Monday, November 12, 2018

My wishes for you and some GSE grist on which to chew

Happy Birthday from me to you!!

Today is my birthday--and because I prefer giving to receiving--I have some birthday biddings for you. (I’m not going to tell you my exact age, but suffice to say, based on my personal interactions with him, Ulysses Grant was a much better president and better dressed than others suggest.)

First, I want to wish you and everyone close to you good health, because without that your happiness and joy will suffer.

Second, I urge you NOT to be passive if you are feeling disappointed with your life situation. No matter the reason, if satisfaction is not present, then work to change those circumstances.

Just trying should make you feel better and succeeding will make you feel fabulous.

Pursuing success or positive change doesn’t occur because another day passes. You need to work at it.

End of Grandpa Maloni’s happy birthday geezes for you!


Last week there were unhappy or offended readers when I wrote (before the Nov. 6 elections) that Maxine Waters (D-Cal.) would be an asset to the GSEs, if the Democrats won the House and she assumed Chairmanship of the House Financial Services Committee.

The D’s did and Waters likely will. So, deal with it folks.

Most of those who like to talk about the GSEs--but are churlish or offended when considering the implicit politics-- fail to understand that everything about the GSEs is leavened with politics. That’s been true for most of the last 35 years and certainly was accelerated in the past decade when Hank Paulson fabricated the need for “Conservatorship” in 2008.

If all it took to win inside the Beltway, was facts, logic, and success, Fannie and Freddie still would be independent, shareholder-owned corporations, serving the nation’s low, moderate, and middle-income homeownership needs in every community in the nation, not stuck in Treasury/FHFA dungeons suffering an illogical deprivation of operational freedom and hefting a “revenue sweep,” capital-starving debt millstone that never can be amortized or reduced!


Because Judge Royce Lamberth—after being lied to convincingly by a legion of Treasury officials and government lawyers—once said so!

My faultfinders can wax eloquently about the courts and the lawsuits, most of which save some recent decisions were throttled "inutero" by the original Lamberth decision, which claimed the government can do anything it wants to the GSEs, no matter how perverse and abusive to the companies and their former shareholders. (See questionable GSE debt service forced on Fannie and Freddie which NEVER can be paid back and—by design—is attached to them forever.)

Part of my view—and I guess where I diverge from my critics--is that I believe it always helps to have political friends in high places, as I hope Fannie and Freddie have in Rep. Maxine Waters. (The absence of same certainly screamed loudly from 2008 through today.)

Having not engaged directly with her since I was an active Fannie lobbyist, I can’t say that Waters always will be GSE rock solid, but that feels more accurate given her past GSE-supportive actions and because—now--she has the political station to influence and produce.

Again, last week my readers questioned how Waters could help the GSEs, if the President deeply dislikes and disrespects her—as his past comments suggest--and the Senate is even more firmly in GOP hands?

My response? If faced with disrespect, ignorance, and efforts to isolate her, I believe that Waters--as would any Committee head worth their salt--will force or extort her way into those issues and put her unique stamp on them.

The skeptics ask, “How can she do that?”

I reviewed for them (and now for you) a simple description of her Banking Committee’s core jurisdiction.

“The United States House Committee on Financial Services (also referred to as the House Banking Committee) is the committee of the United States House of Representatives that oversees the entire financial services industry, including the securities, insurance, banking, and housing industries. The Committee also oversees the work of the Federal Reserve, the United States Department of the Treasury, the U.S. Securities and Exchange Commission, and other financial services regulators.”

It would take a very deft chief executive, which Donald J. Trump is not and Treasury Secretary Steve Mnuchin, very slowly, still is learning to be--to pursue any Administration-desired policy or spending initiative, which falls under the very broad issues in the Banking Committee’s purview while simultaneously hoping to ignore or isolate Maxine Waters. 

In 2019, for the first time in 8 years, the House Banking Committee won’t be “your father’s Oldsmobile.”

Think of the Consumer Finance Protection Board and the Community Reinvestment Act (CRA) favorite whipping boys for the banks and most Republicans and how Waters’ Committee will treat those items and the financial forces which assail them. (As I wrote previously, I believe the CRA is toothless and needs major enhancement, like the big banks being given affirmative numeric housing goals not gauzy generalities.)

Plus, the House Democrats now have taken back from the R’s the basic authorization role (doling out and approving Trump agency spending), oversight authority, subpoena power, and endless opportunities to conduct hearings without any prior approval by the House Republicans or the Trump Administration, even if the Senate goes off on a pro-Admin odyssey.

Ergo, I am pretty confident--beyond the statement Waters issued the day after the elections and which I printed in my last blog’s comments section--the Committee won’t be ignored or left out of any issue in which Chairperson Waters wants to stake her efforts, including GSE legislation or White House GSE executive orders.

