Sunday, January 21, 2018

"Oh Stormy, oh Stormy, bring back our sunny days.....!"

Are there positive GSE times afoot??
Not sure, I’ll believe that when I see it

Mel Watt, Director of the Federal Housing Finance Agency (FHFA), the GSEs titular regulator (although most of the real power/direction/clout comes from the US Treasury) sent a dramatic letter to the Senate Banking Committee last Wednesday, endorsing a set of GSE reforms that sound very close to the Moellis (pronounced “MOLE-us”) plan and which—as the GSE scuttlebutt goes—will be reflected in the February debut of Corker-Warner 2.0 GSE legislation.

(Admin Bullshit alert!)

But, in the stop, go, red light, green light, confusing DC GSE world—when investors were hoping to hear a stunning full throated endorsement of Watt’s letter suggesting some collaboration--Treasury’s Craig Phillips spoke to Thursday to DC’s ‘Women in Housing Finance, generally endorsed some of Watt’s (surprising) recommendations, then added the standard gag producing convention, “But we want the Congress to pass meaningful reform, blah, blah, blah.”

For GSE supporters, Phillips really didn’t walk the walk and may not have even talked the talk.

Phillips absence of certainty, F&F praise, and other caveats were music to DC’s anti-GSE ears.

Those folks have no appreciation for Fannie and Freddie operations, their history, their post-Conservatorship success and current productivity (the two of them, handcuffed by the federal overseers, still are holding up the US mortgage market, which relies on the GSE underwriting standards to fend off big bank mortgage aberrance).

Few, if any,  Fannie/Freddie positives come from the Hill R’s, just the pols unexplained lust to screw over the GSEs and give the nation’s big banks even more power over mortgage markets and consumers.

Shortly after Phillips spoke, “Hill sources” (read behemoth banks and their sycophants) began dampening any hope over Watt’s letter and spinning “future Senate bills will put Fannie and Freddie in “receivership” and went medieval on the GSEs in a dozen different ways (but did not spank them with a Forbes Magazine”).

It’s times like this when I wish I could ask each Senate Banking Committee member exactly what it is about the GSEs they dislike (knowing that most of their concerns are folly and easily rebutted) and why they think anything they can conjure legislatively—once they put Uncle Sam on the hook for financial losses, as most of the new proposals do—is a dramatic, watershed improvement over exactly what Fannie and Freddie provide the nation now cheaper and more efficiently than the big banks??

(No fair using logic and rationality, Maloni!)

When you consider any federal legislation—especially one with lots of moving parts that massively uproots US mortgage markets--you have to crank in the inevitable drafting and implementation screw ups; the predictable greed as the financial buzzards seek parts of the GSE carcasses; the new rules, new players, chaos and uncertainty with anything Washington touches; plus giving the big banks even more market control—which they don’t merit or deserve—you wonder how thoughtful people can do that to a $10 Trillion market tranche of our economy?

The answer is most are not thoughtful or knowledgeable.

(In case anyone missed it the Fed has named a new financial regulatory czar to do away with all of those banks and regulations governing the banking world that it believes produce too much caution and consumer concerns.)

I also have to remind those who believe that thrusting the GSEs into “receivership” is the answer, ignore the fact that Administrations and Treasury Secretaries change, along with their policies.

If this GOP crew in both congressional chambers and the White House believe investors will flock to whatever their new mortgage guarantors are that replace Fannie and Freddie, the precedent of Trump stealing the capital and assets of the GSEs will dampen that enthusiasm if not scare the money guys far away.

I continue to believe this mid-term election year, when with all of the other craziness which can be put at the feet of President Trump and his Administration, is not the ideal time to try and euthanize the GSEs—especially when there is a $100 Billion in GSE warrant monetization or more there for Treasury’s taking if it chooses to keep the GSEs alive, even as privately owned utilities.

One last comment is that I don’t think Secretary Mnuchin knows what GSE things he wants to do or endorse, beyond the “happy talk” about working with the Hill.

If the Hill fails to enact legislation—as I suspect it will—then it’s up to him to do something or just further kick this mortgage can down the road.

Trump the SPP?

Even before the Stormy Daniels affair broke into the news, big time, at midweek, I was thinking how much Donald Trump’s presidential actions remind me of the celebrated “Swedish Penis Pump” (SPP).

