Tuesday, April 17, 2018

Duck Folks, they are throwing marshmallows at us!

GSE Cats and Dogs

In my 35 GSE years, first  working at and then writing about them, I have seen Fannie and Freddie (always more the former than the latter) accused of not serving low income American; serving low income America too much; putting profits over mission; only writing risky loans (subprime) in the decade of the 1990’s; ignoring greater corporate returns because the companies too much wanted to help the poor realize the benefits of homeownership; bamboozling their regulators and the Congress; Fannie executives committing “securities fraud”; violating “bright lines” between the primary and secondary mortgage markets; putting the nation’s financial economy at risk, and on and on.
Most of these allegations were false, yet still perpetuated by the “financial establishment”—Tim Howard’s descriptive phrase for the nation’s big banks and their allies—which have never stopped lusting for the GSEs’ demise so they could posit themselves in Fannie’s and Freddie’s place and control the secondary mortgage market and acquire the GSEs annual income.
As a GSE employee (and later as a blogger) I aggressively fought those falsehoods building a tough exterior and a huge defensive capacity, i.e. “G-r-r-r-r-r,“ but now I sense some “bad guy” desperation as they grasp for new incendiary charges.
Something has changed (maybe they’re running out of oxygen?). Their hopes of obliterating Fannie Mae and Freddie Mac seem to be slowly, slowly swirling down the porcelain policy commode.
My evidence…sparse, but…?
Recent complaints, instead of verbal cruise missiles today seem more like hard-thrown powder puffs.
I am talking about the Right’s outrage over the cost overruns in constructing the new Fannie Mae downtown DC headquarters, as called out in a recent FHFA IG’s report then picked up by the usual GSE alarmists.
These indictments cite expensive chandeliers and decorative wood, which could add to the already government approved cost of the building!!!
Wow, they’re huffing and puffing over expenses for lights and veneer at a company/agency which generates about $10 Billion a year???
We all have been so conditioned and battered by the big bank/AEI/Cato/MBA etc. flood of Fannie and Freddie accusations—predicting hellfire and damnation to the world (and bank bottom lines!)—because of this or that GSE infamy, that the most recent GSE assaults (mainly aimed at Fannie) seem innocuous, as when your enemy runs out of dumb-dumb bullets and starts throwing paper wads at you.
A construction cost overrun?? Oh my goodness, has that ever occurred anywhere in this nation? How about examining GSE cafeteria vegetable and milk cost deficits or bitching about rising janitorial prices??
Over the years, I’ve read and responded to myriad GSE indictments—helped build powerful political coalitions and media campaigns to battle the assaults--but now their faultfinders and opponents are going to the mattresses over a million dollars of questionable decorative spending from a company that brings in several billion dollars a year in earnings to Treasury, plus what they pay Uncle Sam in federal taxes????
Surely GSE denigrators you jest over those paltry numbers—and, for spite, I did just call you “Shirley”—since, despite being de minimis, every business decision Fannie and/or Freddie makes is PRIOR BLESSED BY THE GSE REGULATOR AND VARIOUS US TREASURY OFFICIALS, the institutional home of which gobbles up every dollar of annual Fannie and Freddie profit.
These are not private corporate management decisions hatched in dark boardrooms by covetous dollar hungry employees—as the conservative “broad siders” imply--because everything, the GSEs do is approved, first, by their government overseers.
And it has nothing to do with GSE mortgage operations or how Fannie deals with its lender network or other stakeholders.
Suffice to say—since Fannie Mae is making money and will for the near term until their circuymstances change, i.e. the net worth sweep is rejected—whatever earnings Fannie (and Freddie) fail to spend on overhead each year now is sopped up by the US Treasury.
So, pro-GSE elements need not fear these puppies yelping over office decor costs?
Yet, if that’s all the “bad guys” have to throw at the housing finance giants, unleash those penny-ante fusillades!
And good luck getting those GOP Hill denizens to worry about a few millions dollars, now that their DNA is all over a TRILLION DOLLARS in red ink and deficit spending from their recent budget buster spending bill and the separate tax reform package.
Bitching about cost overruns on new construction, frankly, it reminds me of Claude Rains’ portrayal of Captain Renault’s in the movie Casa Blanca—when he’s handed his winning gambling chips—and announces, hypocritically announces, “I am shocked, shocked to find out that there is gambling at Rick’s.”
Hostilities based on chandeliers and decorative wood?
What an embarrassment to we warriors of yore!!
As former Steeler linebacker Jack Lambert—a front toothless, vengeance seeking professional football specimen--once said of excessive rules to protect Quarterbacks, “Maybe we should have them wear dresses?”
Anything new and exciting staring at Fannie and Freddie??  
Yes, there are a few new court cases charging the Treasury with variations of the GSE violation with which we all are familiar and some of those have been sent to Judge Margaret Sweeney, who has been sitting on her other GSE “case-eggs” for so long that some of those cases are kindergarten age.
Who knows, those still could hatch and the emerging peeps make the “good guys” happy.
Or, possibly, Judge Lamberth could awake and find out that he was flimflammed by government lawyers and pressured to decide a mammoth case, absent all of the facts which the DOJ and agency lawyers failed to provide. Worse yet, his honor was lied to by those same attorneys.
Wouldn’t a mini-reversal be a fun result, with red faces all over town and maybe a lawyer-rendition or three?
But, there’s some hope for the GSEs as the GOP Congress begins to get loose bowels in this election year over their humongous generation of red ink in their spending bills and their “tax reform” package, which is slowly producing very few benefits for middle income tax payers which many of us predicted….not to mention gobs of anticipated red ink projections.
Recent news stories has the Congress relooking at their past spending decisions to slow down some of that deficit spending to show a better face to November’s voters.
If the Congress wakes up to the $100 billion or more just waiting for the US Treasury, if Secretary Mnuchin wants to take advantage of the inherent value in monetizing the government’s GSE ownership warrants,  we still could get some congressional-blessed executive action that keeps Fannie and Freddie alive and functioning as privately owned financial institutions.
Not predicting, just sayin’.

