Monday, December 31, 2018

Could Steve and Louise be the next to leave DC???


Happy 2019 everyone and put on your big boy pads
Because I expect a hot time in the old town next year

Some GSE-related opinions.

As we’ve come to learn, nothing—or nobody-- is forever in Trump world.

DJT’s cat on a hot roof approach to policies and personnel, i.e. trying to jump from one hot surface to somewhere cooler is S.O.P (Standard Operating Procedure) for this President who pretends he is blameless and innocent amid all those executive transgressions where he is and deserves major blame. (Has he ever apologized for anything?)

Nobody ever has been totally sure what this White House’s Fannie and Freddie GSE policy is; everyone and their brother and sister analyst--including me--offers guesses not always guided by Admin direction, let alone insight.

But, we have known who the principal actor is on those matters, Treasury Secretary Steve Mnuchin.

Although, Mnuchin is prone to offer lots of fungible/generic “Fannie-Freddie speak” to whatever tune his institutional and orthodox audiences want to hear, i.e., “We want to free them and reduce taxpayer risk GSE; we want a fix and more private capital; regulation is easier than legislation, but we want a bipartisan agreement on Fannie and Freddie.”

Did you ever hear such confusing and shapeless bullshit? It’s kind of like Mnuchin himself?


 Time for a commercial: This past week’s American Banker asked how to diminish federal government risk in the mortgage market? How about dramatically reducing deposit insurance or making the banks which get it pay closer to what is the true value of the subsidized coverage they receive from Uncle Sugar???
Too novel, too creative??

Now, Stevie M. could be history because—when POTUS-dispatched Mnuchin to calm big bank nerves about shaky Trump policies--the Secretary managed to expound/freelance on “adequate bank liquidity” supplied by the Treasury and Fed which none of the bankers thought ever was an issue.
Oops, Steve—not the sharpest orator in town, either personally, politically or linguistically—IMO really stepped in it and "*&^%$#@ up," big time!
Asked to tranquilize the markets, specifically to convince seven big bank CEOs that all was fine with DJT’s bizarre Twitter dealing with China, tariffs, deficits, trade policies, etc., Mnuchin unknowingly “cried wolf” —with his dumb “liquidity” ad-lib and in effect said--“This Admin wants to assure you none of your girlfriends or mistresses still have STD’s.”

Except, until Mnuchin’s mention it, none of the financial behemoths worried about liquidity, usually a matter precipitated by panic and a rush by depositors and businesses to liquidate hard assets for cash, i.e. very major bad news for bankers.
Market response to Mnuchin’s embarrassing glaring flub, the Dow dropped the most in a day since the Great Depression or close to it. Trump rages at his dumb Secretary and covers it with some additional abuse thrown at the Federal Reserve’s Jay Powell.

Fed Chairman Powell has been doing what Fed Chairs do, i.e. worry about inflation and try and stop it before it starts.
Powell’s job is secure from our reality TV President, unless Powell chooses to bag it.

But when the President sends a third tier Administration economic voice out to tell the world the POTUS has faith in Mnuchin—who just threw gas on burning embers with the bankers-- I strongly would advise the Treasury Secretary to not foul up again and also to see that hollow WH endorsement as a signal not to buy any green bananas.

It could have been worse, the POTUS could have asked his hatchet woman “Scowling Biscuit” Sanders to send that message.

What could this mean for the GSE debate/discussion?

Clearly, it's not good to get on President Trump's bad side, since past obeisance is no guarantee of future Trump fealty.

And Secretary Steve still could survive his stumble

However, if Mnuchin gets dumped, someone else will be the chief GSE policy maker, who—unless that person is very F/F  verbose—hasn’t said very much about the GSEs and may not be as close to the POTUS, causing the market to revert to trying to read the entrails of goats to check what Trump wants to do with Fannie and Freddie.

Could a Mnuchin’s departure raise Craig Philips to #1 White House GSE guru or even Treasury Secretary, except that CP reportedly was a Hillary supporter in 2016? (I guess Jeb Hensarling is available, but he still pronounces the “t” in mortgage!)