Let’s see how far I can take my analogy?

Like the SPP, when confronted with opportunity, the agitated POTUS demands attention, gets red-faced, inflates himself above normal size, girds for a vigorous assault on whatever is in front of him, and then retires only to repeat the same operation the next time he is challenged.

(Note, none of this is a comment on DJT’s virility, hand size, or use of an SPP, just comparison of the SPP’s operational activation and Trump’s dealing with personal criticisms or perceived ego threats.)

I am sure you’ll tell me how close my comparison is or where I am off?

The Maloni Idea

Thanks to several of you who reached out to laud my suggestion of –someone—reviving the old report which Fannie Mae used to publish quarterly showing all of the mortgage finance activity (since and multifamily) in every congressional district and state in the nation.

I argued it would help Congress understand better what the GSEs do and see firsthand how much mortgage finance business they do “back home,” which is the piece of the nation all Senators and Member of Congress care about first.

The good news is that efforts have been made to find and implement the information—which can’t be done as easily or frequently as Fannie once did—but it can be done.

Stormy Daniels

OK, I know few of "the Donald's" tweet buddies will believe the a story, which first broke big in the Wall Street Journal, that 10 years ago, “Stormy Daniels”—an adult film star-- had a brief affair with Donald Trump (am I the only one who thinks Stormy looks “mannish”?) just months after Melania Trump, his third wife, gave birth to their son Barron?

Or maybe, they just won't care, remembering Candidate's Trump boast that he could shoot someone in the middle of New York City and not be blamed.

The WSJ story continues that one of Trump’s regular fix-it lawyers made a $130,000 payment to Ms. Daniels just a month before the 2016 presidential election to keep Stormy from going public with the sordid matter and possibly costing DJT the election.

Trump's self-admitted horniness and wanton pursuit of women—which he displayed during his adult life and which he bragged about before he decided to seek office-- is so Donald, including using his personal lawyer to hush the embarrassment (an MO he’s used all of his professional career) and then to deny everything that the Journal and now other media are writing (don’t miss the Forbes magazine spanking session).

(Publish the Steele dossier, publish the Stele dossier.)

I wonder what Melania thinks of her husband’s proclivities, but of course Sarah “Biscuit” Sanders told us that DJT never said, “Grab them by the P----!”

Oh, "Biscuit" also said Trump didn’t say “Shit Hole countries.” And, if you don’t believe her, ask Senators Tom Cotton (R-Ark.) and David Perdue (R-Ga.).

The GOP—hoping to ignore that it controls all three government units (not to mention the courts)--can try to call this weekend’s federal government shutdown whatever it wants, but the “Spanking Stormy Shutdown” has a nice ring to me because of the timing coincidence.

Our POTUS; the man who would be King

Lots of one year reviews of President Trump first 12 months in office. I won’t try to do that, but I will ask—for the doubters out there—can you remember any 12 month period in our history—save when we were involved in world wars--when living in the United States has featured more hostile, chaotic, unnerving, wracked by more presidential attacks on US institutions (FBI, CIA, science, race relations, immigration, his own political party etc. etc.) as well overseas friends and allies?

It seems clear to me—from his autocratic complaints—about our legal system, Congress, cultural and civic history, DJT would like to change so very much and laments his criticism doesn’t make it so. He seeks the power of kings or emperors and can't understand why its not his.

He generates quarrels and rows, perpetuates them, and then walks away looking for others to blame. I am sure he will be a Tweet-machine during the “shutdown,” scapegoating, and raising specious issues to hide his own "negotiating with jello" responsibility.

You cannot separate President Donald Trump from any malaise associated with these matters, plus dozens of others. Did I mention Healthcare, Russia, North Korea, genial comments about Neo-Nazis, racial/ethnic putdowns, and policy by tweets??

No, Trump is not a good politician, not well read, with little understanding of our country’s Constitution, history, and—apparently—not an effective political deal maker, no matter how much he praises himself.

He has fostered an unhealthy situation and as a nation we will suffer from his obstreperous nature and efforts to tear away any vestige of his immediate predecessor...

I believe our best hope is to vote out as many of Trump’s congressional acolytes as we can and hope we can halt some of the more destructive actions when he and his congressional posse soon try and destroy our Social Security, Medicare and other people programs—in the name of federal savings--to pay for his tax giveaways and infrastructure and military deficit spending.