Ooops: MAGA soon could stand for “My attorney got arrested!”

Maloni, 4-17-2019

Sunday, March 25, 2018

The more things change, the more they stay the same

Same-o, Same-o

The bad guys keep whacking and hacking at the GSEs, but they are using some strange tools and tactics.

In a recent American Banker article, Ed Pinto, AEI’s resident myth builder, and John Ligon, a Heritage Foundation wonk, argued that American mortgagors should ignore their better consumer instincts--opting for long term fixed rate financing, like 15 and 30 year mortgages--and instead do what the nation’s largest banks would prefer, that is choose only adjustable rate mortgages (ARMs).

Now who do you think that selection would benefit the most, borrowers or the banks? I wonder who/what goosed that fun pair to write the article. No fair guessing the “financial establishment,” i.e. nation’s largest and most vocal financial institutions.

The duo’s piece went on to indict the nation’s secondary mortgage market (guess who those folks are?), for what the authors say is a hefty business reliance on Uncle Sam, except a close observation will show Sam’s ties to banks is far, far deeper for banks than it is for the GSEs. (Please, someone other the usual suspects explore and discuss this reality of major bank subsidies and exclusive Red, White, and Blue depository benefits.)

Here’s some Pinto’s and Ligon’s verbal anxiety, angry rhetoric,  complete with their disdain for the public’s long standing support and preference for fixed rate financing.

“Like clockwork, a recently released discussion draft of a Senate housing finance reform bill says the ongoing “guarantee backed by the full faith and credit of the Federal Government” will lead to the “continued availability of an affordable, fixed rate, pre-payable, long-term mortgage loan, such as the 30-year, fixed-rate mortgage loan. Unfortunately, the scare tactics that federal policymakers and affordable housing advocates repeatedly use to try to preserve the 30-year fixed mortgage and federal guarantees of the mortgage market rely on misleading narratives and not the experience of history.”

Whatchu talkin’ bout Eddie?

Ed and John proceed to try and correct what they claim is “misleading” about the buying public’s preference, but what they call misleading is a wise public’s overwhelming desire to opt for FRMs over ARMs—because fixed rate loans aren’t subject to periodic change or possible bank tampering (remember the big bank LIBOR manipulation!), which makes pretty hollow the Pinto-Ligon contention the public’s preferred FRM choice is based on consumer misunderstanding.

What is even more undercutting in the Pinto-Ligon meme is their sideline cheerleaders--the Mortgage Bankers Association, the American Banker Association, and the Financial Services Roundtable—which hope the public will buy (pun intended!) the AEI and Heritage mortgage preference (which isn’t going to happen unless Congress outlaws FRMs)—also demand any GSE-killing legislation emerging from Congress give the big financial institutions the same federal guarantees for which Pinto and Ligon mock Fannie and Freddie.

So that securities linkage is “wicked bad” for the GSEs, but  the banks want the same? (Doesn’t that make it wicked bad for the banks, as well?)

Despite what GSE foes claim, Fannie and Freddie outstanding debt and MBS don’t show up as federal liabilities on any US Budget document, even with the imposition of “conservatorship.”

That phony excuse/justification for Fannie/Freddie opposition exists only in the minds of the Conservative polemicists, making this article more GSE balderdash in the long line of same from the Pintos, Pollocks, Ligons, and Wallisons of the world.

Sigh, sigh!

Ironically, Ed Pinto joined a recent Urban Institute panel discussion (Tim Howard and notable others also participated) in which a majority of the nine principals agreed that a federal role was needed in the nation’s mortgage finance system to make sure that lower income families and minorities would get served by lenders. Ed’s opinion wasn’t recorded but not sure where to put him, given this article and what his big bank allies are demanding legislatively??

GSE Lawsuits

In the meantime, more GSE lawsuits over various Treasury/FHFA misdeeds continue to show up in federal courts, in hopes one of these federal judges will closely review previous opinions, i.e. Lamberth, and reach a different conclusion, i.e. the federal government cannot do whatever evil it wants to the GSEs and their non-government owners.

As the spring blossoms bloom, hope springs eternal, so more power to those plaintiffs.

GSE La-La Land

During a HUD hearing with witness Secretary Ben Carson, Senate Banking Committee Chairman Mike Crapo (R-Idaho) whistled past the Capital Hill graveyard insisting GSE reform still was a high Committee priority. The Chairman would have been better served hammering the Secretary’s (wife's)  furniture requests.

While that discussion could have proved embarrassing to Dr. Carson, it would have been worse if Crapo or any other Senator grilled Dr. Carson on Fannie’s and Freddie’s roles, what the GSEs do and did for the United States, and how the nation’s senior federal housing executive sees the secondary mortgage market operation in the context of his job and HUD’s responsibilities??

Not as sexy as high priced dinette sets but possibly more revealing?

And in related legal news…..

Worth noting that Ted Olsen, former US Solicitor General for President George W. Bush and prominent GSE plaintiffs’ lawyer, week turned down President Trump's request to join this President's ever changing legal team to fight against whatever Special Counsel Robert Mueller produces with his investigation of Russian election interference. Yay, Ted.

Michael Avenatti

I have been very impressed with Stormy Daniels new lawyer, Michael Avenatti, suing President Trump and his attorney Michael Cohen on her behalf, trying to undo a non-disclosure agreement his client initially signed in 2016 (and for which she was paid $130,000) shortly before that year’s presidential election, seemingly employing Trump tactics. The agreement in question seems to contain pseudonyms for all parties involved, as well as an LLC created to facilitate the payment to Ms. Daniels (real name Stephanie Clifford).