Watch and see Mnuchin’s fate, when he and his Scottish actress wife, Louise Linton—also not considered a DC charm machine--return from their brief post-banker gaffe holiday break to Mexico's  Cabo St, Lucas (you know where so many other just-like-yours middle-class families go for a break from the harsh/cold Washington climate).

As Maloni opined, cheating is in the big banks’ DNA!!

Wells Fargo, again!

And Wells operatives and consultants are in the forefront of most “get rid of Fannie and Freddie” schemes. (Also, check WF’s connections to the “Gang of Six” featured in my last blog. Then connect the dots!)

Chairperson Maxine Waters, House Financial Services Committee
GSE fans should understand that the new House Banking Committee (as Wiki and I call it) Chairperson Rep. Maxine Waters (D-Cali.) will face institutional obstacles to her long-held support for the GSEs and, primarily, their low-income housing finance role.
Senate Republicans will frustrate her legislatively, as their House counterparts engage in guerrilla warfare (as Dems did for years), while the Administration will contest most things she champions or advocates.
As true as those matters are, don’t politically underestimate her and her multiyear Republican frustrations, not to mention the impact of her very personal spat with our President who insulted her deeply, every chance he got.
I would be shocked if she doesn’t involve herself and her Committee in what will be a House multi-committee campaign to make public the President’s tax records to determine if there are major conflicts with his past (overseas?) business partners, loans, and money-laundering, all of which have been hinted in reports of the Special Counsel Mueller’s inquiry.
It won’t be a dull 2019 in the House Banking Committee’s Rayburn Office Building hearing rooms.

Maloni, 1-1-2019

Political Cartoon

Tuesday, December 18, 2018

Bum actors perform a very bad movie...

(Artwork by the reknown, "Doc")
Seiberg’s Fantastic Six—Ain’t

Jaret Seiberg who writes about GSEs and other matters for Cowen Associates is someone I’ve known for 20 years. In the past, he and I, and occasionally Tim Howard, would meet for lunch and discuss all matters GSE, just to give him our perspectives on whatever the day’s Fannie and Freddie horror stories were.

I’d say it’s been four or five years since my last meal with Jaret.

A very smart guy, Jaret’s has become negative on anything good happening for the GSEs, through legislation or even regulatory fiat, via Treasury and FHFA. (I agree with him on legislation, but don’t on regulatory changes which is where I believe this will get resolved.)

The truth is Jaret doesn’t know any better than Maloni (or the sainted Tim Howard) what the hell is going to happen. He’s relying on his experience, his instincts, and some hope he’s correct.

But, in a most recent report (see link below), he suggested that an infamous “Gang of Six,” which most recently penned an article for The Hill newspaper, represents a phalanx of experts he feels can set the stage for any congressional and/or Administration consideration, with their respective housing finance histories and past negative GSE positions.

Jaret argues the half-dozen/could represent the kind of thinking that should carry the day.

I’ll be crude. Whether their article arguing for major changes that would eviscerate Fannie and Freddie-- was signed by six or 60 of their ilk—it doesn’t matter. They are running scared of a possible Trump/Mnuchin regulatory plan because as uphill as their torch-the-GSEs ideas were when the GOP controlled both congressional chambers that mountain just got steeper with the Democrats due to take over the House in January.

Quoting Jaret, “To us, the collection of authors of this op-ed represent the roadblock that recap and release advocates need to circumvent to succeed. The authors provide a broad front that appeals to just about every constituency other than investors in the GSE debate.”

Really Jaret, where, in this big-bank-supporting cabal are the affordable housing interests, and the keep-the-cost- of-housing-down for more people to become homeowners folk, or the “we like the efficiency and fairness when Fannie and Freddie systems govern the worst interests of the nation’s largest banks.” 

For years the big guys have displayed greed and market segment indifference, but they still hope to disguise it behind fawning industry panels, press releases, and  slick advertising.

Don’t you think Rep. Maxine Waters and all those new Democrats might demand answers to some of these questions and become obstacles to your changes?

There is a reason this same group of GSE hostiles and its allies have failed for 10 years to achieve their goals and one no longer can blame that on Fanie/Freddie lobbyists or lobbying.

Yes, it’s an old argument to point out this decade's old assault is driven primarily by the big banks, with no concern for consumers, but it still is a valid and I believe politically winning one.

