Monday, April 17, 2017

All GSEs; DJT, mostly, gets time off

First they came for the Socialists, and I did not speak out—
because I was not a Socialist.
Then they came for the Trade Unionists, and I did not speak out—
because I was not a Trade Unionist.
Then they came for the Jews, and I did not speak out—
because I was not a Jew.
Then they came for me—and there was no one left to speak for me.

Martin Niemöller (1892–1984) was a prominent Protestant pastor who emerged as an outspoken public foe of Adolf Hitler and spent the last seven years of Nazi rule in concentration camps.

GSE Week: the Same Blah News

Let me try and review where I think the state of GSE play is, reminding you that I may be way off.

GSE Developments in the Courts

--Judge Margaret Sweeney awoke, saw her shadow-- growled at the government defendants for seeking additional time to give plaintiffs the thousands of federal documents which she has consistently requested for what seems about 100 years now--and then Sweeney—worried about two more months of snow?--promptly  gave the Treasury 43 more days to screw around and delay justice.

Sweeney told the world to tune back in the week of May 25 for her latest “you better” deadline to produce the desired docs, which I believe will produce a predictable government request for more time or some some other stalling consideration.

Ho hum, whatever it takes—or however long it takes—to get a GSE plaintiff’s win.

Those legal requests and others in GSE cases beg the question, “Have any Trump people arrived gotten into the Treasury-DoJ roles in the GSE cases, because the federal government’s actions sure look a lot of the Obama Administration’s obfuscate, delay, “dog ate my homework,” and more delay games???

Any chance Judge Sweeney once, a long time ago and far away, dated “Joe Btfsplk?”

Appeals Cases and Others

--Two appeals court cases, “Robinson versus FHFA (Federal Housing Finance Board)” (Sixth Circuit) ” and Saxton versus FHFA” (8th Circuit) still exist and the hope is that those courts might agree more with the outlier DC Appeals Judge Ann Brown who challenged the Lamberth opinion, than they do with Judges Ginsburg and Millett, who agreed with Lamberth and supported the government.

Those legal actions both will putt (golf term intended) along as we move into the late Spring/Summer doldrums and hope that some judges somewhere see the Lamberth overreach and reject it, setting up conflicting appeals court decisions, where the US Supreme Court would have to pick a winning side.

--Judge Nancy Atlas is hearing the “Collins” case in Texas, another lawsuit over the net worth sweep. Recently, she was asked by plaintiffs’ lawyers to wade into the thicket of whether FHFA is a constitutionally viable federal agency, since the FHFA Director cannot be removed by the President for “cause.”

The DC circuit court, in vacating a Consumer Financial Protection Bureau (CFPB) decision, Government lawyers used that argument to support plaintiffs opposing certain aspects of the CFPB’s regulatory activities. (Both FHFA and CFPB have similar organizational structures, each with a single agency director.) 

--And, yawn, we’re waiting for a Judge Royce Lamberth’s response when Judges Millett and Ginsburg asked Lamberth to review the shareholders rights concern expressed in their opinion which confirmed Lamberth’s original decision. But, none of these matters—as we’ve seen—have hard, “must meet” deadlines.

“Nodoz” or lots of caffeine anyone? 

GSE News From Capitol Hill

The GSE congressional evil forces are hard at work, trying to figure out a way to stifle Fannie and Freddie, for all of their old obvious reasons.

I expect they will continue to fail, ultimately, although in the House-- where House Banking Committee Chairman Jeb Hensarling (R-Tex) can produce an “atomize the GSEs “proposal and likely get it to the House floor. That possibly would screw up his other ambitious plans to neuter the Consumer Financial Protection Board and push Dodd--Frank changes through as well.

But, there just is so much anti-consumer legislation the GOP can promote before it becomes obvious that the Republican party and its leadership care less about the public’s needs for fairness, equity, and financial protection, but prioritize what the large banks lavish on them with campaign contributions.

(I am not sure what’s left in Dodd-Frank to squeeze out, save the demand that major financial institutions have more capital to manage the risk they are great at claiming is excessive while their federal regulators, historically, give them a capital pass or easy capital maintenance.)

But, that won’t stop Hensarling from flexing his jaw and his committee jurisdiction muscles.

While House Dems may not be able to stop ol’ Jeb, but he could get slowed down or stopped, if there really is growing unhappiness in the hustings--see GOP angry town hall reports--with what President Trump campaigned on and what he’s done or plans to do.