Avenatti, a 47 year old California lawyer, is a Penn undergraduate with a law degree from George Washington University. He’s also an amateur race car driver and has worked on several high profile cases. Avenatti has been very aggressive—showing up on TV networks regularly--boldly proclaiming his client’s case against the President and Trump’s attorney.

His “in your face” tactics are as brutish as our President talks. Avenatti more or less is goading the White House, “If you are going to fight us, bring your lunch, because you are going to be here a long time!”

From Wikipedia.

“After law school, Avenatti worked at O’Melveny & Myers in Los Angeles, California, alongside Daniel M. Petrocelli, who previously represented the Ron Goldman family in its case against O.J. Simpson.[18] He assisted Petrocelli on multiple legal matters, including the representation of singer Christina Aguilera[19]and litigation surrounding the movie K-19: The Widowmaker,[20] and worked extensively for Don Henley and Glenn Frey of the musical group The Eagles, including in a suit brought by former bandmate Don Felder against the group and Irving Azoff.[21][7]

Avenatti later joined Greene Broillet & Wheeler, a Los Angeles boutique litigation firm. While there, he handled a number of high-profile cases, including a $10 million defamation case against Paris Hilton,[22] a successful idea-theft lawsuit relating to the show The Apprentice and against producers Mark Burnett and Donald Trump,[23] and a $40 million embezzlement lawsuit involving KPMG.[7][24]

In 2007, Avenatti formed the law firm Eagan Avenatti, LLP (formerly known as Eagan O’Malley & Avenatti, LLP) with offices in Newport Beach, California, Los Angeles and San Francisco, California. He has since appeared on 60 Minutes twice in connection with cases he has handled.[1][25] Avenatti has also served as lead counsel on a number of historically-large cases, including an April 2017 $454 million verdict after a jury trial in Federal Court in Los Angeles in a fraud case against Kimberly-Clark and Halyard Health,[26] a $80.5 Million class-action settlement against Service Corporation International,[27] a $41 million jury verdict against KPMG, [28] and a $39 Million malicious prosecution settlement. [29] In 2015, Avenatti prevailed against the National Football League following a two-week jury trial in Federal District Court in Dallas, Texas after cross-examining Jerry Jones at trial.[30][31]

In March 2018 Avenatti filed a lawsuit on behalf of adult film actress Stormy Daniels seeking to invalidate a 2016 "hush" agreement regarding a 2008 affair with Donald Trump. The nondisclosure agreement had been negotiated in the final days of the 2016 U.S. Presidential campaign.[32][33]”

Speaking of the POTUS…America, please stay mindful of these musings

(CNN)A high-ranking official from former President George W. Bush's State Department shared a dire assessment of the current geopolitical state of affairs, calling it "the most perilous moment in modern American history."
President Donald Trump "is now set for war on 3 fronts: political vs Bob Mueller, economic vs China/others on trade, and actual vs. Iran and/or North Korea," Richard Haass tweeted Friday. "This is the most perilous moment in modern American history -- and it has been largely brought about by ourselves, not by events." 

No need for me to add anything to all of the news about our struggling President, with Mueller, ex-girlfriends on national TV telling all, forced departures from his Cabinet, appointments of extremist replacements and other department heads nailed for wastes of taxpayers’ dollars.
For the Trump loyalists and apologists out there, sorry, what we and the world are seeing is neither normal nor desirable presidential behavior.


Two CNN same story headlines from the day after the protest marches.

“A day after March for Our Lives, Pope urges youth to speak out”


“Santorum: Instead of calling for gun laws, kids should take CPR classes”

Maloni, 3-25-2018

Tuesday, March 13, 2018

GSEs and that damn hotel in California

Welcome to the Hotel California……..

Stacked in my car CD player, right now (even after—parked in my driveway--the vehicle was rifled by a thief who got my roll of quarters because I don’t know how to use my cell phone for parking meters) is “The Eagle Greatest Hits,” along with my CDs featuring the most famous R&B groups of the 60’s and 70’s, Drifters, Temptations, Four Tops, etc.

The Eagles monumental hit “Hotel California” is the GH’s album’s first cut.

It’s a song that has as many “I swear to God” interpretative connotations as there are suggesters, all musing about the meanings in this anthem to the Left Coast, drugs, Hollywood and the entertainment industry. (Editorial Confession: my youngest son is employed in LA as an animator on “Cosmos,” a network science show aimed at the entire family.)
The most accurate explanation I find comes from a long-lost interview with original Eagles founders Glenn Fry and Don Henley who said the “California” story is about the wild and hyperactive, swashbuckling and uncontrolled LA music scene/industry, which gobbled up and signed new acts right and left used/abused and then kicked them to the curb with barely a thank you or compensation for their original and occasionally successful efforts.

The most haunting line about Hotel California is, “You can enter anytime but you can never leave.”

That line was used last week, again, this time in court, by an appeals Judge hearing the Collins GSE case to analogize the federal government conservatorship requirements and Fannie’s and Freddie’s inability to escape them, no matter how good the plaintiffs’ legal arguments or how successful is the GSE operations.

The irony here—given my belief that no federal judge will rule for the GSE plaintiffs unless and until the Trump Administration (Mnuchin and the POTUS) indicates its desire that the GSEs remain functioning and in control of entrepreneurial managers as well as their private shareholders (even in “utility mode”).

The judge who made the seer like observation about the trapped mortgage providers/guarantors is one of a troika of jurists who could bust the GSEs out of that evil hotel, but I doubt ill it will occur, until something like the triggering mortgage market signal is indicated by those who control our government.
Regarding the latter possibilities, as I’ve stated so often, it falls on Mnuchin and FHFA Director Watt—more the former and less the latter—to drive an executive/regulatory action to free the GSEs and return then to real functionality, keeping their earnings and building capital.

Mnuchin’s Future? No worse than other cabinet officials, but….