If you are a Fannie-fan or a Freddie-fan, none of that should worry or offend you; quite the contrary.

On the other hand, if you don’t care for assertive women or aggressive Black women wielding power—and you still are worried about caravan of rapacious invaders, infiltrated by Muslims, hurtling toward our southern borders (whatever happened to that Fox News story and its POTUS induced fear?)--strap on your seat belt because the room may start rocking.

When all the recounts finish, there will be two dozen or more new female Democrats in the House—many of color and various distinctions—joining the returning now Majority party!

Maloni, 11-13-2018

Wednesday, November 7, 2018

Off the Top of My Head

What this week’s election could mean for the GSEs?

“Hello Banking Chairperson Maxine Waters!!”

(Note: Blog Drafted on Monday, November 5, the night before the elections.)

When you first read this, I hope, the Democrats will have won the House of Representatives fortifying the chances that the GSEs will be kept alive, not through legislative reform, but by an executive action which Treasury Secretary Steve Mnuchin will realize he must pursue, if anything Fannie and Freddie-positive--even from this Administration confused point of view--is to happen in the next two years.

If the D’s don’t prevail in the House (or far less likely in the Senate), I’ll cry in my diet soda and engage in a gaggle of “woulda, shoulda, couldas.”

But, if the House goes D even if the GOP continues to control the Senate after Tuesday, a 2018 Democrat House success suggests the 2020 elections also could bring a Senate Democratic majority, as so many GOP Senate seats and far fewer Democrats (22R-12D) will be up for grabs, a not perfect ‘yang and yang’ (generally) of this week’s elections when more D’s and Independents (who caucus with Democrats) were up.
One possible view of 2020 shows a heavily wounded Donald Trump, still carrying partisan gashes and lacerations from his first two years in office and a major House setback, positioned to lose his own race too…….if he chooses to run again?

A D controlled House will mean lots of oversight hearings and possible subpoenas which will add angina producing stress to a President who doesn’t like opposition, especially the political/legal kind, to which you must listen or respond. The heat will only intensify the POTUS.

The latter analysis just is my opinion, but after two years of being dissed, Democrats will want some payback, which as we all know is a “b----!” (There is a pun there, too, given the large number of Democrat women running for House seats.
If the POTUS’s 2020 future darkens, I see him electing (pun intended!)  to pack it in rather than risk a national defeat which—unlike this week’s Republican setback in the House—he couldn’t dodge or blame on others, his traditional style.
Contemplating a growing possibility that he faces rejection in his second try for the presidency-- sullying his all-important (phony) self-image of “never losing”--would be a massive personal refutation THAT HIS FRAGILE EGO MAY NOT BE ABLE TO HANDLE, so I don’t think he’ll risk it.

DJT will find an excuse not to run, again, to bail, i.e. "Pence is ready"; "I had my turn and did the heavy lifting"; “heel spurs” or the equivalent. 

BTW, I’m not predicting, just noting the possibilities. 

If Democrats Control the House; Net, net Good for the GSEs

The biggest change for Fannie Mae and Freddie Mac, if Democrats win the House, is Maxine Waters (D-Cal.) will head the House Financial Institutions Committee (what I still call by its old moniker “House Banking”) and set financial agenda, tone and action in that chamber.

If the D’s are close in the Senate, then Waters will try and write GSE legislation. If that doesn’t happen, I believe she will act to preserve and protect the GSEs and possibly seek to cut herself in and deal/negotiate with the Trump White House on any executive regulatory action, which ensures prominent segments of the GSEs stay intact.

It will be fun to watch as Waters and Trump—protagonists since the President first days in office, largely because she’s a Black woman—duke it out with Waters having a much more bully pulpit in 2019 than she’s ever had before.
Don’t forget, she will be pivotal to ongoing big bank efforts to loosen controls on themselves while simultaneously pushing less consumer protection. Watch out banks!

Look for all of the M. Waters praise come gushing from the bank and financial services communities, reflecting her growing prominence.

I hope she and the D Speaker and Majority Leader carefully will add a few new Committee members who really understand housing and mortgage finance issues or want to dig into those subjects. The GSE community lost Dave Capuano (D-Mass.) when he was defeated in his primary election and no Democrat stepped up to replace him.

If anyone reading this knows of has a congressional newbie who understand GSEs and related issues, suggest to your new House Member he or she can add instant value to their congressional service by seeking to join House Financial Services.

They need quickly to convey that desire when they next meet in DC with the House leadership.

