Bad
GSE Things Happen in Threes
(Some
elbow and wrist surgery, at the end of last week, left me “Block-sedated” and
with a heavy wrap on my left arm between those two locations. This blog has
been typed largely with one finger/hand, the right.)
The Congress scuttled home for its summer recess (think
rats!), mostly to bloviate and tell tall tales and falsehoods to their
constituents about what they did (a little) and didn’t do (a lot) while
representing them. However, three separate GSE legislative actions, in both
chambers, could lead to a very F&F-active fall congressional session for
enterprise supporters.
That is not a good
thing for F&F and it could get much worse.
The Senate approved a
four year extension of the Highway Trust Fund bill—with no corresponding action
yet taken in the House--extending the current 10 basis points (BP) Fannie and
Freddie guarantee fee “pay for” out to 2025.
It doesn’t increase the current 10 BP, being used now as a
pay for to cover previous relief but it doesn’t eliminate it, either. (Several mortgage finance/financial
services trade groups asked the Senate not to go this route and let the
additional fee die in 2021.)
See
NYT Editorial, below.
Good New
or Bad News?
The bad news is the GOP Senate, again, taps F&F as a
piggybank for a much need transportation bill. The good news is its action, if
unchanged, means the Hill has backed into F&F being around for another 10
years, albeit providing revenue for other federal initiatives.
The other Senate issues, the first discussed in my
last blog, involved SBC Chairman Dick Shelby (R-Ala.), who managed to
attach his entire “regulatory reform” authorizing bill--which had come out of Banking
on a strict party line vote--12-10, to an appropriations bill intended to fund
the federal financial regulatory network.
That Shelby bill, among other things, would increase the
size of large SIFI (Systemically
Important Financial Institutions) banks which enjoy lesser regulation then
their even large TBTF financial brethren.
Right now the SIFI cutoff for limited regulation is $50 Billion in assets and Shelby would
raise that to $499 Bill (since $500
Billion thrusts them into a higher category of regulation). Shelby also lowers
the regulatory threshold for smaller banks, screws with Fed operations, throws
bank interference into the F&F common securitization platform project, and
does other GSE harm (see comments from his colleague Bob Corker (R-Tenn.)
Again, no House action on this legislation, either. Yet,
but all the financial institutions are hot for it.
Bad
and Bad
Last week, the House Banking Committee, after working out
matters with the Committee D’s, approved an Ed Royce (R-Cal.) GSE compensation
bill which would disallow a Mel Watt (FHFA Director) plan to grant salary and
bonus compensation (up to $4 Million) to the F&F CEOs and instead limit
those salaries to the current $600,000 paid to both positions. (Originally, this legislation would have
lowered those salaries to the $250K range.)
Here is where we start to get into the real bad GSE news, in my humble opinion.
We’ve already established that nobody on Capitol Hill likes
the GSEs, although most can’t explain why beyond repeating horror stories they’ve
been told but can’t elaborate or substantiate.
But this scheme is simple and understandable, it inflicts
pain on F&F, at least to the top guy in each place.
Ergo, anything bad for the GSEs, i.e. limiting their CEO
compensation, will move swiftly through the legislative process with lots of
support.
The above bill still needs full House approval, which won’t
be tough to schedule and get, and then goes to the Senate, where the Senate will
quickly pass it or…..festoon it with other anti-GSE bells and whistles, to
which very few in either party or in either chamber will oppose.
The 6 year Senate Highway bill—which ironically may
conflict with the Shelby bill provisions, i.e., the latter has a prohibition on
using GSE funds for non-GSE purposes—could pass, independently, but there might
be disagreement over the funding, albeit I doubt if many will oppose using the
F&F money, if Shelby and the R leadership want it.
Additionally, the Shelby reg reform bill could pass on its
own, unless pulled down because it violates a Senate rule about “authorizing on
a spending (appropriations) bill.” (I am sure Shelby, in deference to the GSE pennies
partially funding the highway bill, would remove any conflicting language form
his legislative effort.)