But, just this week a slight shadow crept over that wished for but not quickly realized hope—as Secretary of State Rex Tillerson just found out today and Gary Cohn learned a week ago.

Cabinet status in the Trump Administration is not a long term sinecure (are you listening Betsy DeVos, Ben Carson, Steve Pruitt, Kellyanne, et al).

Mnuchin by all reports is OK with DJT, says the right things about the GSEs, but he is not a favorite on Capitol Hill (see his outrageous exchange with Rep, Maxine Waters (D-Cal.) where he clearly tried to fill his non responses with not-on-point formal oration intended to run through the allotted five minutes each Member gets to ask questions. The 300 seconds also includes a witness's answers. If you prattle, intentionally, as SM did, you choose “run the procedural clock” disrespecting your questioner.

Added to his dournessindividual lack of appeal/winning personality, the Treasury Secretary’s Scottish actress/model wife, Louise Linton--has displayed qualities which are the equivalent of “nails scratching on a DC blackboard,” with her bragging mention of the couple’s financial success, major tax requirements, her designer clothing, and  Marie Antoinette approach to DC life.

Unfortunately, those things matters for cabinet, if your goal is to keep your job and not to wind up on Trump’s bad guy list (Tillerson, Cohn, AG Sessions?).

Bottom line, will Secretary Mnuchin be around/last long enough to rescue the GSEs? Hoping so.

Speaking of Gary Cohn….

When Gary Cohn walked out of the White House’s top economic job over his dispute with the POTUS over Trump’s demand to impose steel and aluminum tariffs, and Cohn’s concerns over starting a trade war, the name of Larry Kudlow, TV talent and former Bush Treasury officials was named as a possible replacement. That noise has increased in DC.

Initially, I took to my small group of GSE friends and mentioned my opinion why I thought Kudlow would not be good for Fannie and Freddie, remembering his comments and op-eds over the years, suggesting he was not a GSE fan.

However, I was corrected by some GSE graybeards, whom I respect, pointing out Kudlow has strongly suggested that GSE shareholders have been treated unfairly/poorly, as well as Kudlow being a major fan of Josh Rosner, a pro-GSE stalwart for the past several years.

If Kudlow gets Cohn’s job, I am rooting for the graybeards!!

Pennsylvania’s 18th Congressional District

By the time most of you read this, we’ll know if Conor Lamb—33 year old ex-Marine and former assistant US Attorney, plus Democrat candidate for Congress in today’s March Special Election—has prevailed against his GOP opponent and pulled off a stunning political upset.

Republicans have thrown $10 million into this race for a House seat President Trump won by 20 points in 2016. If Lamb, whom I’ve met and support, can triumph, it will add to the recent election rejections of Trump and the Republicans, happening so far only at the state level. Now it’s a House of Representatives seat.

Conor Lamb is sharp witted, very bright, articulate and more conservative than most House D’s.

This is a white collar congressional seat, south and east of Pittsburgh, where Trump, twice, VP Pence, the notorious Kellyanne Conway, and other GOP bigwigs have crisscrossed to try and boost their lackluster candidate. The POTUS’s embarrassing 65 minute speech in suburban Pittsburgh last weekend, was filled with spurious comments, putdowns, and the usual Trump untruths about his performance as President.

As POLITICO observed, If Lamb wins, or even comes close, it will be a signal that Republicans are in danger even in districts where Trump was won handily in 2016, and raise Democratic hopes of capturing the House and Senate this fall. The race would also serve as a model for Democrats running in deep-red districts across the country.”

Maloni, 3-13-2018

Sunday, March 4, 2018

More GSE Stuff and less Trump...

GSE Things I Think……

On GSE matters, my analysis sometimes hits but, occasionally, I miss…..badly. It’s tough work being a GSE seer (no benefits, no contractual time off, or even healthcare!!).

But I tend to write and analyze instinctively, taking a fact or item from here and one from there, trying to weave a plausible explanation for blog readers based on my history.

I’ll repeat I don’t believe this Congress’s Republican majority is up to any major GSE reform legislation in 2018, given the complexity of the mortgage issues, the chaos and market upheaval embedded in what the anti-GSE interests are seeking, the fact that it’s an election year and the GOP burden of running on Trump’s record is difficult enough, added to the core reality the GSEs are working well and no major operational issues exist. Consumers can get fixed rate financing, generally, from lenders in their own communities at reasonable prices, while credit requirements seem to be slowly widening meaning greater eligibility.

Not that GSE risks have disappeared, they haven’t. Watch this week, if/when Senate Banking does a “reg reform” bill, which could draw something mischievous which seeks to pre-empt any 2018 executive/regulatory initiative.

Sen. Bob Corker (R-Tenn.) to the delight of many in the volunteer state--not the least of whom was Rep. Marcia Blackburn (R-Tenn.) who wants Corker’s job--decided to stick with his plan to retire this year, but he still could make trouble.

However, the general Fannie/Freddie terrain placidity and the absence of jarring headlines, social media emergencies, artificial budget deadlines suggests to me no major congressional “GSE reform” restructuring will happen in this even numbered year.

Now, if we just can get some decent basement furniture for HUD Secretary Ben Carson (and satisfy Mrs. Carson), that department can get back to doing nothing and staying out of the headlines competition with other White House humiliations and dishonors.

I am not going to comment on GSE legal developments and court cases because there is nothing I can add to my belief that the GSEs will get little support from the federal judiciary until the Treasury takes some action to signal it wants Fannie and Freddie around long term. Yes, judges and their clerks read the newspapers and view social media just like others.
Still, reports of Judge Margaret Sweeney’s picture showing up on DC area milk cartons do suggest fears of her disappearance.

GSE fans and GSE Foes

There are two groups of GSE supporters—with the twain occasionally overlapping—investors, who want to see GSE common and preferred stock rise in price, so they can cancel book losses or even make a profit on stocks they’ve held for years and/or bought when the bottom fell out of Fannie and Freddie stock 10 years ago.