Other items, if there is a D House

I won’t go into tortuous detail about all of these possible matters, but you expect far more House oversight and hearings of previous GOP actions and future plans.
--Ways and Means and House Judiciary and Intelligence will seek access to the President’s tax records, to review if any of his past business partners were foreign nationals, with an emphasis on Russian, China, Saudi Arabia, and various Eastern European countries, suggesting violations of US laws and regulations.
--Dems will attempt move a mammoth infrastructure bill, with which the Admin might go along.
--Remembering the predicate of a D House, I expect a major movement on bipartisan opioid legislation, penalizing manufactures and tightening up illegal overseas drug imports—ideally with the opposite happening with non-opioid medication to reduce US consumer drug costs.
--Like it or not, US jobs today--and a greater number going forward--need trained and educated individuals which our school systems just are not producing. We need those successfully educated and trained people and many hardworking others who may not be educated superstars, but want to be in this country and strive as Americans, like many of our US immigrants forbears.
After all of the Democrat anger and noise, I think it is incumbent upon the D party to come up with a comprehensive immigration bill--close to which his acolytes said during the campaign that Trump would support--but also deals with many problems the current system has.

Maloni, 11-7-2018

Friday, November 2, 2018

Our Opportunity is Here..

Cats and Dogs; GSE earnings, and you know what….

Congratulations to the Freddie Mac ($2.3 Billion) and Fannie Mae ($4.1 Billion) employees and management for their solid (some might say exceptional revenue, given all of standard grief and interference) 2018 Q3 earnings amidst standard GSE harassment and their leadership comings and goings.

Really Hank Paulson--and the Obama acolytes and “fellow travelers” --hardly looks to me like "a failed business model!”

And while I often tease him, let me state in an email to me sent earlier this week, Paul Muolo, Inside Mortgage Finance’s chief GSE writer, pretty much nailed the Fannie revenue number announced today. (My early guess was higher, at $5 Billion, but I then realized on an annualized basis that would be about $20 Billion, suggesting I was—and it showed—too high.)

No, Don!!

Once again, for the record, I continue to disagree with Freddie’s President Don Layton, who in his earnings call touted CRTs and implied that critics didn’t understand the interstices or capital implications of CRTS.

Later that day, Tim Howard—who has been a consistent CRT critic because of the inflated analysis of the security's claimed all-purpose value, was asked a blog question based on Layton’s statement.

I won’t repeat it here, just see what Howard said.

Recalling what I’ve written before, Freddie always has been quick to agree with Treasury and the Federal Housing Finance Agency (FHFA) GSE regulator, playing the “Little Jack Horner” part, where Jack—hoping to please his parents (think Treasury/FHFA) and get strokes, puts in his thumb, pulls out a plumb (CRT praise) and says, “What a good boy am I!”
The GSE world still is awaiting Freddie’s formal submission on the proposed FHFA capital rule. I am anxious to see if Layton and his troops acknowledge that too much capital (as the GSE critics demand)—and as the FHFA proposes—is the wrong step for two entities which only deal in quality mortgages.

Don and friends, no matter that your overseers claim, more GSE capital is not necessarily better.

There is a cost to excess capital and big banks should have much higher capital requirements because they have myriad complex investment opportunities in commercial and foreign assets—if banks so choose—not exclusively, as Fannie and Freddie exclusively traffic, heavily regulated US home loans.

Big bank Fannie and Freddie opponents want higher mortgage costs if they can impose arduous GSE capital requirements on the twins.

Back to GSE earnings…
The good Fannie/Freddie earnings story—as is understandable—will get lost in the four days run-up to November 6’s significant congressional elections.

Election Day

When you vote next Tuesday—after you remind all of your friends and family, across the nation, to do the same—cast your voice to dial back autocracy, manufactured fear and partisan hostility; vote to return some respect and normalcy to our political exchanges with one another; vote against hate speech, anti-Semitism, bigoted profiling of  US minorities and immigrants (from which most of us have lineage); assaults on our civic and government institutions which any/every democracy needs; accessible healthcare options; and, finally, vote with an honesty which evaluates the leadership position in the world we hope our country has and pray it hasn’t been forfeited by conservative extremists playing at policymaking.

Maloni, 11-02-2018

Monday, October 29, 2018

Our best hope is to defeat them all.....

From Maloni the citizen, not the Maloni the GSE advocate

I am a Pittsburgh kid, born and raised.

When my family moved from the house in which I was born, I went to Allderdice high school in Squirrel Hill, where I still have many friends most all of whom are Jewish (my father was an Italian Catholic and my mother was Jewish).

Went to and graduated college in the City.

Nearly 50 years ago, I came to DC to work for the then Pittsburgh Congressman, who was on the House Banking Committee.

My only (late) brother had his bar mitzvah at the then tiny Tree of Life synagogue in Pittsburgh’s Oakland neighborhood—our original community--the congregation later moved to Squirrel Hill and merged with two others and was housed in the “Tree of life” building where last week’s fatal atrocities happened.

Long before that horrendous tragedy, I planned this pre-election blog and broadly what I wanted to say.