I am certain, the compensation limitation legislation will
pass. The question for me is does it do so de novo or does it become a
“hate/fix the GSEs” omnibus?
But, when one party runs the Sense and House, while you
don’t need a special bill for mischief, any existing legislative vehicle gives
you that—the more important to other interests the better—because it also will attract
supporters from the “stomp the GSE" crazies.
Once they start who will stop them, not this Admin which
likely agrees with most of those provisions, maybe some Senate D, more
sensitive than the House to procedural rule busting abnormality?
But a bill—like the pay raise limit proposal—gives the
perfect vehicle to carry GSE pain.
There are not a lot of available congressional heroes if
the R’s decide it’s now time to screw with the GSEs.
That’s my fear in a nutshell.
What
Others Are Saying
Poor
US banks, they are making bazillions and complain about every single
thing, claiming the US government is disadvantaging them.
I doubt if it will stay shut down, but the House—with
huge Tea Party backing--wisely refused to extend funding for the
Export-Import Bank, which gives taxpayer subsidies to major US corporations to facilitate
their overseas businesses.
Keep the money here and let the behemoths use their own
income to win foreign sales!
Yahoo Friday business headlines
Case in point from Yahoo, “U.S. banks on top
globally!”
“U.S. banks are giving their European counterparts a run for their money... Over the past five years shares of major U.S. banks have climbed on average 45%, while major European banks, including Barclays (BCS) and Deutsche Bank (DB), have seen their shares drop by 17%.”
and...
Housing Wire on Royce capping GSE exec income.
http://www.housingwire.com/articles/34624-bill-to-eliminate-6m-raise-for-fannie-freddie-ceos-passes-house-committee-57-1
___________________________________________________________________
WSJ’s Joe Light on same vote.
__________________________________________________________
Trump’s
real net worth, a billion here, a billion there and pretty soon…??
http://finance.yahoo.com/news/heres-tally-donald-trumps-wealth-090002711.html
_______________________________________________________
_______________________________________________________
Realtors
Report, failing US homeownership rates
IN
CASE YOU MISSED IT: The U.S. homeownership rate fell to 63.4 percent in the
second quarter, the lowest ratio in 48 years. The West suffered the lowest
reading at 58.5 percent compared to the Midwest which had the highest at 68.6
percent. The figures were compiled by the U.S. Census Bureau.____________________________________________________
Bruce Berkowitz’s Fairholme Fund 1H15 –
Questions for Government on Fannie Mae.
These questions, which cut to the heart of the
Third amendment law suits, were posed in Bruce Berkowitz’s in his most recent
quarterly business report.
- Why did federal regulators
design a financial support program for Fannie and Freddie on the basis of
academic estimates of future performance rather than tried and true
statutory accounting and claims-paying ability (which is the standard for
all regulated mortgage insurers)?
- Why did federal regulators
require Fannie and Freddie, while in conservatorship, to purchase $40
billion per month in underperforming junk bonds from competitors?
- Why did federal regulators
force Fannie and Freddie, while in conservatorship, to participate in
Treasury’s Home Affordable Modification Program (HAMP) and Home Affordable
Refinance Program (HARP), which resulted in more than $46 billion of
losses that the companies would not have otherwise incurred?
- Why did mortgage-backed
securities issued by Fannie and Freddie perform dramatically better than
private label securities issued by big banks throughout the financial
crisis?
- Why did federal regulators
settle litigation cases initiated by Fannie and Freddie against major
financial institutions for significantly less than what other similarly
situated plaintiffs recovered?
- Why did federal regulators
seize more than $18 billion in litigation proceeds recovered by Fannie and
Freddie to date?
- Why did federal regulators
order Fannie and Freddie to delist their securities from the New York
Stock Exchange in 2010?
- Why did federal regulators
prohibit Fannie Mae from selling $3 billion of Low Income Housing Tax
Credits to third-party investors?