The second group is systemic admirers--where I firmly stand (although I also am an investor but with a basis that would not shake my net worth if it disappeared)--those who believe the GSE-dominated secondary mortgage market truly is the most efficient, fairest, and practical method of delivering well priced (for all concerned) mortgage credit to every community in the nation, through a network of primary market lenders present virtually everywhere or via the Internet.

For me, an added bonus is that Fannie's and Freddie's operational systems force the nation’s largest lenders (the “bank financial establishment”) to adhere to the GSE underwriting requirements if they want Fannie and Freddie to bless their mortgage loans converting them to GSE securities.

As long as Fannie and Freddie blunt that inclination, banks can’t run mortgage-rogue, which they surely would with no restraints.

The GSEs act as governors on what I contend is the big banks natural inclination to cut corners and force decisions on consumers which mainly benefit the lender/bank. That control is one of their major fears.

The GSE investor crowd seems to be the lightning rod for negative media and congressional attention largely because some of them include hedge fund interests, while the second group of F/F systemic supporters get steamrolled because most critics don’t understand how the market works or how it did work before 2008. All they know is “GSEs bad.”

That hostility also is ironic because the anti-GSEs battalions have tons of multi-billion dollar financial institutions and their equally fat and wealthy senior execs—whose combined wealth overwhelms the GSE investors--but those folks never get GOP mention or abuse because critics act ignorant if their true objective.
In seeking to vaporize Fannie and Freddie, despite the MBA’s and bigun's rhetoric, the TBTF banks want the GSEs revenue and market place. It’s a simple explanation. The battle is all about the money!!
Triple irony is that most GSE Hill critics lamely would claim, “Well Fannie and Freddie are part of the government,” without realizing that the big banks get and always received far greater subsidies from Uncle Sam than the GSEs, making them far more red, white, and blue. . But try and explain that to Congress, since most banks don’t accept that reality and never inform Congress of that bank business fact!

And that problem potentially worsens, since most of the GOP-drawn GSE alternatives come with even grander federal loan loss guarantees for bank mortgage backed securities. But what’s another hundred billion or so to the guys who recently blessed two trillion in additional red ink with their “tax reform” giveaway.
The  congressional GOP seems to draw distinction between which zillionaires they like and admire and those they dislike and jape, i.e., the hedgies and others who bought GSE stock when it was dirt cheap, hoping it would grow in value. (That used to be country club Republican behavior, but I guess not anymore?)
Systemically and analytically, I most vexed by GSE opponents who can’t describe what F&F do but believe, instinctively, whatever the GSEs do and the way they do it is wrong. The latter’s ability to reason is badly dysfunctional.
I keep trying to think of ways to get through to these elected representatives to focus on, operationally, on what’s best for their constituents, not just on how much the big banks can contribute to their political campaigns.


Two themes seem to be bobbing up and down in DC, in various manifestations, and to me that’s a very good thing.
The first is the “bad guys’” focus/fear that either FHFA Director Mel Watt or Treasury Secretary Steve Mnuchin—separately or together (I just can’t see Watt moving dramatically without Mnuchin agreement) will move through executive or regulatory action to provide GSE relief and therefore remove the restraints allowing GSEs greater freedom to serve the nation’s mortgage finance system. (See legislative caution mentioned above.)

In past blogs we’ve noted that is hopeful (for the “good guys”) and why the optimism exists, i.e. Congress incapable of slicing the GSE Gordian Knot. It’s heartening, but never underestimate the power and tenacity of the big banks and their allies  to suborn any GSE positives.

For me hope #2 is Mnuchin coming back to the GSE warrant values and the $100 Billion plus in fresh revenue it represents for the Treasury, and its “General Fund,” if this Administration chooses in a meaningful way to keep F&F alive. (Just like Watt needs Mnuchin’s blessing, Mnuchin needs Trump’s approval.)

The Treasury and the White House would gain a big slug of money soon and perpetuate a fair and efficient GSE system, which currently is appropriately regulated, although slightly overdone and rigid. The GSE system, for nearly 50 years, has been good for consumers,  the mortgage finance system, and its professional players. The post 2004 segment was an aberration, easily explained by the dastardly political interference which deprived Fannie of experienced and proven leadership as subprime lending heated up. (Read “The Mortgage Wars” for the story.)

Again, despite their constant laments, big banks have earned plenty of money in the GSE dominated secondary market, while they own the primary market.

Another plus, but just beginning to blossom, is the echoing of an argument that Tim Howard and others have made. “Future investors in mortgage debt, securities, and guarantor operations will be quite leery and most hesitant, if the federal government fails to address and re mediate the Fannie and Freddie precedent of Treasury blithely aggrandizing billions of dollars from core mortgage market principals and keeping that money.

Interest rate and credit risk are home loan market issues, but government theft by political fiat is tough to predict and protect against, strongly arguing to crucial required mortgage participants, “Just don’t gamble with that possible jeopardy” and look elsewhere in the economy to put your money.

Staying (largely) Quiet on Trump

I promised myself and others I would lower the volume on my President Trump objections and I will.
I just hope the nation sees and appreciates the institutional chaos, as well as political and policy damage, this tweeting shoot from the hip President is inflicting on the nation and world.
The government is filled with personnel vacancies and the Trump Administration can’t attract quality people to fill them.
Just read the papers, watch TV (seldom FOX) and contemplate if the guy at the top is damaged and inoperative, aren't multiple segments of the federal government likely to be as well?
Where do we see that stability, not the White House or any of the domestic agencies? We’re hoping it exists in the judicial, FBI, and national security agencies, but what if things are shaky there, as well?
These anxieties also are happening among Republicans, just waking up to DJT’s worrisome antics, whether it’s gun control (he’s been on several sides of this matter), military parades, Jeff Sessions, $25 Billion for the “wall,” immigration matters, Hope Hicks, nepotism, i.e. Ivana and Jared, foreign trade, unlimited presidential terms,and more.
Please stay tuned and dedicated to playing your role in our democratic system, meaning educate yourself and vote!