Last Friday’s Pittsburgh murders by a bitter anti-Semite, plus the bombs sent to national Democrats by a thug weightlifter who had been kicked out of his family home by his mother, and the racist killings in a Louisville, Ky., Kroger supermarket to me are part of the same devil’s brew about which I planned to inveigh.

But in the aftermath of those same week tragedies—reading/watching the current national discussion about our personal responsibility and thinking about individual actions when faced with the bigotry and hatred—I softened some of my animus and intent.

I vowed I would take a stand but not add to the violent partisan and decorum-reducing tone going into the November 6 congressional elections.
I made up my mind to not take a predictable way out, not join the mob, or heavily vilify President Donald J. Trump's aberrant personality, bizarre manifestations of his presidential authority, and the anger and division which have marked every day of his presidency.

Ergo, I won’t repeat the long list of Trump actions--domestic, international, and personal--I’ve touched in my prior blogs.

He did not kill anyone or send bombs in the mail. 

I hope you'll vote next week against all of the President’s congressional enablers, Republican would-be office seekers, and I can convince you to communicate the same with your personal network.


First, vote against whichever Republican is running in your congressional district, not because that individual is heinous but because once he or she gets to DC they'll be forced by GOP leaders to frolic in the swamp that produces policies that, mainly, are poisonous and noxious to civil discourse.


More importantly, I  ask you to write, call, email, tweet--whichever is your favorite, easiest communication method--your friends, colleagues, business associates, and family around the country, to vote and do the very same.

It’s called leveraging.

It's the most immediate and constitutionally accepted way of injecting some balance into our daily lives and to expel some of the venoms.

In doing what I propose, we may lose some decent moderate Republicans—but few have stepped up to embrace that mode and speak out--and for that I am sorry, but that’s a small price to pay if we get back our country’s traditional political fairness and bipartisan respect.

Collectively, President Trump--despite his success at implementing several of his campaign promises, which traditionally is a hallmark of an effective politician—and the incumbent congressional Republicans have been partners in creating a toxic set of conditions that violate a skein of American historic ideals and democratic principles.

This Administration daily spouts outrageous lies which get choreographed and amplified by its faux media allies and right-wing posse.

From a longer range perspective, including economically with spending we can’t afford, norm-busting which hurts the least able and most vulnerable among us, and the failure to lead, not just read words from a teleprompter, I think perpetuation of the GOP-dominated Congress is deadly for our nation's future, ergo my wish to you all.

I’ll blog to you after the election, when we might be able to talk about GSE issues again, facing a saner political future.

Maloni, 10-29-2018

Sunday, October 21, 2018

I disagree with Don Layton, the GSEs were innovative..when permitted

Are they or aren’t the the GSEs government?

CBO says “Yes”; OMB/Treasury say “No”

It would take people with time and an inclination to listen and  absorb--meaning few in Congress—to explore why some of the confusing and conflicting treatment the GSE’s get in Washington adds to the public’s befuddlement over  what Fannie and Freddie do, what they are, and what are their true worth to the nation’s mortgage finance system.

I wrote about some of this in my last blog, but then—in the interim—this Congressional Budget Office (CBO) document appeared. I thought it conveyed--better than I had--what causes some of the GSE muddle in DC.

Those clashing government agency descriptions add to the Fannie and Freddie doubts, aids those wish to distort GSE values or even status, and adds to a situation which lends itself to manipulation and mortgage market distortion by GSE political and business entities.

Are they part of the government or aren’t they, are they on the US Budget or aren’t they? As noted in this CBO discussion, it depends on who you ask??

In the meantime, the two financial behemoths chug along--from their secondary mortgage market perch—and deeply support the US primary mortgage market, where consumers first go to get mortgage loans (based on underwriting conditions Fannie and Freddie set) on any loans (which are most!) lenders send to the GSEs to be securitized, i.e. put into mortgage bonds or mortgage backed securities (MBS) for which--for a fee--the two then guarantee payments to securities investors. (That GSE  bond sales action recycles  proceeds to lenders for future loan making.)

Maloni’s historical perspective. The Congressional Budget Office (CBO) always had the GSEs in its “green eyeshade” accounting/policy crosshairs, even when Democrats ran the institution, but CBO’s pronouncements were--and still are--largely ignored except to score rhetoric points.

The flip side is Treasury and OMB often institutionally merged at the hip for GSE policy and political reasons.

To wit, the two Cabinet players still refuse to admit--following the GSEs forced “conservatorship” in 2008 and their management's/board's operational surrender to the federal government--Fannie and Freddie became “federal agencies,” because it could mean the GSEs combined $5 Trillion in assets and liabilities would have to appear on the official federal budget.

That would be a no-no for any Admin, but especially the current one, which—because of the $3 Trillion deficit it’s added in DJT’s first two years in office and projected eight more years of similar red ink-- even it has a public relation point it refuses to go beyond.