As I’ve written before, I think this Administration will find some way to utilize the $100 plus billion sitting on the table waiting for a Treasury plan to resurrect the GSEs.

Don’t ask me about details, I don’t have them. But when you are running this much red ink, you grab the low hanging fruit and—primarily--you don’t screw with and scramble housing finance when the President hopes to run for a second office term in 2020 based on how well the economy is performing.

But, before you and others get carried away in flights of fancy over this latest gang of six, maybe a closer look might suggest they have warts and blemishes.

Let me offer some sides of these guys which Seiberg doesn’t. He nor anyone else should lionize the six more than they deserve and ignore their current or recent paymasters, a fact which often explains their motives.

When all is said and done, each of them is shilling for the financial giants which hope that someone will give them Fannie’s and Freddie’s market slot and annual revenue, without them having to give back anything to make the mortgage finance system more efficient, transparent, or less reliant on the federal government (which because of the banks huge deposit insurance federal subsidy, enjoy $Trillions in federal benefits, but the depositories like to pretend they don’t).

Oh—as icing on their cake, in most of these "new ideas"--the banks and their buddies want Uncle Sam to add a federal guarantee on any new mortgage securities they issue.

Seiberg’s Six Champions/Heroes

Lew Ranieri—whom I’ve always liked and honored for his seminal work on creating mortgage-backed securities in the early 1980s—is a gun for hire. 

If I had a dollar for every time I’ve heard him extoll Fannie and Freddie, and how much admiration he holds for what they did, are, and how they do their job, I’d have a lot more money than I do now.

That doesn’t mean he’s not permitted to evolve. But I suspect given his admirable entrepreneurial instincts, Mr. R sees greenbacks for himself in any new arrangement which displaces the GSEs.

Another guy I like is David Stevens, now a consultant and former President of the Mortgage Banker Association (MBA), a Freddie Mac executive, and one time head of the FHA. But Dave spent too much time playing cloak and dagger with the less-than-mortgage-reputable Wells Fargo Bank (also one of his former employers) and MBA’s big bank members, on multiple “kill, maim, destroy the GSEs” schemes to give him any credibility.

And then we have Ed DeMarco an anti-GSE character in search of someone to pay him to pursue his campaign to gut the GSEs, a job at which he failed when he was working from the inside as acting FHFA director. After various tasks, Ed now is head of the Financial Services Roundtable Housing Policy Council. 

Jaret, there’s a redundancy in that title, since the FSR bankers have not shown themselves to be housing or consumer friendly for years, despite their claims. And, why do I think Wells Fargo has a big Council presence as well? (Came across an interesting article some months old but quoting data from just a year ago showing how big bank mortgage lending, specifically Wells, BofA, and JP Morgan, to lower-income American families, has fallen dramatically from a half dozen years ago, by 50% or more. Not surprising.)

I’ll be gentle criticizing Doug Holtz-Eakin, owing to his birth in Pittsburgh like me. I’ll go easy on him. Noting only that the august Congressional Budget Office, which he once headed, has almost never said anything positive or good about Fannie Mae and Freddie Mac, and still puts out baseless reports—one as recently as last week—misstating how much money could be saved over 10 years by doing away with the GSEs or forcing them to raise costs (screw those mortgage rates, huh CBO) or just serve fewer families). 

(Psst, the $190 billion in 10-year savings CBO estimates can be saved is an entirely theoretical "subsidy" cost, and is dwarfed by the real cash theGSEs pay in federal taxes and in their “annual revenue sweep,” which CBO conveniently doesn't count. Nor does it count the $280 Billion they’ve given Treasury since 2013.)

To be fair, that recent CBO report wasn’t on DHE’s watch but he endorsed many of the same thoughts when he was running the place.

Back to the bad guys, another article author, Jim Parrott,  former Obama official/now consultant, seems to have several big bank financial services clients (Bank of America?).

If one looks at the documents which came out of Judge Margaret Sweeney’s court in the Fairholme GSE case, you see Parrott exposed as one of chief “sweep” advocates, who proposed aggrandizing all of Fannie and Freddie's profits in perpetuity to keep the GSEs poor and recapitalizing.

