Some Cats and Dogs

F&F Action and Smallish Mea Culpa

 

Should be lots of Fannie and Freddie Fodder this week, especially when Mel Watt testifies before the Senate Banking Committee on Wednesday, but first I need to open with a few follow up items.

I am contrite for going off so heavily on the GOP in my last blog. It’s not what most people want to see/read/hear in this venue.

I believe what I said and think all of it is supportable, but it’s only a sidebar to the broader financial services and Fannie and Freddie discussion that I hope the blog generates.

I plan to keep better control when I am tempted to engage in excess. Maybe using fewer sentences expressing my opinions is a good start.

Several of you wrote directly, while others wrote to the “comments section” about “Cubans” and my discussion of them categorized as “Hispanics” or “not Hispanics.” Someone asked should anyone be categorized by anything but their native country?  (“I was born in Mexico, I was born in El Salvador, I was born in Cuba, etc. etc.)

Views ran strong and deep and it doesn’t matter what point I was trying to make about the GOP and why most—not all Cubans—are registered Republicans.

More to the point, the national Republican Party and its congressional manifestation have about 15 months or so to prove to the nation that they consider last week’s vote to be a mandate for something different and positive for the American public, not just to gloat over a strong anti-Obama fallout and continue to tread on our unpopular president.

Always an optimist, I am rooting for the former, but have my doubts the GOP can rise above their inclinations and pull it off, since they will try and hang the sitting President (and all things Obama) around the neck of whomever the Democrats chose in 2016.

Not sure if that’s the path to desired and necessary national leadership or using your newly validated political strength to design policy and govern. But we’ll soon see if the enhanced GOP “in action” means anything other than more creative gridlock. 

Fannie and Freddie Reality

Lots of speculation on what’s next for Fannie and Freddie, a subject on which I’ve speculated, too. 

Indeed, most of the current post election talk has tended to reiterate the conventional wisdom that the Dems, with only 45 votes, can forestall massive unpopular policy changes (GSEs—if it is too extreme--or anything else) because the R’s will need 60 votes to override a presidential veto.

During the lame duck session, we will hear more F&F “noise,” but that’s because the real players won’t be talking substance/strategy now but waiting until the dust has settles on congressional committee and party leadership choices. Although Mitch McConnell (R-Ky.) and John Boehner (R-Ohio, already have been chosen by acclamation to be the Senate Majority Leader and House Speaker, respectively. 

SBC and HBC 

Once Sen. Dick Shelby (R-Ala.) lays out his Senate Banking Committee agenda—if he chooses that over chairing Senate Appropriations --we’ll get a much better insight; ditto with HBC Chair Jeb Hensarling (R-Tex.), if the latter survives a House R Caucus challenge from Frank Lucas (R-Okla.) or somebody else. 

Until those committee authorities emote, most speculation will be just that. 

The DC “nattering classes”—as opposed to “knitting”--think that the GSE knot is too tough to cut next year and believe the Congress is willing to let well enough alone and look the other way as the Administration makes some marginal changes in operations through the regulatory process.

Not to be the skunk at anyone’s picnic, but I believe the above is accurate, unless the House--which gets much more conservative once Nov. 4’s GOP winners join up--also gets super pragmatic—figures out some way, creatively to wrests concessions from their Senate counterparts (on this or another matter) and send some version of the CWJC bill to the President’s desk, thereby politically belling the President’s cat. 

That action would allow the GOP Congress loudly to take credit for pushing a law to solve the nations’ housing finance system problems.

I don’t think that will happen and nothing they can do instantly will fix the nation’s mortgage finance system, but it would be a mistake—at least now—to underestimate House GOP flexibility and its desire to help deliver the WH to their presidential favorite son. 

Anyone arguing that CWJC or most variations won’t accomplish that objective--but merely rearrange the Titanic’s deck chairs, putting the big banks in First Class--will be shouted down by the GOP media machine as it plows forward shaping the terrain to defeat Hillary Clinton or whomever is the 2016 Democrat candidate. 

So, this “Big Lie”—since a close review of those Senate bills reveals little that is pro-consumer or pro-affordable lending--will succeed (but not replace) the other “Big Lie,” which claimed F&F caused the 2008 financial disaster. 

Lawsuits

Reminder: The many “third amendment” and “takings” lawsuits will move at their own pace, occasionally impacting what happens elsewhere but for the most part the court proceedings move on their own track and schedule. With possible appeals and SCOTUS looming behind anything near-term, the process with will be with us for a long time. 