Maloni, 3-4-2018

Sunday, February 25, 2018

GSE Stuff, Mueller, Russia, the NRA, and President Donald J. Trump

Some GSE Notes, plus my observations about our President!

I keep looking for some commonality among the sparse GSE-related doings, as I try to analyze what's going on in Washington both to explain them from my historic perspective and even to hazard a guess to future developments. 
But it is tough finding positive Fannie/Freddie things, let alone loads of cohorts in DC. 
Investors Unite does an excellent job, the small lenders (CMLA) and the Independent Bankers are stalwarts, plus the low-income housing community we have helps, but we have few foot soldiers, let alone corps leaders. 
With almost no GSE advocates beyond those mentioned, ones who read and exalt Tim Howard’s superb blog, and a few folks who say nice things in response to my posts, Fannie and Freddie allies are not numerous. 
We’re a small group.
Doing my best Johnny Carson, “How small is it you ask?” 
Well, Tim Howard and I planned to host a joint meeting of all of our GSE fans. We figured two discarded, but contiguous public telephone booths near Capitol Hill would suffice for the meeting, plus permit sufficient space for vendors. 
We decided one Dunkin' donut and two cups of coffee should cover all our guests’ food needs, and the public restroom in nearby Union Station could handle the toilet needs of all of our participant. 
Our group is so small, if he drops in, we expect Sen. Bob Corker (R-Tenn.) might be the tallest attendee. 
(Lame humor attempt. No, Howard and I are not doing such an event.)  
Seriously, I see little near term positive for Fannie and Freddie, except the continuing obtuse nature of our opponents for which we all must be thankful because therein is where we have hope. 
Last week 127 mortgage bankers, from across the country, wrote to congressional leaders, rhetorically wringing their hands exhorting lawmakers to write powerful “kill the GSEs legislation” (my terminology not theirs) before either Federal Housing Finance Agency Director Mel Watt or Treasury Secretary Steve Mnuchin acts through executive fiat on their own version of “GSE reform,” which scares them” 
Legislation ain’t happening—with uninformed Senators and Members Congress tripping over their ancient/dogged biases--nor will GSE fans get much help from the courts, including the SCOTUS, which all can hide behind the “Lamberth opinion.” 
It appears Judge Royce Lamberth decision's delivered without having all of the relevant facts--denied him by our very own Justice Department--gave subsequent federal judges all the cover and justification they needed not dig into the GSE issues and accept the DoJ falsehoods. 
Also, from Mt. Olympus or wherever the Wall Street Journal‘s editorial board hangs outs—we heard thunder, lightning, and anguish as the heavens opened up—and the fearsome (and now maybe fearful?) WSJ opined in its predictable anti-GSE way—sounding like those MBA members, the trade association, and its President and CEO David Stevens--worrying that the Trump Administration (really Secretary Mnuchin) might act unilaterally and support the GSEs. 
All that did was make me root for the WSJ’s and the MBA’s, fears since it would cause the WSJ editorial staff gastric distress  (keeping in mind my late mother’s curse on all who crossed her or her children, “May they need kaopectate for the rest of their lives!”).  
After reading that MBA letter and the WSJ’s editorial lament, I screamed, “Yes mortgage bankers. From your fears to God’s ears, let’s all root for Mnuchin and/or Watt rising to the GSE rescue!” 
I think that either of those two officials--Watt acting on his belief in “access and fairness” and Mnuchin on his knowledge of how securities markets work (not to mention the $100 Billion plus he could recoup for the federal government)--would do a better, more efficient, less disruptive, less biased, open minded, and constructive job for the nation’s mortgage markets and homebuyers, than anything this Congress could design on their best day. 
I sure hope the MBA and the WSJ are onto something with their anxieties and horrible dreams of Treasury or FHFA action, because--as I’ve written before--I think that’s the best near term hope for Fannie and Freddie, not some GOP blessed Fannie/Freddie literal statutory execution. 

A Bit More Fannie and Freddie 

--Adding to possible FHFA mystery steps--an agency which can’t do much without blessings from Treasury—is the agency mandate to the GSEs to increase their respective Returns on Equity (ROE). That regulatory ask often—but not always—is a call for more revenue. 
That should cleanse anything lingering in the MBA’s bowels, since—simply—if FHFA wants the GSEs to generate greater income/revenue by raising their respective prices, it also suggests someone wants the GSEs to maintain their operations. That prospect flies in the face of the MBA’s destroy the GSEs position and should make those 127 mortgage banking letter signers consider kaopectate, too. (See above). 
--Does anyone think that well-known former Obama anti-GSE source, recently seen visiting several Senate offices—who is not registered as a lobbyist—is working on the very positive  “Moellis Plan,” which would free Fannie and Freddie and let them bloom once again?? 
I doubt it. Chances are that Jim Parrott’s Senate hob knobbing again with the Corker-guys with whom he worked on the earlier “give the big banks what they want, but kill Fannie and Freddie proposal.” If that is what unregistered lobbyist Parrott is doing, is he going to come clean with the Secretary of the Senate, report himself to the Ethics Committee, or will any of those GOP offices and staff blow the whistle on him??? (Don’t hold your breath.) 

Mueller, Russia, Putin, and President Trump????????? 