But where’s Parrott’s practical experience with the secondary mortgage market operations he‘s been damning for several years?

Working for President Obama (who did nothing for Fannie and Freddie), Parrott--as my grandkids might say “disremembered” his true rational for the confiscation idea (did he also lie to Congress?) and adopted the phony “GSEs were in a death spiral” claim. That Parrott falsehood, too, is buried in the detritus left behind when Fannie and Freddie—from 2012 on--earned over $280 Billion, all sent to the US Treasury.

How can the Obama WH (Parrott,) use a statute--HERA, the Housing and Economic Recovery Act of 2008--which states the regulator is supposed to preserve and protect GSE assets and capital, and then implement a ploy to take all but a thin stream of capital from them, just as the two are on the cusp of earning tens of billions for the taxpayers?

The six feasted on the GSEs like termites do on wood.

Which brings me to the Jaret’s final idol, Mark Zandi, a well-known name and longtime Moody’s chief economist (beyond working for a rating agency where, too, is his secondary mortgage market operational working experience?).

I have one question for MZ, this Seiberg solon?

Where were you in 2007-2008, when the nation’s largest banks and investment banks engaged in risky gross and indiscriminate private label securities (PLS) creationoutside of the far better and more responsible GSE mortgage underwriting systems--and used inflated ratings from Wall Street rating agencies (suroprise, like Moody’s), sold their quick-to-default bonds all over the world, making the U.S. domestic real estate softening and an international debacle??

Answer: Zandi was working as chief economist for Moody’s watching all of those ersatz ratings fly out the door, attached to those crap PLS mortgage bonds, earning Moody’s millions. 

Why didn’t Zandi raise his hand, call a halt, or just expose it all?

Jaret, you really should pick your heroes more carefully.

Your current “Gang of Six” are just hustlers, with various titles and agendas hoping—for their selfish political or personal gain--to destroy what has been and remains a very efficient national mortgage finance system with the GSEs in the trenches managing and supporting the operation.

Next year, take Tim and me to lunch, again, and we can help you atone for your sins.

Maloni, 12-18-2018

Merry Christmas and Happy New Year to all!!!!

Tuesday, December 11, 2018

GSE hope and a fear or two......

New Year, New GSE Court Hopes??

I’m on record viewing skeptically the possibility of any positive legal actions that hugely benefit plaintiffs who have been suing the federal government over its mistreatment of Fannie Mae and Freddie Mac and their shareholders.

But, as cynical as I am (my shorthand for that condition is, “the courts read the newspapers, too” means judges are guided by the prevailing—mainly negative—views of the GSEs), others believe that the late January 2019 Fifth Circuit’s “en banc” review of the Collins case, as originally decided by Judge Royce Lamberth, offers new hope.

Technically, that’s true, but not surprisingly, a hearing date is nice but still unknown is what “en banc” mean in this case, since it won’t be the entire group of judges on the Fifth Circuit and might be only those few who are available that day and do not have other cases or conflicts. (Hell of a way to run a railroad, your honors!)

But, what worries me most is that I have not heard—from any of the several GSE hearing judges/justices—a full-throated rebuttal of the original Judge Lambert decision, which found that the federal government can do anything it wants to the GSEs and their shareholders, no matter how bizarre or out of sync with the statutory language of the Housing and Economic Recovery Act of 2008 or HERA.

Indeed, most of the presiding judges have been like sheep consuming Lamberth grass and pasture plants, not questioning the absurdity embedded in HERA and how the regulatory mandate to “preserve and protect GSE assets” excuses expropriation of GSE earnings in perpetuity, now totaling $280 Billion dollars.

Until that happens, I’ll fall back on my opinion that the best hope for the GSEs is a Trump Admin regulatory fix from the fertile mind of Treasury Secretary Steve Mnuchin.

If Mnuchin leaves to go back to NYC or moves elsewhere in the Admin (some recent rumors), his successor will pick up those cudgels.

Mnuchin/Treasury has some skin in the game, namely how best can he squeeze the most out of the federal government’s current 79.9% Fannie and Freddie ownership, without killing the two golden geese or angering the House D’s and their growing low income housing allies, who see the GSEs as they once were, balancing the homeownership scales and making owning a home more available and affordable for those who want that piece of the American dream and are creditworthy.