Ergo, no way will Mnuchin’s future GSE actions put the GSEs on the federal budget.

Don Layton, National Journal Article & American Banker Interview

“The GSEs were not a source of innovation for decades, if ever. Now we are a source of innovation," Layton said, adding that he hopes the legacy of his time at Freddie Mac will be that he helped make the GSEs more competitive with each other. (Layton interview in National Mortgage News.)

I don’t know Don Layton, Freddie Mac’s outgoing President, who plans to retire within a year.

I read two articles headlined above, done around the time of last week’s MBA Washington DC convention, and it left me rather cold, still trying to understand what was his message about his six years heading Freddie and what his hopes are for the future secondary mortgage market system.

Let me first establish my biases.

Based on my personal history as a former Fannie executive and my later years when I just observe the national mortgage markets and interplay of the GSEs, I’ve never been overly impressed with the Freddie management team and believed they were more nascent and less innovative than Fannie.

Worse, they also seemed very comfortable being both those things, as the second party in a GSE dominated system, each business day, automatically, Freddie would get sufficient product—seldom a majority—but enough to keep them happy.

Freddie execs were comfortable with Fannie getting a bigger market share and taking most of the market and political risks. It became part of the institution's chemistry and affected each of their Presidents, decent people but hardly creative business giants.

I assumed Fannie and Freddie still compete against one another for mortgage loans, but Fannie always has been the larger of the two, so I guess “which shop gets the most business” isn’t a Freddie imperative and seldom was in the past, because they just weren’t that nimble or price sensitive.

Time is money, the Fannie MBS, the Freddie PC, and other things

While Freddie was the first to securitize mortgage in the early 1980’s, the company stuck with its more clumsy and slower paying bond model, after Fannie came out with its more efficient and attractive to lenders and institutional investors mortgage backed securities (MBS), because Fannie distributed  payments faster to invinvestors from the underlying loans.

Once Fannie’s MBS roared past Freddie’s in term of liquidity (more of it out there) and better pricing, the superior/inferior die was cast. Despite a Freddie PC dink here and there, Freddie was forced to settle in second place and accepted it in perpetuity.

For years Freddie stuck with its market clumsy (in comparison) “participation certificate” or PC, which never matched the more efficient and better paying Fannie mortgage-backed security or MBS. 

That is the main reason Freddie has been so supportive and jubilant about the new GSE common security, which both will employ in the future. It will bring better pricing to Freddie at Fannie’s disadvantage. 

When Treasury and the FHFA forced the GSEs to develop a common securitization platform,  Freddie cheered and yelled ”onward,” while Fannie quietly nodded “go ahead,” but dragged its feet because it was being forced to give up its long held advantage.

Back to Mr. Layton, his interview, and his quotes below. (Layton in American Banker interview.)

“Competitiveness is built into our DNA—I just have to keep it going. We’re starting to think a little bit about the down cycle. It’s been a great run up. I don’t think there’s going to be a strong down cycle, but we have to be prepared for it.
“Whatever we can do to help to land [the proposed rule on enterprise capital] and bring that to finality is important to us. We’re an expert on that, we care about it a lot and we developed the kind of father to the system that eventually came out. The comment period ends the middle of next month. The finalization of it should tie in … with my retirement.”

For an entity with “competiveness built into our DNA,” Freddie has been very sleepy.

If they are such experts, I certainly hope Freddie will NOT toady and endorse FHFA’s capital proposals with capital levels geometrically higher than what is needed for a secondary mortgage market entity which only securitizes lender produced mortgages with strong underwriting standards?

Sorry Mr. Layton, even in your time Freddie has been more about making FHFA and the Treasury happy than breaking down doors and responding to competitive challenges.

Mr. Layton, I wish you future good luck and much success.

If/when you enter the GSE dialog as a civilian, come in wearing your big boy pads. I hope you are a far more aggressive activist and GSE advocate than you’ve been as Freddie President.

Maloni, 10-22-2018

Monday, October 15, 2018

Oh Really DoJ, FHFA is not part of the federal government????

Kinda like Banks exist but the Comptroller of the Currency and FDIC are specters 

GSEs and the Law, it gets “Curiouser and Curiouser”, 
Shot for being a sheep or kill them for being wolves 

Previous Administrations told such stunners as “ketchup is a vegetable” and “I didn’t have sexual relations with that woman,” plus “Brownie did a great job.” Welcome to the “new” Washington DC or is it Moscow or Pyongyang, where—if this Administration says so—day is night, black is white, yes means no, and the GSE’s regulator ain’t really part of the official federal structure.

Damn!! The government has argued that Fannie, Freddie and FHFA are not the federal government. 

I think everyone agrees that Fannie and Freddie are not "the government;" the issue is whether FHFA as the GSE conservator is?