Special Counsel Robert Mueller and his staff last week filed 13 indictments against Russian individuals and institutions for interference in the 2016 US presidential election, backing his charges with very precise, detailed, and copious evidence showing exactly what the Russian perps did, starting two years earlier in 2014. 
Those details describe an astounding invasion and threat. The President’s indifference confuses and astounds me. 
I’m not talking about possible collusion with the President’s campaign--that issues hasn't been addressed by Mueller, yet--but just the Russian boldness and audacity (which DJT should combat, not accommodate). 
The President, who has been squirming, deriding, and stiff-arming the Mueller work as “fake news and a hoax,” first reacted to Mueller’s latest indictments with a very predictable Trump position (paraphrasing), “Yes, but there was nothing saying my campaign colluded with the Russians,” as if as elected leader of the United Sattes he had no stake in honest American elections not poisoned by foreign meddling. 
Really, really?? 
Mr. President where was/is your concern that an overseas adversary government--historically and unchangingly antithetical to US interests and institutions--sought successfully to infiltrate our electoral process, undermine its validity, and insure Russian political and societal objectives, including elect you President?? 
Where is your personal and national anger, your patriotic outrage and fury, Mr. President?? 
Except for some angry tweets accusing everyone but the guy looking back from his mirror (which is Trump S.O.P.), the President of the United States said very little, beyond trying to blame it all on Barack Obama. 
Mr. Trump, do you think your bro Putin had anything to do with this matter or any of our international headaches? 
This week, lamely and late, the President finally asked AG Jeff Sessions to look into future implications of this type of invasive election skullduggery. 
Prior to that Sessions request—despite the world knowing Russia was guilty of a variety of mischief and dishonesty--Trump did nothing pre-emptive, asked nobody at the FBI or any of our national security agencies to protect the integrity of this nation’s future elections, with an important one coming up in 10 months. In fact, he claimed he believed Putin when the Russian thug said his country and its spy services did none of these things. 
How do we know DJT did "nada" to head off future election tampering? The heads of each of our national security agencies, publicly, testified to that sorry fact just days ago in the Senate. 
Why does Trump “turtle” for Russia and its political hooliganism? 
In addition to the Trump family’s wet dream of doing massive hotel building and development in the former Soviet Union (whose leaders still act just as their Tsarist and Communist predecessors did), it’s likely the Russians must have something on DJT which explains his dramatic reticence. 
Trump the businessman--who still refuses to share with the nation all of his tax returns and their details--may have started borrowing money from Russian banks and oligarchs, when his financial fortunes ebbed in the past. He may even have engaged in the massive money laundering those Russian sources, banks, and officials required and still need as they sought to launder and hide literally billions of dollars. (Big US real estate purchases via Trump Inc. could hide that, too.) 
Remember Eric Trump telling Fox News, “My dad’s favorite color is green.” (Yes “green,” more than red, white, and blue.”) 
What else—besides the reported “Steele dossier pictures”—can cause our current President to be the only US President since the end of World War II to so compliant/soft on Russia and its leaders? 
He still won’t mention Putin/Russia etc. or their election interference. Before the Mueller 13 indictments, he refused to extend stronger sanctions on these same Russian officials after the Senate and House—with record bipartisan votes—directed him to do so. But, now he has evidence, confirmed by his Justice Department appointments. 
As you think about the Mueller 13 indictments look back at all of the Trump statements and accusation trying to steer the nation away from that finding and the extending possibilities. 
Trump: “It’s not me. It’s the guy behind the tree” (with all due respect to former Senator Russell Long (D-La.).

Washington Post editorial on preventing Russian or other foreign election interference.

Marjory Stoneman Douglas High School, Parkland Florida

There is very little I can or will add to lament the horrible massacre of those 17 students and teachers and the wounding of others. 
As with most of these ordeals, it brought out the best and worst of us. 
After offering his "thoughts and prayers," I am glad someone suggested the President meet with the kids and their parents, as well as those from other school murder tragedies, even if DJT had to rely on WH-provided notes to help him remember to convey compassion. 
But the time for words will shortly pass and the craven NRA-butt kisser ("the NRA leaders all are patriots," DJT said this week) will be confronted with congressional demands for action to make these war weapons more difficult to acquire for anybody, but certainly youthful buyers. 
Well see if our President walks the walk then, or lets the NRA and its allies back him down? 
In the meantime, Trump can show leadership and maturity in telling the world (and his Trump tweet mob) that the Parkland kids are not paid actors or traveling agitators for hire, currently a favorite GOP meme. 
The President should mirror the grace of Senator John McCain, who--when running against Barack Obama in 2008--was asked by a follower "if Obama was an Arab?” 
A resolute McCain, on national TV, said, "No, ma'am. He's a decent family man [and] citizen that I just happen to have disagreements with on fundamental issues and that's what this campaign's all about. He's not [an Arab]."

That’s the character a leader shows.

Steve Sack - Minneapolis Star-Tribune

Maloni, 2-25-2018

Monday, February 12, 2018

Could Mel Watt Save the Day?

GSEs, the MBA, & President Trump

The Mortgage Bankers Association (MBA) and David Stevens their President might be desperate as their very loud voices to crush the GSEs and aimed at Capitol Hill have produced no substantive/immediate response, save huzzahs from the usual suspects.

As most people know, the mortgage lender trade group and its leaders have put a lot of time, effort, money, and skullduggery into destroying the GSEs, which is not surprising given the dominance of the nation’s largest banks among the MBA membership.

But the same actions are very surprising when you realize how much MBA members and lenders throughout the country—big and small--rely on Fannie and Freddie to provide liquidity, manage lender mortgage volumes, and securitize all the loans the banks (large and small) and other mortgage providers prefer to sell or keep on their books as MBS.

(I can’t believe that years of chaos, confusion, and transition, which such a massive legislative transformational shift would produce, is worth more than the “bird in the hand” which the GSEs represent for the MBA and its dues payers. That’s one of the reasons I don’t believe that the MBA rank and file are onboard with Steven’s’ plans.)