Mark Calabria to succeed Mel Watt???


Garden variety conservative, whose name has been around for months; his anti-GSE, pro-bank priorities are well known. He might want to check the US history for the dark episodes of relying on depository institutions, exclusively, for housing finance.

That hasn’t gone well and the pre-2008 private label security (PLS) bank follies suggest the risk still is there, especially with Treasury and Fed soft on bank regulation.
If nominated, likely Calabria will get necessary GOP votes in the Senate, with lots of phony accolades about his skills and experience, but….

My view of the GSE world inside the Beltway is the red chips all rest in the Treasury Secretary’s office, which holds 79.9 % ownership of the GSEs.

If Calabria is bent on being GSE-hostile, he would be wise not screw around, tampering with Treasury possible $100 Billion plus return-to-the-government cash haul, embedded in the freeing Fannie and Freddie and allowing them to return to private ownership.

Caution economist Mark Calabria, 79.9 % of nothing is….nothing.

In addition, unlike in the past eight years, if Calabria is in charge and engages in GSE-belligerent FHFA action, he will earn major institutional and personal pushback in the House, including House D’s squeezing FHFA’s budget and otherwise making his life tough.

The surprise will be if Calabria doesn’t run to form and instead looks to improve the current GSE situation and not be an obstructionist. (Of course, I believe in UFOs.)

Ennui: A vignette from my GSE past, the way things were

About two weeks ago, I noticed the FHFA approved a new (higher) mortgage ceiling for the variety of single and multifamily units the GSEs finance/securitize, effective January 1 of the coming year.

The new ceiling allows lenders to employ now for GSE loans delivered to Fannie and Freddie post Jan. 1.
The market and industry media response was ho hum, which pre-2004 never was the situation.

The mechanics for adjustment back then still may be the same.

In essence, FHFA (OFHEO in my time) every September would survey 1000 mortgage lenders (banks, thrifts, mortgage companies, credit unions) from across the country to determine the size GSE mortgage they were originating—relative to the previous year’s data—and then index that  percentage increase (it seldom went down) to the previous year’s base number, making it effective for loans delivered in January of the coming year, allowing the higher balance loans to be originated but briefly held until the calendar year switched.

However, a long time thrift industry lobbyist who went from trade association to law firm, to individual institutions (mostly in California)--who admitted to me personal jealousy over all things Fannie and Freddie—every year would initiate political  battles on the Hill, claiming that this study over which the GSEs had no control, was eating in to “private lender” markets.

The guy would twist the annual agency survey, established in statute, numbers—which invariable produced the same continuing result giving the GSEs access to 90% of all loans under written but only 75% of the dollar volume, meaning the higher value loans were beyond the GSEs ability to buy/securitize them, and therefore exclusive available to the interests he represented to finance them with no GSE competition.

That separation was known as the “conforming/non-conforming loan limit,” meaning “conforming to GSE ability to acquire or not available to F&F and exclusively the province of non-GSEs lenders. (Psst, that another way the federal government subsidizes the banks through keeping Fannie and Freddie—and their efficiency and lower borrowing--costs away from certain borrowers.)

He was persistent and every year, he played the same tune and it went on for as long as people paid him to make that hoary and ultimately losing case. But, invariably he reached someone on the Hill to challenge the new number the issue, for which our response was easy.

“Congressman, the GSEs don’t control the survey, the lenders interviewed, or the data reported. By law, we just apply the new findings and move forward.”

And every year, Fannie got the Realtors, Homebuilders, and even (then) the Mortgage Bankers to speak to those same congressional sources, because the survey results meant more opportunities for consumers and the trade associations' dues paying members.

Ergo, when FHFA issued the new numbers a fortnight ago, there were CRICKETS, NADA. There was no noise from anyone, not even a murmur. But the guy—whom I always liked—still is alive.

I wonder if today he gets fire in the belly, when his old warhorse snorts in the barn, and those higher annual GSE mortgage ceilings figures come out? (Once this blog is published, I expect to hear from that guy and share some “Remember when” stories.)

Maloni, 12-11-2018

Sunday, December 2, 2018

Tutorial: With no GSE “uglies” left, have we finally exposed the bad guys and their transparent objectives?