- Why were Fannie and Freddie,
while in conservatorship, forced to divert billions of dollars in guaranty
fees to Treasury to offset the cost of a payroll tax cut?
- Why did FHFA, as conservator,
force Fannie and Freddie to gift all of their capital and all future
earnings to Treasury in perpetuity?
- Why were Fannie and Freddie,
while in conservatorship, forced to pay “voluntary” cash dividends to
Treasury if funds were not available and the regulated entities were “not
in capital compliance?”
- Why did FHFA force Fannie and
Freddie, while in conservatorship, to issue debt in order to monetize
their deferred tax assets and pay the proceeds to Treasury in 2013,
particularly when FHFA had previously stated that deferred tax assets
“[could] not be monetized?”
- Why did Fannie Mae CEO Tim
Mayapoulos describe the Net Worth Sweep as a “positive change” with “a lot
of good in it” in his August 2012 announcement to employees? Was he
coerced by federal regulators?
- Why has the Securities and
Exchange Commission permitted a single controlling shareholder (i.e.,
Treasury) and its affiliates to simultaneously act as director, regulator,
conservator, supervisor, contingent capital provider, and preferred stock
investor of two publicly traded companies?
- Why do some Treasury officials
question the sustainability of Fannie and Freddie’s earnings power in the
years ahead, when Treasury’s own 2014 Annual Report indicates that the
companies will be consistently profitable for each of the next 25 years?
- Were certain federal government employees who crafted
the Net worth Sweep acting at the behest of crony capitalists seeking to
displace Fannie and Freddie?
It will be great fun when we get some answers to some or all
of them!!
__________________________________________________
Vice
President Joe Biden
From me, Joe, please don’t run.
______________________________________________
I guess Maureen Dowd thinks differently, or maybe for her, it’s (ABK) “Anyone but Hillary”
http://www.nytimes.com/2015/08/02/opinion/sunday/maureen-dowd-joe-biden-in-2016-what-would-beau-do.html?ref=opinion
_____________________________________________
_____________________________________________
Trump sends best wishes (and the finger?) to
other GOP candidates.
“I wish good luck to all of the Republican candidates that traveled to
California to beg for money etc. from
the Koch Brothers. Puppets?”
___________________________________
GSE
Earnings
Wash Post says Fannie/Freddie earnings coming at the end of
this week, but who knows? They’ll probably be decent but someone will complain
or denigrate. It’s only the GSEs!!
_____________________________________________
Maloni,
8-3-2015
2 comments:
Why didn't Congress mandate draconian salary reductions for top mgmt and bonus curtailment for GS and TBTF when they gave them real bailouts? FnF CEOs earn less than NFL rookies. Ok, give them stock options to stick around. Cash cows for the gov $19Tirllion in debt and unable to balance a budget.
Why does Congress have an embarrassing, paltry, minuscule approval rating of 17%? Wish America Trump could give them all the punchline..."you're fired!"
Paul--Best answer I can give you is that Congress, save a few Members and Senators, refuses to blame the banks. And part of that is the huge political contributions financial institutions send to the Hill, especially the two Banking Committees.
The amounts are mammoth and both party leaderships put freshman or other on those committees because they are know for "easy and large fund raising."
Because most Senators and Members, no matter what they say to get elected, once they get there--and get a taste of the "princely" treatment they all receive, even the back benchers in the minority party-- they want to stay in office and will do anything to insure they are not voted out.
The safest thing to do is to keep a very low profile, try not to piss off any major interest group back home and don't make waves.
Most deny these facts but it's hard to look at how little they do or the asinine way they approach problems--refuse to increase the highway tax to provide needed funds to build and repair roads--and claim they do or did anything, save kick a lot of cans down the road and then blame it on, as the infamous Louisiana Senator Russell Long suggested, "Blame not you, not me, but the guy behind the tree."
Post a Comment