Monday, June 8, 2015

Cats and Dogs, June 2015


Presidential Candidates, Both Camps


Stealing a headline from the New Yorker Magazine, it looks like there are more GOP/Democrat presidential candidates in queue than bikers arrested after the gang fight/war at the Twin Peaks, Waco, Texas restaurant, which the police busted up. literally and figuratively. (I’m rooting for Rick Perry’s candidacy, since he would be such an easy target.)

Although comparing pictures of the two crowds—bikers and 2016 candidates--doesn’t easily suggest which group is which!

They all look sinister!

The Democrats are doing their part to slowdown the Hillary Express, but I don’t see that happening—only she can do that.

Bad Contemporary Social Karma for R’s?

The GOP has major challenges and internal fissures over social concerns—and how those matters rate with the important young and independent voters--like same sex marriage and now transgender issues, highlighted when  former Olympic gold medalist (Bruce) Caitlyn “Cait” Jenner, self-identified as a Republican. 

Existing Republican candidates avoided the issue or tripped on it with their odd comments. 

Denny Hastert’s uncomfortable and embarrassing possible child molestation issues news can’t sit well with the Grand Old Party, complicating matters because a House Republican majority, in 1999, voted this former high school wrestling Coach Speaker of the House, a job he kept until 2007, when he retired and became a DC lobbyist. 

(Best near term news for the GOP in this “bad sports connections” regard—following  Jenner’s political party announcement and Hastert’s spoiler—is that Britney Griner and Glory Johnson, the two women’s professional basketball league stars—who, in the space of a few weeks, got busted for domestic violence, each served a  7 game WNBA suspensions; pledged their love for one another; got married; and then last week, when Johnson announced she was pregnant and would miss the upcoming basketball season, Griner, who once said her engagement to Johnson “made me the happiest person on Earth,” filed for divorce on Friday, 28 days after their wedding—have not announced they are Republicans. But, there still is time for that declaration.)

Royce: Banks in on CSP and Single Security 


Speaking last week at a National Journal housing event, senior HBC Member Ed Royce (R-Cal.) called for legislation to let banks horn in on development of the GSE common security platform (CSP) and, separately, the F&F project to construct a common mortgage backed security. (Statutory language to that effect was in the SBC’s “Shelby bill.”)

In a letter to the Congressman (which appears at the end of this blog), I asked what justification there is in using taxpayer’s money—since any revenue F&F don’t employ in their business operations goes right into Treasury general fund—to make it easier for the banks to take over the nation’s primary and secondary mortgage market and not even pay for the investment both F&F already have made. 

Both F&F were forced by their former regulator, Ed DeMarco, to partner and create a single purpose corporation and pursue DeMarco’s CSP view of the future.

Why should F&F (actually, the federal government) pay to create a CSP and a single security for the very rich commercial banking industry? 

Why is that necessary on Uncle Sam's dime??

I suggested that banks, with their huge profits, easily could  work on their own CSP and even the single MBS.  

I also reminded him that the problems with bank backed mortgage backed securities or “PLS, indicating “private label,” had nothing to do with the structure but everything to do with the bank guarantees backing them. 

Institutional investors, who buy these bonds, still don’t trust the banks after the PLS showing of 2007-2008, when the banks pumped onto world markets $2.7 Trillion of poorly underwritten and falsely rated PLS, which failed in record numbers.

(I’ll share any answer Mr. Royce provides.)

Senator Chuck Schumer (D-NY) 

I attended an event for Senator Chuck Schumer (D-NY) last week and had an opportunity to discuss with him the pro-bank Shelby (R-Ala.) bill, sponsored by the Chairman of the Senate Banking, which committee Republican supported and the D’s opposed on a straight party line vote of 12-10. 

I asked Schumer if Shelby’s proposals—covering several efforts to loosen oversight on a variety of banks and bank issues—could be used by the Democrats to win over angry voters in 2016, since the public that already disliked the banks and might sour on the GOP trying to give the financial institutions, even more breaks and benefits. 

I’ll paraphrase his answer since it had two parts and also was indicative of how the Senate Democrats and likely national Democrats are thinking about 2016 congressional and the presidential elections.

Schumer said he felt the Shelby bill would get no D support on the floor or from the Admin and, as such, was dead, absent major changes. 

But, he felt American voters, while disliking banks, were more worried about their own disconcerting financial and economic problems, jobs and income uncertainty. Therefore, he argued Democrats had to concentrate on solutions to those bread and butter matters, which he felt had viable policy solutions. 

The Democrat answers were in major investments for infrastructure spending, more assistance for education (at all levels), boosting support for small technology businesses, and increasing homeownership opportunities. 

Re “politics,” Senator Schumer said Hillary Clinton would be the D nominee and she’s better able to handle any presidential challenge than other candidates in either party and that the Democrats had a good chance to take back the Senate, ticking off eight states where the D’s victory chances were strong. A success story, which—coincidentally—would make Schumer the Senate Majority Leader. 