The public may  not sit back, quietly, if Congress seeks to produce “more benefits for the banks” while lower and middle income Trump voters--and those others who didn’t support him--hungrily hold out their empty hands for promised consideration, jobs, health insurance, “Meals on Wheels,”* etc. and need many of the federal programs the new Administration seeks to cut. (*One wag noted, not only do they want to end the ‘meals,’ but they’ll also want to steal the wheels, too.”)

Voters who hope to buy a house or refinance their mortgage might not be happy when Jeb tells them to eat his dust and throws them to the mercy of the nation’s largest banks, who have never been consumer friendly, i.e. see opposition to CFPB, Dodd-Frank rules, and other pro-consumer issues.

The Senate rules and the stronger Democrat numbers holds out better hope for GSE advocates, if anyone on the Hill really believes this is the year to “reform the nation’s mortgage finance system,” code for “get rid of Fannie and Freddie.”

Until he changes his mind, Senate Majority Leader Mitch McConnell (R-Ky.) says all chamber non-tax reform legislation will abide by the 60 vote Senate rule, meaning it could be stopped by filibuster.

As I wrote to someone who asked about possible Hill action (paraphrasing), “There still is no meeting of the minds. Nobody up there recognizes, let alone understands, the role of shareholders, profits, and accurate capital. In any omnibus bill, instinctively congressional Democrats will try and solve every social ill they believe the current system ignores, while the GOP will try and abolish Fannie and Freddie and make the banks and their lending rules the only option for mortgage seekers.”

It’s another reason why I think the best hope revolves around the Trump White House, eschewing formal congressional action, then doing as much as it can to revive and resurrect Fannie and Freddie through regulation and executive authority. 

I hope Secretary Mnuchin and his new deputy Craig Phillips grasp that wisdom and realize the ugly—almost uninformed--nature of Congress on these matters.

Phillips has been named Mnuchin’s GSE point person and, like his boss, while he has a long Wall Street history in the business, will need to bone up on the ugly DC politics. (See the excellent Gretchen Morgenson’s NYT feature on Philips.)

Corker and Warner

Of course anything Fannie/Freddie in the Senate will draw “the terrible twins,” Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.), who never saw a pro-GSE idea they liked. Yet, both invoke—without ever explaining it or I suspect understanding it—“The GSEs are guilty of private gain and public loss.”

When they do that, I am itching to ask these Senate solons—who, like Hensarling, favor giving the primary mortgage market as well as the secondary mortgage market operations to the nation’s biggest banks—1) which federal financial institutions don’t bathe in federal subsidies, 2) do they realize the big banks--going outside the GSE systems--lost more money on their “private label” mortgage security follies and took more than twice as much taxpayers dollars than the $187 Billion foisted on Fannie and Freddie in 2008 (banks took home over $400 Billion of Uncle’s TARP money in 2008-2009)?

So, exactly who or what did (and still does) engage in private gain and public loss with their pre-2008 shenanigans (and post facto bailouts) which led to our national financial woes nine years ago?

Rocky Top and Now Alex Jones

The other thing which bothers me about those two are the unresolved question of whether they personally profited selling GSE securities based on insider information coming from their Senate Banking Committee service?

Corker has a pretty shaky past with his personal investment and big bank-supplied (Wells Fargo) favors and has become a wealthy man. That was before he told a national television audience they should “short" Fannie and Freddie, advice he may have followed himself, bringing Warner along. 

Sometimes identified as the chamber’s wealthiest Senator, Mark Warner name's came up, too, in reports of the same activity. (Why would a Senator, with a reported near half billion net worth engage in penny ante trading based on insider info about two major entities which are constant issues in the Banking Committee?)

RockyTop News did a five section report series on Corker’s financial activities and despite objections made about Corker to the Senate Ethics Committee—does it still exist?—no report on either Senator has come from the Committee.

And now Alex Jones and James Corsi have picked up the scent and are articulating the same Corker (and Warner) allegations. Maybe these crusading Conservatives will prove some fire exists from all of this smoke.

What are the chances that the two Senators would clear the record and open their tax returns to prove they never acted in that manner nor profited from GSE stock trades?

Probably not too great, huh? 

GSE News from Around Town (DC)

Speaking of Senator Corker, his former aide, Michael Bright has come up in discussions about who might be nominated to head the Government National Mortgage Association (Ginnie Mae), the securitization operation in HUD which handles FHA and VA? 

Those graybeards among you will remember that Ginnie Mae was created out of Fannie Mae in 1970, to do what the “old” Fannie Mae had done, issue securities with government loans (FHA and VA) backing them.

The 1970 Lyndon Johnson legislation “privatized Fannie” and charged it to provide liquidity (buying and securitizing non-government insured mortgages or “conventional loans) to mortgage markets throughout the nation. After first exclusively serving the savings and loan industry, Freddie came along 10 years later and was given Fannie’s same broader market mission and lender custiomers.

