Bill Maloni's GSE Blog

2015 President’s Day edition, Yay GM

 

 

Thank you, NYT’s Gretchen Morgenson

If he listens, Hensarling Could Be a Star

 

Please read Gretchen Morgenson’s F&F column first, if you haven’t already. (Go ahead, read it again!)

http://mobile.nytimes.com/2015/02/15/business/after-the-housing-crisis-a-cash-flood-and-silence.html?referrer=&_r=1

 

It’s fabulous, simply fabulous.

Why is her column so good, since much of it has been written before by (the real) Tim Howard and more recently by Michael Krimminger and Mark Calabria, as well as law professor Richard Epstein?

Because her paper is the New York Times, it gets instant attention—the Sunday Times has well over two million readers--it has reach and could even appeal to some GOP traditionalists–like many in Congress—attracted by Ms. Morgenson GOP lineage. She once time was part of the GOP’s conservative wing working as Steve Forbes presidential campaign press secretary. 

More fabulous

I am not sure how many of those two plus million read Gretchen’s work read, but--because of her vast Times forum and its inherent credibility/integrity-- her column can spread this story in a way that the previous writers could never hope, no matter how eloquent they are/were.  

On a good week, I get 700 hits to my blog. TH717 gets four times or more of that. That ain’t close to GM’s foot print. Analogy: Think of me driving around DC with an “Eat at Joe’s” bumper sticker” and GM touting the same eatery on satellite radio and cable TV.

Ms. Morgenson is not a F&F-friend, but she has produced an enviable record of taking on the big banks over their numerous operational shortcomings, so she has stature.

Corporate investors throughout our country should be concerned, if the Obama Administration bent and broke laws to deal with a federal revenue deficit or employed the old F&F animus and showed its too often displayed political “numb nuts” propensity.

If the US Treasury blatantly can take from F&F investors, it can do the same to targeted others.

Without intending to do so, Ms. Morgenson also may have teed up a congressional opportunity that—without this glorious attention—may escape the Congress (and still may, if the Hill doesn’t see the totality of the issue and not just see some F&F impact).

Check back in below.

 

Jeb Hensarling’s Week

All week (before the GM column), I considered what GSE issues I was going to discuss in my “President’s Day blog,” and I kept tripping on stuff HBC Chairman Jeb Hensarling (R-Tex.) was doing.

The book sale 

There he was last Wednesday in a congressional hearing room, extolling a flawed Peter Wallison book (i.e., flawed research courtesy of Ed Pinto produces a flawed book). In his tome, Peter again tries to hoist the nation’s 2008 financial meltdown on the shoulders of Fannie Mae and Freddie Mac. I grow tired listing all of the sources who have rebutted his premise.

Maybe, as I am told they do with old jokes in prison, I’ll just give these refutations numbers and yelp out “15” (meaning the Fed staff, the FCIC staff/report, the Treasury, David Min, Paul Krugman, David Fiderer,  etc. etc....) the next time I see Peter’s thesis. 

In our last blog, we pointed out new Pete’s book and his current belief that sales have been held back by left wingers writing bad reviews about his newest tome. But as I suggested, maybe it isn’t political, maybe those folks just don’t like the book. 

A sidebar story to last Wednesday’s HBC hosted Wallison book event, was Peter’s answer when asked by a questioner, “If there was any virtue in F&F moving out of  conservatorship?” 

Peter Wallison: No, if we ever let them out of conservatorship, they would go back to the business that they were in before. I’m perfectly happy that government is taking all their profits, because it keeps them from gaining capital. If they had capital there would be tremendous pressure in Congress to release them. We have to come up with a new system, unfortunately we don’t know what such a system will look like. Once we come up with a new system, Fannie Mae and Freddie Mac will be gone. 

To me what leaped out is Wallison’s stated belief—and he’s been around DC and in and out of congressional offices/committees/hearings to understand the drill—that an Obama executive action to allow F&F to build capital from earnings would have bipartisan appeal and encourage the Congress to acquiesce to returning F&F to a more fulsome mortgage market role.