The first GSE financial regulator, the Office of Housing Enterprise Oversight (OFHEO) was created by Congress in 1992. It begat the Financial Housing Financial Agency (FHFA) in 2008 as part of the Housing and Economic Recovery Act (HERA).

Records show that agency started issuing near draconian regulations in 2008.

But in 2012—as the GSEs just started financial recovering—non-existent FHFA promulgated a contrary regulation which “swept” nearly all future Fannie and Freddie earnings (and protective capital) forever, since that money went to pay for the initial government cash infusion a debt FHFA claims never can be amortized, ergo the GSEs always will be in hock to Uncle Sam.

That’s now a $270 Billion swipe for a thief the government says isn’t part of it.

No wonder the American people are befuddled by Fannie Mae and Freddie Mac? Their own elected/appointed federal officials can’t decide or refuse to admit if Fannie and Freddie, i.e. the GSEs, are federal or not, let alone if their debt and MBS is or isn't guaranteed by Uncle Sam?

The answers here seem to be some existential mix of who happens to be in charge of the government when the question is posed and which Senator, Congressman, or agency you quiz?

That ask often produces the recipient’s demand to, “Tell me/us your specific concern, which debate side you’re on, and how much political weight do you swing?”

At that point, you might get an answer?” But soon, government lawyers will fudge Fannie’s and Freddie’s roots, heritage, and ancestry WHEN THEY ARGUE THAT FHFA IS NOT PART OF THE GOVERNMENT.

Yes, you read that correctly.

As GSE Links and Attorney Peter Chapman summed up so nicely in a post last week—whoever is guiding the Department of Justice’s prosecution of the many GSE court cases it faces over Treasury action—wants federal judges and juries to believe the GSEs are not federal instrumentalities and have no congressional lineage, history, or responsibilities AND FHFA IS AN ORPHAN.

(Yay Judge McConnell's whose latest decision sparked this! You go, man!!)


From GSE Links, with some commentary from Peter Chapman. New updates in Fairholme vs. U.S. Peter Chapman writes, “At page 22 (PDF page 45) of its amended omnibus motion to dismiss (Doc. 421) filed in Fairholme v. U.S. on Oct. 1, 2018, the government provides Judge Sweeney with a long list of cases saying Fannie, Freddie and FHFA are not government actors. As you’ve likely read in the past couple of weeks, that uniform holding was disrupted by a decision in a foreclosure-related lawsuit in Rhode Island in August. FHFA wants the U.S. Court of Appeals for the First Circuit to review a recent decision by the Honorable John J. McConnell, Jr., in Sisti v. FHFA, ___ F. Supp. 3d ___, 2018 WL 3655578, slip op. (D. R.I. Aug. 2, 2018), holding that FHFA is a government actor for purposes of evaluating due process rights and claims under the Fifth Amendment of the U.S. Constitution. Judge McConnell concluded that Fannie Mae, Freddie Mac and FHFA can be found to be government actors for purposes of a due process claim. Judge McConnell’s analysis and conclusion differs from dozens of other court rulings saying the opposite. FHFA says immediate appellate review of Judge McConnell’s decision is appropriate because (i) it involves a controlling question of law, (ii) there is substantial ground for difference of opinion, and (iii) an immediate appeal from the order could materially advance the ultimate termination of the litigation. Opposing FHFA’s request for immediate review of Judge McConnell’s analysis of the law at this early juncture, Mmes. Sisti and Boss say FHFA’s appeal should occur after a trial. Mmes. Sisti and Boss argue they shouldn’t be forced to engage in burdensome piecemeal litigation. In a reply filed today, FHFA counters that the question about whether or not the housing finance trio are government actors is a purely legal question, therefore militating in favor of immediate certification to and review by the First Circuit prior to a trial in the District Court. (See GSE Links for more on Judge John McConnell’s decision and the government’s reaction.)



We’ve seen decades of the GSEs AND THEIR ATTENUATING OVERSIGHT APPARATUS viewed as part of the government.

In my 50 years in DC, first working on Capitol Hill, then with two federal financial regulatory agencies, and finally 35 combined years lobbying for and writing about Fannie and Freddie, I figure 98% plus of GSE beefs, complaints, challenges, etc. etc. are because the two were perceived/argued to be part of the federal government and/or enjoying government subsidies/benefits that big banks didn’t have (a myth because huge federal bank subsidies exist-- and always have existed in far greater numbers than GSE benefits).

With the Bush Administration’s 2008 “GSE conservatorship,” the GSEs were deemed federal chattel; ill-treated like the proverbial red-headed (federal financial) stepchildren; cut off and demonized, disproportionately punished greater than any US financial institution; blamed for events in which they had a role but not the featured one (see commercial bank $2.7 Trillion PLS activity leading up to 2008 meltdown); and charged double by Treasury the lower interest rate banks were assessed (10% to 5%) for the own unique federal financial support received (the Troubled Asset Relief Program or TARP).