Who to scourge is less revealing than WHAT is left to destroy and why??

Over my Fannie Mae years, 1983 to 2004, the GSEs were heralded as heroic institutions. Fannie had management books lauding it, succeeded at any number of corporate and mission tests, and birthed its fair share of political enemies, more so Fannie Mae than Freddie Mac, but the Freddie’s contributed a few adversaries, too, often drafting in Fannie’s large wake.

However, the lion’s share of the anger was aimed at “the hubristic Fannie Mae” as one person labeled us. (Personally, I welcomed that primacy because I felt it was indicative of how well we worked.)

We were the 10-ton gorilla, by design, working Capitol Hill and the agencies in support of homeownership and expanding the demographic/ethnic groups historically denied the opportunity to own homes. To succeed, we wore velvet gloves over mailed fists, the political stuff of lies and legends, political fear and respect. (Read some of the literature!) 

We chose to be the largest/loudest voice for housing among some historic major industry leaders, like the Realtors, Homebuilders, and Mortgage Bankers. We succeeded in cooperating with, uniting and organizing those big three--and attracting a host of low, moderate, and middle, single and multifamily housing allies--in a variety of coalitions and advocacy groups, which strengthened the ability of each of us to prevail.

It was a mighty housing fleet! And some DC denizens were frightened by it.

Adding to the DC effort, Fannie had creative national advertising campaigns supporting homeownership, and unique attractive, fresh quarterly business data, packaged in micro census tract formats for every congressional district and state. Those reports allowed us—with great specificity—to show where and how much business Fannie was doing in each congressional district or state for the people that Senator or Member of Congress cared about the most, their constituents. Not surprisingly, it was shared, too, with an additional group of influential community leaders, a boatload of local and state officials.

It didn’t hurt, either, by extension to promote the numbers of associated jobs our new or existing home sales produced among those tradesmen, painters, who supplied furniture, carpeting, electricity, yard work and more for those new homeowners.

We fashioned a smooth machine, based on mortgage facts and making good on our statutory mission promises!

Combining our financed loans’ outstanding principal balances, revealed Fannie often was the largest dollar investor in that particular piece of geography, giving us tangibility. A fact we touted. ("Here is why Fannie Mae should be important to you, Congressman!")

We were relentless in our activism, using grassroots networks which grew up around the 50 or so Partnership Offices (PO’s) we opened around the country, each one had a boutique annual business plan designed to show our intention to grow the number of families we hoped to help secure their own homes. And—every three months to prove the work was legitimate--we reported back through that congressional district’s local media on our success at achieving those numbers.

Both Fannie and Freddie created employee-funded political action committees (PACs), allowing us to join the dozens of interest groups which went to congressional fundraisers and supported candidates; we weren’t shy about identifying those proposals/policies we thought were anti-housing and homeownership.

Fannie won award after award as the best place in DC to work for women, minorities, Gay and Lesbian employees, and workers who bore elderly parental responsibilities.

Fannie gave stock options (no longer done) to every single employee from the cafeteria workers and cleaning crew on up.

(Ironically, Fannie’s common stock today closed Friday at $1.18, just about where it was when I started at the company in 1983, 35 years ago.)

The Fannie style was to overdo rather than under do, throw one brick too many rather than one too few.

It worked for more about 20 years.

However, it caused a few mainly incompetent and vain officials at the original GSE regulator, the born-in-1992 Office of Financial Housing Enterprise Oversight (OFHEO), to live in their fears and frustrations, believing us unmanageable. They lied and sought to pierce the heart of the Fannie-demon in 2004, spuriously charging Fannie senior executives had committed “securities fraud.”

Of course it wasn’t true, but—as often is noted--the big lies travel round the world before truth wakes up the following morning to respond.

It took a federal judge 8 years to throw that allegation out of court but the personal, political and institutional damage was done.

Back then, very few Senators and Congressmen knew exactly what Fannie and Freddie did—and apparently many still don’t—yet, on a major bipartisan basis, they loved the back home GSE homeownership performance, jobs, message, attention, and campaign support.