To me, the MBA’s fundamental and selfish position, which the trade association speaks about only in code—“The GSEs have crossed a bright line separating primary and secondary mortgage markets” (Huh, the GSEs don’t originate mortgages and their regulator—with the help of the Treasury--sets their guaranty fees!)-- is Fannie and Freddie have too much influence over the loans MBA lenders originate in the primary market which smoothly enter the secondary market where GSE rules dominate. That operational reality has been a very positive national phenomenon when you compare GSE default rates with those of other mortgage guarantors and portfolio lenders.

When the GSEs in 2008 were put into conservatorship by Hank Paulson and the last Bush Administration—with a follow up matching repressive Obama Administration regulatory performance--the GSEs were told to prohibit lenders from processing  “subprime loans”  through the F&F underwriting and securitization windows—and they have succeeded, impressively in doing that.

For years, the MBA has lined up behind every major (and minor) legislative effort to screw the GSEs, including all the variations of the Corker-Warner bills as well as the Milken Institute Michael Bright and Ed DeMarco schemes (and anything Jim Parrott and Michael Stegman endorse), while denying their intent and actions.

Those endorsements were set up and justified  by the over-hyped  MBA “Task Force” deliberations and subsequent report, rumored to be produced from a Wells Fargo provided wish list that backed all sorts of big bank priorities, which at the end of the day meant no more Fannie and Freddie spoiling the MBA’s—and big bank-- soup.

In the past two years, while the MBA mostly has looked to Capitol Hill for relief for their members, the MBA and its leaders are beginning to see that Congress may not do their bidding, despite the continued efforts of the retiring Sen. Bob Corker (R-Tenn.) and Rep. Jeb Hensarling (R-Tex.).

So what could be worrying causing sleepless nights at MBA HQ these days?

Maybe the fact that most in Congress aren’t listening or have many other legislative priorities on their agenda.

Then, how about this little nugget from the National Association of Mortgage Professionals publication??? (See below.)

Fannie and Freddie May Be Totally Revamped in the Blink of an Eye
You may wonder how Fannie and Freddie could be totally changed in a matter of days considering Congress has been stalemated for years on that issue.  That is only the case because Mel Watt, FHFA Director, wants Congress to make the changes.  Next year, President Trump gets to appoint a new FHFA Director who may decide he wants to completely change them.  We have focused on the power of the CFPB Director but the FHFA Director is another unaccountable head of an “independent agency” that can do whatever he pleases. That became abundantly clear in a House Financial Services Committee hearing today featuring Treasury Secretary Mnuchin.  The Director has the unchecked power to take them out of conservatorship or completely change the way they operate. 

Wow, how about that possible gut punch to the MBA’s bread basket??

Could Mr. Stevens and the MBA be displaying its fears that Federal Housing Finance Agency Director (FHFA), Mel Watt—whose term expires in early 2019 and most likely won’t be reappointed by President Trump—has all the legal authority in the world he needs to structurally change the GSEs, end the net worth sweep and restore Fannie and Freddie to their more traditional privately owned roles??

 Will he or won't he, if Congress folds its cards?

It’s hard for me to believe that Mel Watt on his way out the door would shake things up in that manner, but who knows?

He might if he believes his decent legacy of “regulating’ the GSEs could get flushed away by selfish, big bank driven legislation which only rewards the rolling-in-cash obtuse large financial institutions but not the nation’s secondary mortgage market operations or certainly its mortgage consumers.

C’mon, Mel Watt consort with Steve Mnuchin, let him get his $100 Billion plus for Treasury’s worries over deficit spending, while you breathe life into a secondary mortgage market pair that has and will do a better job than any combination of new big bank creations, plus the sleepy-eyed Government National Mortgage Association (Ginnie Mae), which also means the squirming/sticky hands of Michael Bright and Ed DeMarco.

This Week in Trump World

For me, it has been very difficult to concentrate on GSE issues—which means the fate of Fannie Mae and Freddie Mac—while so much else has been going on in DC with the President and his Administration, both of which seem to careen from one calamity to another.

After more than a year in office, the crises seem never to stop, with major allegations from one mess or another accusing senior Trump officials—and then the sloppy Trump handling raising further doubts--as they try and keep up with the mercurial President who seems to be haunted by his own pantry of skeletons and reacts defensively—not like a thoughtful, responsible leader —when one of his team meets trouble.

There is nothing I can or will add to the Rob Porter screw-up which exposed both the President’s lack of understanding/sympathy for the female victims of abuse and the number of WH execs—who handle top secret information—without the requisite security clearances. The GOP would howl if that were Obama’s team.

I would share some different perspectives with those who look at Washington and see nothing wrong with how our President and his team are dealing with the major challenges facing the United States, domestically and internationally.

I’ll share two thought provoking vignettes and an op ed column, describing stuff going on in the White House and behavior from our President.

The first is a quote from a Vanity Fair article—before the Rob Porter incident-- about how John Kelly, Trump’s Chief of Staff, manages his boss.

According to a source Vanity Fair describes as “Republican close to the White House,” things are not, in fact, okay. That individual rather colorfully summed up the situation, telling the publication, “It’s like Kelly views Trump as a mushroom. He wants to keep him in the dark and feed him a bunch of s**t.” 
The second comes from a POLITICO reference to a new book by Democrat political consultant Lanny Davis. 
SNEAK PEEK – LANNY DAVIS in his new book “The Unmaking of the President 2016: How FBI Director James Comey Cost Hillary Clinton the Presidency”: “In 1984, the psychiatrist Otto Kernberg described a severe form of narcissism called ‘malignant narcissism,’ with personality traits that, in combination, constitute a significant pathology and mental disorder. ... 1. A sense of entitlement ... 2. Lack of conscience and empathy ... 3. A sadistic streak ... 4. Egocentrism ... 5. Grandiosity ... 6. Paranoia ... 7. A manipulative nature ... 8. Project their bad behavior onto others ...” 
Last is a link to Maureen Dowd’s New York Times op-ed, Sunday, February 11. 
Trump Shows Us the Way

Maloni, 2-12-2018