "that the prevailing culture in the banking industry

Bill Maloni said...

Mr. Sticks--Incisive!

Anonymous said...

Who is Lew repping in his office? The big banks already have plenty of allies.

Bill Maloni said...

Anon--Those traditionally have been for whom the Secy (D&R) protects and coddles (see Geithner, et al).

Sherrod Brown (D-Ohio) got that onto the hearing record last week in the Senate (see the Huff Post article detailing that accommodation, which I linked in this week's blog).

What I tried to point out the WH's approach to mortgage finance reform--despite the Admin's rhetoric--did not seem to include the Democratic party's historic constituents, middle income America and minorities.

As I noted, there was nothing, repeat nothing in the CWJC proposal the WH championed that required any lender anywhere to originate mortgages for low income families.

There was a fund for that purpose but no lender mandatory use of it. Plus there was a crap load of other things which many of us argued was anti-consumer and, frankly, which was why it died after a SBC marginal SBC vote.

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