But they also understood the scary connotations of the word “fraud.” Even baseless and unproven fraud, when uttered by a federal regulator, was something you wanted to stay away from, far away—and they did!

The GSE ideological, business, and political opponents didn’t stay away, instead they leaped on it—and still are at work.

My point in all of this is 10-15 years after all of that history, the surviving GSEs are political and communication husks.

There are no outsized personalities left. No big-time Democrats running Fannie Mae, "paying themselves large bonuses and stock options and providing jobs to their party friends" (another allegation). There's no longer a GOP- leaning “Mormon Mafia” at Freddie (although there could be a few still running around) doing the same with/for Conservative consultants.

When Fannie and Freddie were put into conservatorship in 2008, the two had their in-house lobbyists, outside political consultants, and political action committees formally stripped out of their lives (there is a First Amendment violation running around in that somewhere). The latter not only didn’t happen to any other financial institution caught up in the 2008 financial debacle, but even federal government agencies have their own lobbyists who regularly promote administration policy to Congress and the outside world.

That all was then, but this is now

Today, Fannie and Freddie have congressional liaison workers who only respond to calls from the Hill but not advance agency policy with those Hill callers.

Respectfully, they’re glorified clerks not lobbyists. (Sorry, hardworking GSE pals over there).

So, no more glossy GSE homeownership national advertising campaigns, etc. etc. No more “hubristic Fannie.” 

What remains only is the GSE STATUTORY MISSION, to provide a liquid, nationwide deep secondary mortgage market, in good economic times and bad,  which supplies  the primary mortgage market—the banks, mortgage companies, thrift institutions, and credit unions offering loans to consumers—with mortgage executions consistent with the market cost of financing.

That leads me to ask—if all of us objectionable bogeymen and women are gone, if all the PR, lobbying, bells, whistles, housing fairs, campaign contributions, if the “look at us” GSE housing promotional material in 12 different languages have long  vanished—why are the multitude of GSE enemies still are out there flailing away at what?

What’s left today just is the basic US conventional loan system, which—because of the GSEs design and operations--is the most efficient, most consumer-friendly, most equitable, most blind to anything but creditworthiness.

Then why is that model so often debased?

Once, because Fannie was created post-Depression as part of the New Deal by the Roosevelt Administration, it was seen as a “Democratic thing,” but the mechanism served all. No mortgage application ever asked for political party or preference. Millions upon millions of low, moderate, and middle-income families were helped for over 80 years.
The system worked and still works, even with all of the falsehoods (still facing court challenges) about its history, bookkeeping, accounting and business losses.

Hank Paulson’s abusively wrong descriptor, “the GSE have a failed business model,” has been shown empty and vapid.

In just the past five years, Fannie and Freddie have produced @$280 Billion in GSE profits going to the Treasury/US taxpayer, not shareholders, after the Obama team rewrote the 2008 repayment rules and expropriated all that money for Treasury. (Cue the court cases.)

The best evidence I can offer for GSE perpetuation is Fannie and Freddie still stand, handcuffed, but functioning and delivering huge amounts of mortgage finance in the face of political folly/interference and dozens of proposals to kill them off and substitute political schemes which never will work as smoothly for American home buyers, if those pet ideas ever get off the ground.

The mega GSE financial institution opponents, still bankrolling the ongoing assault, clearly don’t care about consumers, since they’ve done their very best to cripple Fannie and Freddie, the Consumer Finance Protection Board (CFPB), and what’s left of the Dodd-Frank financial protections, not to mention the big banks still fresh memory of their “PLS follies.”

The banks want to control mortgage products and price which never is good for consumers. They can’t do that now because of the GSEs central positioning.

Policy makers and stakeholders: It’s pretty simple to me—and should be to you who have a hand in the nation’s mortgage finance future—the big bank opponents want the GSE’s market position and their annual revenue, which they hope the White House or Congress will give them with no reciprocal pro-mortgagor actions.

Whether you appreciate President Franklin Roosevelt and his achievements or not, you are staring at the nation's core four generation American mortgage finance system—with Fannie and Freddie as major components--that works and easily can work better, with slight modifications on which reasonable people readily should be able to agree—if they don’t live in the sum of their ideological fears.

Maloni, 12-2-2018

Happy Chanukah!!