Maloni, 1-21-2018


Anonymous said...

Bill, I think legislation can come only after 2018 election. In 2019, Hensarling and Corker will be gone. Watt too. Mnuchin will have someone in FHFA who he likes.

Will Crapo remain Chair of the banking committee assuming GOP still controls Senate?

robert peebles said...

you worked at one of the GSE's correct?
Were you in any position to garner political clout with congressman or Senators, and if so what have you been able to do as far as spreading the "truth" within those ranks?

Regarding your feelings re: Trump. In your dissertation of everything wrong with him, you fail, like most every celebrity in Hollywood does, to mention anything positive/good that he has done, in spite of having to get work accomplished with almost 50% of Congress voting against "EVERYTHING" he tries to accomplish.
He is OUR president of the United States. I would expect you and everyone to at least honor the office of which he holds with respect, not disrespect.
I wasn't a fan of Obama, for goodeness sake, by all counts he siphoned $100 Billion of the GSEs money to fund Obamacare subsidies, but I never defamed him with such hatred as you do Donald Trump.
It's undeniable the wealth creation his Administration has created. Most corporate working employees 401k are up 30% or more. Donations to non profit organizations have ballooned becuz of the increase in the stock market. Being a politician in the US used to mean that any country could extract maximum value for themselves because the POTUS of previous administrations allowed such, but not Trump.
I guess I just would hope that you will be one of the educated and truly knowledgeable people that can both admit faults and successes, and try to use your blog to have individuals that read it come together, not further the devisiveness.
One last question......we've had no new discovery documents be released in it seems a year. When will there be more because it does us no good to have these released, AFTER court cases are heard.

Bill Maloni said...


Ironically, I think the GSEs can get more via a Mnuchin executive action in 2018, then they can get in 2019, legislatively,....(and I am going to bite my tongue here) even if Democrats win both houses in 2018.

In 2019, I suspect you still will have copious GSE doubt and misinformation which will produce a differnt kind of legislative risk. What I would fear most is a total rewrite of their charters to make them do heaven knows what? Goals are fine, but make them realistic.

The GSEs need restructuring but more freedom and flexibility to make their own business decisions, responding to market situations, not massive new mandates.

Nobody knows, but if there is a Mnuchin 2018 regulatory fix, I hope it will feature some elemental swap of the warrant values for GSE continuation as privately owned corproations or utilities with a less intrusive regulatory FHFA hand.

Anonymous said...

Thanks for the new post, Bill. I always enjoy them.

When I was involved in export finance, I was always told that political risk is the worst kind. The GSE fiasco has been a textbook example of why.

As for Orange Julius, those few times when he does actually accomplish something useful always seem to be overshadowed by his acting like a complete ass. I have zero respect for the man, except perhaps for his remarkable ability to stay out of jail... so far anyway.

Bill Maloni said...

Robert--Thanks for reading.

I'll try and respond serially to the issues you raised—although some of my answers you may not like...

Yes, I was Fannie's chief lobbyist for 20 years (SVP for Government and Industry Relations), before retiring in 2004. As a corporation, Fannie was respected and very successful working with the Congress on both sides of the Hill and both sides of the aisle. I had great staff, a major resources, and worked with creative, supportive people elsewhere in the company.

Each of the three Fannie CEO's I worked with immensely valued our work which primarily was to “protect our federal charter." In my 20 plus years, the charter never was changed in any manner we didn’t first support.

I'd like to think I successfully influenced many Senators and Member, industry leaders, and executive branch officials, from both parties, about Fannie’s housing mission. And all of these photos of same on my office wall, reflected more than just raising money for their reelection efforts, although some of those pix reflect that part of my professional life.

I've been writing this blog for the better part of 10 years and I must confess I don’t think I have convinced or converted many Hill people to like and support the GSEs. Or, if I have, they've hidden it well.

If you have read me recently, you see I refer to the "GSE Shit Wall" which is the result of years of heavy direct lobbying, spreading falsehoods and threats about Fannie and Freddie. GSEs can’t lobby and aside from a few trade association and part of the low income housing community, the other side--mainly but not exclusively the big banks--have done an excellent job of distorting the truth demonizing the GSEs.