GSE fans, please hold that pregnant with possibility thought GSE fans, while I turn back to Jeb.

 

Rest of Week; HBC Report to Budget Committee

 

In a mid-week Committee markup of non-statutory language, Hensarling’s Committee Democrats attempted to amend the HBC prose headed to the House Budget Committee. (Each House committee sends one of these, offering a variety of opinions on issues in their respective committee’s jurisdiction.)

One proposal from John Carney (D-Del.) suggested the committee should note Treasury has been repaid by F&F, adding some “Mom and apple pie” mortgage market verbiage supporting the 30 year fixed rate financing.

 

Chairman Hensarling’s negative response was foreshadowed a few weeks previously when GOP HBC member Ed Royce (R-Cal.) struck the unusual pose of claiming that F&F haven’t repaid the federal government any money. Royce ignored the many media references to those actions, as well as verification in the President’s Budget the two have repaid @$225 Billion, at 2014’s end, after Treasury gave them $187.5 Billion in 2008. (The $225B was repaid in just two years, starting in 2012.) 

It must have been too threatening, too truthful, since the majority scuttled the Carney language and all other D proposals.  

How about SEC-register every T-bill/bond? 

After ignoring the F&F debt repayment history, Jeb  did lead his merry men and women, in the same committee exercised, to recommend Securities and Exchange Commission (SEC) rules--which apply to publicly traded US corporations--should also attach, as well, to the US Treasury’s debt raising bond activities!! 

“It is only fair that our government should have to follow the high standards of transparency, accuracy and accountability required of our nation’s job-creating companies,” said the House Financial Services Committee spokesman. 

Now the politics here are a little ditzy, but Jeb and his colleagues must believe that it’s too easy for Treasury to issue debt, raising necessary money for government operations, so they want to consider tossing sand in the government’s debt activities and slow that process down (although I am not sure to what end). 

Falling into their laps……. 

But the best was yet to come for Chairman Hensarling—or others in Congress, if Jed doesn’t answer the bell—when Gretchen Morgenson handed them a massive political opportunity in her wonderful column this weekend. 

As seen/read above, Ms. Morgenson detailed how the Obama Treasury and Department of Justice have responded to the various lawsuits brought by GSE common and preferred stock holders.  

Those investors tend to believe that Treasury’s decision to significantly change the original 2008 F&F 10% dividend debt repayment rules—and instead sweep every penny the two earn-- violates the Constitution. The shareholders think it also exposes F&F to unnecessary risk, despite their recent business revenue gains, since nothing the two earn stays with them for critical capital protection. (Even some HBC Republicans expressed concern over that fact.) 

I written about this financial pillage, regularly, because the DoJ and Treasury tactics appear less about holding close sensitive financial business information/data but more about hiding senior government officials’ gaffs, political mistakes, or flawed financial calculations, starting when US Treasury officials likely aggrandized statutory power the Congress gave exclusively to the F&F regulator—the Federal Housing Finance Agency (FHFA)--and circumvented or broke the law to do so.

I believe the documents are being covered up or withheld because they reveal Treasury big-footing FHFA into giving over its exclusive F&F conservatorship authority to Treasury. Disclosure could moot that which followed, including the sweep, not to mention make some people look really stupid. 

S-o-o-o-o-o-o! 

Ms. Morgenson, doing more work in her column than most congressional committee staffs would do, helpfully has listed a raft of specific documents that the Obama Treasury has been withholding/hiding through claims of “executive privilege,” hypocritically suggesting the docs are so sensitive to the nation/world’s markets that disclosure--of these seven year old notes, emails, press releases, and memos--could cause financial/economic disaster. (Excuse me, but at this juncture, blog readers now may engage in spirited, hilarious, stomach busting, ridiculous laughter aimed at certain Obama officials!) 

Here is the capper for Jeb’s week. Wait for it, wait for it…. 

