Hypocrisy, Hypocrisy, Hypocrisy, Hypocrisy, Hypocrisy;
DC Trades Pretend They Aren't Dancing to Bank Tunes
Don’t worry, this is not a full time return of my blog, just a comment on the ongoing efforts by major Washington DC trade groups to convince policy makers—once again--to get rid of Fannie Mae and Freddie Mac anoint a new, untried, but undeniably questionable group of GSE successors, without concern about market place cost, inevitable inefficiencies and delay/confusion for consumers.
Scotsman Guide (9-22-17):
Trade groups fret over fate of GSE reform
I responded in two publications with my views of the whys and wherefores of this letter driven by the Mortgage Bankers Association and the American Bankers Association. Below is a slightly expanded version of my thoughts.
The positional and policy gossamer these groups spew is their feigned ignorance (“There’s gambling at Rick’s?”) that the primary beneficiaries of their efforts will be the nation's largest banks and their minions (see who signed on).
Last week’s letter is similar to several other near identical tomes written over the years by the same interests seeking the same thing. (Google it, to satisfy yourselves.)
Yet, the letter writers preferred system of mortgage lending stewards is the main reason their repeated efforts to do away with the GSEs have failed.
Nobody trusts the forever scamming banks and why should they?
Yet the same people keep going back to the same big bank solutions which the Senate Banking Committee rejected when it just was the Corker-Warner bill.
Since the financial unraveling almost 10 years ago, since 2008, the banks—to which the letter writers want to extend total mortgage market control--have rung up more than $250 Billion in federal financial regulatory fines, most for damaging business actions, i.e. screwing consumers, unrelated to their equally thoughtless scaled back home mortgage lending.
What doesn’t change in all of these schemes is the consumers get stuck with the “hind udder,” the big banks get fatter, and various mortgage process middle groups will get their financial sustenance, but much like crows do eating a cow's natural intestinal byproducts.
Other legislative schemes pile on even grander big bank subsidies/federal guarantees than exist today. (See the MBA task force proposal to guarantee bank securities losses.)
There is a reason why these Washington lobbyists want the world to forget the outrageous and causative bank mortgage behavior leading up to the 2008 crisis, when those institutions went outside the GSE systems and issued $2.7 Trillion in near worthless "private" (meaning non-GSE) mortgage backed securities (PLS), which quickly failed and led to the taxpayers bailing out the banks with more than three times what was infused in the GSEs ($187 Billion compared to $700 Billion for banks). Whether the GSEs even required that 2008 forced government help is being challenged in multiple federal courts.
Many of these association/signers want you and Congress to ignore post-2008 GSE regulatory successes and—historically--the GSEs role in making the nation’s mortgage finance system more efficient/friendly for borrowers and acting as a needed rigorous governor on big bank mortgage shenanigans.
If the Congress, the media, and the public don’t ignore this financial history, grasp those facts, and then just "follow the money," it will explain a lot of the names on this letter and their apparent institutional amnesia.
At the end of the day, a simple reworking of the GSE charters, Fannie and Freddie keep their earnings and resume their traditional mortgage finance role, is much of the right answer for the American people.