Then, in a bizarre premeditated regulatory twist—just as they were about to turn profitable (as the government knew)--Fannie and Freddie had virtually all of their prospective earnings (and capital) confiscated/expropriated to repay debt that never could be amortized, under a 2012 “sweep” arrangement (Senior Preferred Stock Purchase Agreements or SPSPA), which now could unravel since a jury—as opposed to a cabal of judges—gets to see the facts and hear the real story of conservatorship. (See recent Judge Lamberth ruling mandating a jury trial.)

Ergo the need for the government to argue FHFA is not part of it!

It has worked for them arguing against Fannie and Freddie, why should the government's attorneys stop now trying to apply the same argument to the GSE regulator?

Why the history of factual chaos and distortions??

How many Members of the House and Senate understand what statutory national role the GSEs play or that Fannie’s and Freddie’s $5 Trillion in assets and liabilities are not on the federal budget, let alone why?

The Conservative press, think tanks, business antagonists, and mostly R public officials have pummeled the GSEs for a variety of false and spurious federal ties to justify their desire to cede the nation’s secondary mortgage market to the nation’s behemoth financial institutions.

Their anti-GSE lies flow easily.

Fannie and Freddie critics display little thought for stopping their favored ersatz GSE replacements, which would repeat many of the grievous errors the same big bank/rating agency/investment bank cabal committed less than 10 years ago.

But that hasn't stopped the “bad guys:” from perpetuating any myth to bury the GSEs.

Those F&F institutional troublemakers also denigrate past GSE successes—offering some hoary self-serving explanation (ironically, often tied to the GSEs red, white, and blue history)--and ignore or distort why the home-buying public seems to like having Fannie and Freddie around, i.e. GSE efficiency, lower prices, market access, consumer fairness, reliability, and more.

I never thought I root for angry GSE bad guys who call all things GSE part of the government, but I will now if federal lawyers—to fend off GSE plaintiffs--have decided to ignore history and allege the FHFA is not part of the federal apparatus.

I guess they also want us to believe –weirdly--all the Fannie/Freddie shade thrown for decades have been misdirected, a mistake, wrong, an error of gigantic proportions—even when pitched by many officials in Treasury and DoJ.

Yes, since a law passed in the 1980’s GSE every debt instrument and mortgage-backed security (MBS) carries some version of (paraphrasing), “This security is not the full faith and credit of the federal government,” but nobody--even my most diehard allies—ever suggested the GSE regulator is a fatherless alien.

Yet, the GSEs now finance a greater part of the nation’s mortgage market than they were eight years ago.

But, we’re asked to believe their congressionally designed regulator—which is paid for by the GSEs, is under the congressional appropriations process, and told to report to Congress—has no nexus to the government or anything else. Bwah-ha-ha-ha!!

But, the government keeps telling whatever tall tales it needs to, to stay one step away from a major pro-plaintiffs decision. Will future regulatory judicial appeals have to be made to Martians? (There’s a Uranus joke here somewhere?) 

There you have my latest rant--or hopefully don’t have it--because I hope some future jury (or judge) won‘t buy the government’s claim and will reach the most obvious answer, which is that the GSEs and the FHFA are soaked in red, white, and blue, and he/she/they must return Fannie and Freddie to practical mortgage operations.

The current DoJ hopes to have them disemboweled or legally neutered, after arguing disingenuously the GSEs just are shadow regulated orphans which showed up in DC one night after falling from the back of a garbage truck and their overseer is an extra-terrestrial ghostly non-entity.

Maloni, 10-15-2018 

Tuesday, October 9, 2018

The President's in a fog and many of us are sad for other reasons

GSE News is thin....and we suffer a terrible Loss

While most of the GSE plaintiffs have added to their cases the Lambert opinion calling for a jury trial, little has changed as the government seeks more time to plot its next moves against those remaining Fannie/Freddie court cases, that seek relief from either the conservatorship, the PSPA “sweep,” or both.

A longtime acquaintance—reflecting one of my fears—suggests scuttlebutt is Ginnie Mae’s Michael Bright is prepping himself as is he soon may be nominated for the Directorship of the FHFA and –if that happens—still be permitted by the Trump Admin to hold onto his current Ginnie Mae job, as well.

Why waste a steady GSE critic?

The precedential reason why that might work for this White House is the dual role OMB Director Mick Mulvaney has spent as acting head of the Consumer Finance Protection Bureau (CFPB), dismantling as much of it as he was able until his anti-consumer successor awaits final Senate approval.

For months, Mulvaney has worn two hats, torturing CFPB and its allies, and toiling at his day job presiding over the Trump budget concerns and pooh-poohing all the Admin’s red ink generating activities. The latter is a toll on our kids and grandkids, which grows daily as the Republicans in charge of the House and Senate put in place more deficit spending and tax cut plans.