David Fiderer Update

“David’s article” now is becoming ‘David’s e-book,” as he chose to expand his excellent piece, more than doubling its size. He’s shooting for an end of the month publication. I still believe that the content is worth the delay. But, hurry up Hammer! 


What Others Are Saying 

The always interesting Glen Bradford, writing in Seeking Alpha.


 Eric Pianin writing in the Fiscal Times.


A must read by Eliot Blair Smith

Mortgage Banker profits rise in 1Q 2015, as reported by Inside Mortgage Finance’s Paul Muolo.

By Paul Muolo

Independent mortgage banking firms and subsidiaries of depositories, on average, earned $1,447 on each loan funded in the first quarter, a 95 percent sequential improvement, according to figures released Wednesday morning by the Mortgage Bankers Association.

The trade groups research is based on lenders that produced an average of $473 million of new originations during 1Q 2015. The average production profit was 60 basis points compared to 32 bps in 4Q14.

Although profits rose, so did expenses, but not dramatically. MBA said total production operating expenses “remained a challenge,” rising to $7,195 per loan during the quarter compared to $7,000 in the prior period.

Secondary market income came in at 297 basis points for the period, up from 266 bps in the fourth quarter. The findings were based on results supplied by 359 MBA members.

Steve Pearlstein, writing in Washington Post, is no fan of AIG or GSE lawsuits…but will it matter? 


Maloni letter to Rep. Royce.


Dear Congressman,

We met years ago, before I retired in 2004, when I was Fannie Mae’s chief lobbyist for 21 years. I am sure your records show me as a campaign contributor, too.

These days, I am just a congressional and mortgage market observer, not working for anyone or even “the usual suspects,” although I have written a financial services blog for the past 5 years.

I know you are not a GSE-fan (although one time, I remember you being one), but I have a question about the politics and the equity in the suggestion you made this week about the ongoing effort to complete a common securitization platform (CSP) involving other players, i.e. the banks, and bringing them into work on creating a single GSE security.

First off, Fannie and Freddie (F&F) were forced--by their previous regulator Ed DeMarco, since replaced by your former Banking Committee colleague Mel Watt--into creating the Delaware single Purpose Corporation to create a CSP. Neither thought it was crucial or necessary.

The F&F budget for the CSP is $300 Million, with no specific detail of how of that money has been expended. But some has as operations are underway, executives hired, space leased. 

Why would you support those public tax dollars (since any revenue F&F don’t employ in their business goes to the taxpayers through the Treasury’s general fund) funding something for banks which love to claim how “private” they are?

Aren’t there better uses in your district and others than spending public money to grow bank profits?

There is nothing in law which stops the banks from investing their own revenue in a common securitization platform (or even a common security model).

The banks certainly have the earnings to do both.

As I am sure you understand, the reason PLS (private label mortgage backed securities) don’t/can’t fly has little to do with F&F. It is because the institutional bond investors (the smart guys, not Mom and Pop) still don’t trust the banks which must stand behind and guarantee these “private bonds.”

It has nothing to do with the structure of the mortgage backed securities, but everything to do with the memory of banks poorly underwriting and falsely labeling $2.7 Trillion of flawed PLS in 2007-2008, when their last efforts at PLS dropped the world into a deep dark financial hole.

(Despite the AEI’s rhetoric, it wasn’t F&F red ink that was most harmful--they had only one third the actual losses as the big banks/investment banks—but the major institutions private securities were the systemic crusher.)

As I noted, you and I might not agree on the future of the GSEs, but I would appreciate knowing—given all of the bank chicanery, legal and regulatory violations and their billions in fines-- how you rationalize spending your constituent’s tax money for bank development of a CSP or single security. Do constituents in California’s 39th CD really support those expenditures?

I look forward to hearing from you.

Sincerely, William R. Maloni 


Maloni, 6-8-2015


G. Buckman said...

Bill, love your bluntness with Royce. Like you say, grenades kill as well.

I was wondering if you've had a chance to read this document from The Leadership Conference...

I believe there is more info regarding it on Politco Pro, but I don't have access....wasn't sure if you did.

Anywho, I'd appreciate your take on the subject if you care to share?

Thanks again for all you do!


Bill Maloni said...

I saw the "PBJ" (nickname for a GSE website) suggestion that this could be a "trial balloon," but I doubt it.

Naturally, I could be wrong, btu nothing this Admin says or does suggests hey see themselves on the wrong side of the F&F issue and needing of a "plan" to get out. If they did (to put it behind them, give Hillary some "space," think the judges will rule against them), the Admin just could continue appealing and delaying until its late 2016.

On the flip side, if they wanted to appear magnanimous and breathe life back into F&F, the Prez want to announce it and take credit from those who should care, the latter being the American public except they don't realize it.

I hope the letter is more than a letter, but I don't see it GB.

Bill Maloni said...

Sorry. A few typos and dropped words, but you get my drift.


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