I would suggest Ms. Morgenson—in addition to highlighting a story which needs more harsh media scrutiny--presented a premiere opportunity for the House Banking Committee to see that new subpoena authority it bestowed on Chairman Hensarling.

 

They should insist he demands the Obama Admin Treasury/FHFA/F&F send those enumerated documents to his committee for its scrutiny, “right  #)&*$%# now.”  

 

(Cue the brass, the William Tell overture--Texas remember--and the Ride of the Valkyries.) 

Let the White House tussle with the “rootin-tootin” Chairman of the House Banking Committee, not just Federal Judge Margaret Sweeney, over reports and communications it claims are too sensitive/secret for our gentle ears. 

I hope people finally will see this Administration’s CYA antics and understand why many believe Obama and some of his cohorts have treated F&F like red headed step children. 

Jeb’s committee can opine if the Treasury played fast and loose with the laws in 2012, possibly breaking some, one, a few? 

Why would Jeb do it? 

Simple, so he can embarrass the same Jack Lew/US Treasury officials he’s trying to drill politically with his SEC threats. Likely they are same senior crew of advisors and officials hiding the F&F political and policy mistakes.

Since none of the said acts happened on Mel Watt’s turf, the House Banking Committee--the part which would care--wouldn’t be embarrassing their former colleague Mr. Watt, who still was a Committee member in 2012, not head of FHFA when said indiscretion occurred. (That honor belongs to Ed DeMarco.) 

If Hensarling doesn’t want to undertake this task, others might consider it, maybe SBC Chairman Dick Shelby (R-Ala.) would or possibly Sen Sherrod Brown (D-Ohio) or Senate Finance Chair Orrin Hatch (R-Utah), Finance’s Chuck Grassley (R-Iowa) or even Sen. Pat Toomey (R-Pa.), just to name a few.  

If Jeb or any of these aforementioned public officials take up the cudgels, they should thank Gretchen Morgenson for providing a lighted path.

Thanks, Gretchen. 

 

What Others are Saying 

The President: Let’s send Castro up to testify, he’s ready, right, right, uh guys…..? (From Inside Mortgage Finance)

 

New HUD Secretary Comes Off as Ill-Prepared for Encounter with House Panel

By George Brooks

gbrooks@imfpubs.com

Department of Housing and Urban Development Secretary Julian Castro faced the wrath of the GOP majority during a House Financial Services Committee hearing this week on the state of the FHA, focusing in particular on the agency’s recent decision to cut annual mortgage insurance premiums.

While Castro may have been warned about stepping into the lion’s den, he appeared ill-prepared for the confrontation with Republicans, unable to answer basic questions such as FHA’s net income, overall delinquency rate and the serious delinquency rate for 2014.

Democrats, on the other hand, helped the embattled secretary regain his footing by expressing support for FHA’s efforts and putting perspective on some of FHA’s actions to strengthen the Mutual Mortgage Insurance Fund and help qualify more borrowers for FHA credit.

 

Josh Rosner in “Value Walk”

http://www.valuewalk.com/2015/02/fhfa-little-agency-hasnt/

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Fannie Mae earnings???

The Washington Post reports that GSE earnings could occur this coming Friday, 2-20-2015, although no firm dates ever are announced by F&F. So maybe 2014 4Q earnings this week or maybe not.

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Alcee and the “Dildo State”

Congressman Alcee Hastings (D-Fla.) colorfully disses Texas.

http://www.cnn.com/2015/02/05/politics/alcee-hastings-frozen-texas/index.html 

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Civil Rights letter

Several times I have mentioned, but not run a copy of the letter, supporting Fannie and Freddie, sent to FHFA by a number major civil rights groups. (See below.)

http://civilrightsdocs.info/pdf/housing/Leadership-Conference-FHFA-letter-11-19-14.pdf

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Washington, J. Adams, Jefferson, Monroe, J.Q. Adams and all the rest……... 

Happy Presidents’ Day!!

 

Maloni, 2-16-2015