Bright has been a major activist for large doing away with Fannie and Freddie and substituting a larger and more active Ginnie Mae, despite ignoring the many problems associated with thrusting this sleepy government agency, with no institutional experience—let alone depth of talent or even employee numbers—in securitizing non-government insured and guaranteed mortgage loans—not the large and more numerous conventional financing (a mortgage industry technical term)--which have been the exclusive province of Fannie and Freddie, while Ginnie contented itself with its sole mission of packaging government-backed mortgages, with most of the front end and a lot of the back office work done by mortgage lenders not Ginnie staff.

That’s the Bright dream, it has his name on it, when he was employed elsewhere and working with and for people who did not have the consumer’s best mortgage execution top of mine but were/are desperate to gut the GSEs.


She's gone.

Last week, a wonderful, beautiful, intelligent, thoughtful, supportive and dedicated wife, mother, sister, volunteer, and friend, was taken from us far, far too early.

Three hundred people attended her services, cemetery burial, and went to her home to celebrate her life. Each memorial segment superbly conducted by her brave and grieving family with the grace and class she epitomized. Abby, your husband, children, grandchildren, sibs, their loved ones, as well as your many, many friends—and the senior citizens mishpucha you succored and sustained—deeply/dearly will miss you.)

An Afterthought…

Even at such a sad occasion, I engaged in one non-funereal thought/dream/fantasy, after seeing dozens of current and former Talented senior mortgage professionals collectively grieving.

There were multiple ex-CEOs, CFOs, Marketing and Credit EVPs, Single Family and Multifamily experts, several lawyers, General Counsels, Communicators, women and men of all ethnicities, part of a prior era’s dream team.

I felt if I could gather them as a group, walk them into Fannie Mae, today, they would have it running precision smooth for our country, if permitted to employ all of their mortgage finance experience and entrepreneurial skills with minimal regulatory interference.


Brett Kavanaugh’s wife and I cross paths (or packages)

After returning from the sad experience discussed above, I found a package left on our front porch.

We get lots of packages, tons of packages, and--because there are two houses with the same numbers in their addresses on streets either side of us--we often get packages meant for other families and not just Mrs. Maloni and me, whose combined habits can wear out delivery services.

This was the case last week, as I glanced at the box, saw the common numeral as ours in the address, noted it hadn’t been addressed to any “Maloni” and decided I would leave it undisturbed until the next day and take care of it with the local community office identified on the label with the same shared number as our address.

When I went out the next morning to get the newspaper, I stared at the box and noticed the addressee was “Ashley Kavanaugh,” a name I recognized as the wife of the Judge and while the labels were formal, there was handwriting scrawled on the package suggesting “open with care.”

I may have come to town on a potato wagon, but not the night before.

Cue my paranoia!

I hurriedly ran from the package on the porch, went inside and called the local police and in less than five minutes the Chief was on my porch, with one of his guys, eyeballing the package.

After perusing it, he suggested I stay in the back of the house until “they” determine what was in it.  Since it was no time for amateur hour, the Chief proceeded to call the US Marshall’s office, which I guess is the explosive tech experts.

I stayed far back in the house, away from the front porch, often on the second floor, until the package was removed.

The Chief later called to assure me there was nothing dangerous in the package, but didn’t tell me what was in it. That worked for me.

The POTUS and Judge Kavanaugh

I wrote a draft blog about this matter a week ago—when it was front page--intending to include a lengthy piece in the newest blog, but decided to cut it short, since everything had been said, on both sides, with Kavanaugh now approved but still trailing smoke.

I have no idea who was right when Dr. Ford first testified and Judge Kavanaugh followed, each delivering conflicting statements. Neither side nor their advocates would back off.

But, I do fault the President for not standing up and providing leadership the moment he saw the nomination hit the skids and take on its hostile controversial form.

Donald Trump could have gotten almost any candidate he wanted on the Court, had he quickly moved away from Kavanaugh.

Instead, rather than use this evolving ideological warfare to rise above it and display the needed presidential character our nation seeks, President Trump failed, chose to stick it to his opponents, and threw gasoline on hot coals by ridiculing Dr. Ford during a campaign trip.

There was nothing in Brett Kavanaugh’s judicial history which made him head and shoulders above any of the other members of the deep GOP bench the Republicans can turn to for judicial candidates.

The President could have pulled the Kavanaugh nomination—because of the flap-- and instead appointed any one of those deserving GOP judges/lawyers to the SCOTUS and still achieved what only really concerns him, a steady vote for the social, political and commercial positions his base supports, meaning a guaranteed fifth vote against any and all governors or filters on this Administration’s financial, consumer, gun control, immigration, environmental, and broader healthcare limitations.

Another lost opportunity!

Maloni, 10-9-2018