(CRT’s Mike Kim reports that Continental Western Insurance, plaintiffs in the Iowa F&F lawsuit, have filed a motion against the government’s initial filing, asking Judge Ross Walters to dismiss the case because of the Lamberth finding. Plaintiffs note that GWI was not part of the Lamberth lawsuit and that the government’s request for “preclusion” violates SCOTUS rulings.) 

Watt’s Wednesday Senate BC Testimony

Watt should expect to hear bitching from both sides (although D’s will treat him with more respect) over every issue that been in the media the past two months, from 3% down to agency fees, the Admin’s authority to act without Congress, common security and underwriting platform, and maybe even gun-toting FHFA investigators. He might get asked about the court cases, at least his agency’s part of them (most of which occurred before he got the job). 

If President Obama truly is going to move independently on immigration, soon, Watt won’t budge much from the general principle of Administration regulatory authority to take actions either in general or in the case of congressional intransigence.

His testimony will generate a few news stories, but I would be shocked if Director Watt goes much beyond mortgage finance policy where he and other Admin spokespeople have marched.

 

What Others Are Saying 

TH717, a Good Primer 

One of my blog goals has been education of people who come late to the GSE issue and don’t know or can’t appreciate the interplay of opposition to the mortgage giants from the GOP and the F&F business and political opponents.

That’s one of the reasons why I periodically point to books and articles that illuminate and link other material on the issue. 

I don’t know the person I’ve labeled “not our” Tim Howard” (have no guarantee that is his real name or if he writes the stuff appearing in his journal), but he has been publishing GSE opinions under the name “Tim Howard717” and generating interest.

This past week, he published a useful primer, almost a distillation of many of the issues I touched on over the years.

I recommend it to people just learning about F&F or even you grizzled vets who consume GSE info regularly. 

http://timhoward717.com/

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Speaking of doing excellent education (and also being quite smart and accurate!), read David Fiderer’s new National Mortgage News article. Once again, “The Hammer” nails it! (Every congressional member of the two H&S BC and their staffs, along with great numbers in the media, needs to read David’s work.

Fiderer shows how foolish Treasury and FHFA legal interpretations dug a GSE financial hole much deeper than it needed to be; casually ignored F&F capital generating guarantee and portfolio operational strengths; errantly super-sized GAAP (generally accepted accounting principles) loss protections; and that FHFA blatantly and consistently ignored its primary job of a “conservator” to preserve corporate resources and revenue with any eye toward future commercial revival. 

“Preach it, Brother Dave!”

http://www.nationalmortgagenews.com/news/commentary/how-the-187-billion-gse-bailout-went-awry-1043151-1.html 

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What, the Dems Made Bad Decisions?

When you read the National Journal article below think of the possibility some clever congressional R’s once made a successful pitch that sounded something like this and Democrats now have to ponder the position ion which they’ve put themselves. 

“Hey D’s, join us in the GOP in dumping all over the existing housing finance system; call it lots of names, and then we’ll give the leftovers, wrapped in a fat on budget, red, white, and blue package, to the big banks!”

http://www.nationaljournal.com/off-to-the-races/bad-decisions-came-back-to-haunt-democrats-in-midterms-20141110

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Richard Bove declares Loretta Lynch, President Obama’s new AG nomination will be a positive for the GSEs, if approved. (I don’t think I agree with Dick on this and also can’t believe that F&F are anywhere on the Admin’s legal priorities or her own. At best, she might be disengaged but that also might make her more receptive to “agenda driven gremlins” in the WH or Treasury.)

http://www.valuewalk.com/2014/11/fannie-mae-attorney-general/
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Bad Fannie Mae 

Gretchen Morgenson dings Fannie Mae’s collection methods from defaulted mortgagors, but she should likely point the finger at someone in the FHFA not the company itself, if she is looking for who is the string pulling culprit. 

http://www.nytimes.com/2014/11/16/business/borrowers-beware-the-robosigners-arent-finished-yet.html?ref=business&_r=0

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Ya-w-w-n--n, New Bank Fines for Breaking Laws;

 DC: If We Fine Them, Do You Think They’ll Stop?

 

http://www.foxbusiness.com/industries/2014/11/12/six-big-banks-fined-43b-in-fx-rate-rigging-scam/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+foxbusiness%2Flatest+%28Internal+-+Latest+News+-+Text%29

 

It’s a British made commercial for Guinness beer and it’s a week after Memorial Day, but still worth watching. (Thanks, Flash.)

https://www.youtube.com/embed/rx0MRawkrj4

Maloni, 11-18-2014