Bright has bounced around various financial institutions and consulting spots, since he did Corker staff work on the Senators first legislative effort to destroy the GSEs.

That bill died of its own weight because it gave too much authority to the big banks and offered no mandatory affordable housing by financial institutions. 

While his paid positions have changed, regularly, Bright’s GSE objectives haven’t.

He and Ed DeMarco—much more on Eddie D in a minute—produced a “get rid of the GSEs” discussion draft while toiling for the Milken Institute

DeMarco took a new job last week as President of the Financial Services Roundtable Housing Policy Council, from which he no doubt heavily will lobby to kill the GSEs.

I hope Ed enjoys the same policy success he’s had since leaving his old job, as acting-head the GSE regulatory, the Federal Housing Finance Agency, where he also tried but failed to kill the GSEs. They are still here and Ed’s into his third or fourth post FHFA job.

Surprise, surprise, last week, the FSR sent a letter to the Hill “complaining about the GSEs and the legally still being heavily questioned legality of the forced $187 Billion financial support from Treasury. But nowhere in the letter is any reference that the FSR member big banks sucked up $400 Billion of taxpayers’ dollars (aforementioned TARP) because of their ruinous PLS habits. (Darn those readily available facts!)

Just as I asked about Corker and Warner adopting a new tack, I wonder if the FSR (and Ed) can consider a world where they actually cooperate and work with a GSE-centric mortgage model—which is what they have today and apparently from which they make lots of money—instead of chaotically trying to replace them.

The housing policy world knows the only way banks can work successfully in mortgage finance, long term, is when they have a strong or stronger entities (the GSEs) enforcing reasonable bank mortgage lending behavior regarding loan products, market access, and prices???

It’s All about Homeownership and what that means to Americans and America

In looking at my blog work this week and dozens of other articles and legal and political related issues, we can sometimes forget—if we even knew—about how and why the federal government supports homeownership and the resulting national and societal benefits that flow to American families and communities from what is measured as close to 20% of the United States’ Gross Domestic Product (GDP).

That all came back to me when pouring over an article sent to me by my former Fannie colleague and friend Gwenn Hibbs (the world’s best financial services lawyer).

It’s an excellent history lesson for those who haven’t spent years delving into the “whys” behind all of the “what’s” we see in the national mortgage policy ideological, industry, consumer, and political disputes. 

(Super read, Gwennie!!)

Maloni, 4-17-2017


Michael Gatti said...

To use another golf reference,when it came to mortgage business the Banks
SHANKED their tee shot out of bounds, and still posted a par.All the
spectators saw the ball go out of bounds, but decided to look past that fact.

Its getting to be more than frustrating to see the inability of the courts
or the politicians to see the wrong done, and do something about it.

Thanks for what you do, Maloni for Prez?? I wouldn't wish that on anybody,
but maybe some levity will help.

Bill Maloni said...

Thanks for reading and commenting Michael--

I don't know how we recapture that past quality our nation enjoyed, when people were responsible and rose above their partisan perspective, could identify right and wrong, and would speak out.

It all can't be blamed on Trump, because it started long before him, although--IMO--his campaign and presidency have added to its demise.

This is where the media and we citizens just need to strenuously exercise our First Amendment rights and hope enough thoughtful Americans can establish, once again, some semblance of national respect for facts and the truth.

That sounds aerie faerie but I don't know what else we can do at the grass roots level since we are not sending to Congress candidates who qualify for "Profiles in Courage."

It won't be easy or happen soon, but the alternative just screams "banana Republic, armed with nukes."

Anonymous said...

Thanks, Good analysis.

Bill Maloni said...

Anon--You're welcome, any time!

Anonymous said...

Hey Bill...I noticed Celeste Brown, MS' global treasurer is moving to Fannie. Seems like she was arguably a rising start in Morgan's hierarchy. Of course, I have no idea what her specific circumstances are, but seems like an interesting move considering the headlines are fairly terrible on the GSEs right now. Any thoughts on something like this ?? Seems bizarre to me.

Bill Maloni said...


With all due respect to Ms. Brown--whom I don't know--the coming of anyone to a GSE post or going from a GSE post doesn't mean much, right now.

The management teams are not driving the ship. Neither company is permitted by FHFA/Treasury to be entrepreneurial.

The scary thing is some of the needed legal maneuvers in this campaign are in the lap of a man who didn't know Hawaii is a state and part of the United States, which he is sworn to protect.

Psst, also told the AG pronounces the "t" in "mortgage."