With regard to President Trump, again if you look at my early post 2016 election blogs--while I never supported him--I did hold out hope that he would rebound from "Candidate Trump" get comfortable in office and not resume the unhealthy elements of his campaign for office.

I promised to parties him when he did well and disagree when I thought his actions were wrong.

I think his lying, ugly and churlish actions have been wrong. I believe that major elements of the Trump personality won’t permit that facts to emerge.

I don't think there can be a Trump 2.0 and I won't repeat all of the reasons why, but many of them appear in recent blogs.

And, while I am certain you disagreed but were respectful to the Obama presidency, lots of people weren't, from Mitch McConnell's vow to make him a one term president to the Yahoo who called out liar when BHO gave one of his state of the union address, plus all of those folks in the middle who swore he wasn’t born in the United States or was a Muslim.

Talk about a Congress not cooperating with the President, look back at what the Hill R's did to Obama and then compare the D's one year of congressional hearings and bipartisanship on the healthcare bill and the secrecy, partisanship, which the GOP rushed through a $1.5 Trillion tax giveaway.

Do we know, yet, what’s in it?

Please respond either offline or here what things you think the President has done well and for which he deserves kudos.

I might disagree but won't dismiss your list out of hand. (Oh, don't suggest the POTUS responsible for zero 2017 domestic airline deaths, either.)

While I agree that some part of DJT is reflected in the market's rising value, I have to point out we are in the middle of a multi-year broad growth started under Obama. (Oh, and BHO first year percentage market increase was greater than DJT’s.)

I look forward to hearing from you.

Bill Maloni said...

Anon #2 (tough following you guys)--

For years at Fannie we knew that political risk was our primary concern. We believed, because of what we did and how we did it, as long as we had a supportive Congress and public—plus the hosuing industry—no successful moves would be made against he charter.

That changed when the political charlatans of the OFHEO (the predecessor to FHFA)—upset that Fannie wouldn’t kowtow to their pressures--with no proof, wrongfully accused top Fannie execs of securities manipulation--which took 8 years for a federal court to dismiss--the GSE enemies shorthanded it for the clueless Hill as, "Fannie execs paid themselves millions and then defrauded the company."

Nobody in Congress understood what supposedly Fannie officials did but it sounded like the kind of mess you didn't want to get near.

And all the political support disappeared. In fear.

Again, employing smoke and mirrors (ergo the many federal lawsuits against Treasury), Hank Paulson, in 2008, used the GSE red ink to put the companies into "conservatorship," from which he and others planned they never would leave. But the business model survived those machinations and the companies began making huge bucks again, rapidly paying back Uncle Sam $275 Billion for the $187 Billion they had been given in 2008.

robert peebles said...

Differing political views will always be there, but there is one problem that we both have vested interest in and that's how to get FNMA/FMCC to be seen truthfully for their contributions/benefits/need to be on the forefront of housing as well as making sure shareholders rights and value are upheld.

I have no idea what kinda cost are involved but it would almost seem like at this point, deep money pocket hedge funds could mount a televised campaign to expose the public/political weenies out their about the situation, or even lower cost postcard mailings, anything that would put the GSEs in focus.

I have polled many friends, strangers, etc.....and I'd say 1 in 100 or less have even and iota of an idea of the GSE mess, or even have an opinion about it because they are so under the radar.

60 Minutes did a piece in 2009 on the takeover/interviewed Timothy Geither, and others.........I have thought that with all that had been revealed, Pershing/Paulson or someone might push for another piece, hopefully slanted in our favor this time. Often times, a 60 minutes piece can have dire or helpful consequences to a companies fortunes (I recall what happened to Lumber Liquidators a few years ago)

I feel that as you pointed out, the GSEs cannot lobby, yet Big Banks are furiously doing so. There needs to be some action on our side to get the truth of the 2012 Sweep out to more than just those of us with a vested interest.

Any thoughts or ability to shakes things up? How do we get a show like 60 Minutes to revisist this preferably pushing our angle/views ?

Bill Maloni said...

A national ad campaign is very expensive and needs lots of 24-7 hands on an guidance, which the hedge funds understand, but likely don't want to udnertake.

While I would agree with you that the GSEs are being threatened, they still are operating now and the public can be assuaged/conned when policy makers pooh pooh any risks, especially when consumers can go to any lender still—if they have the right credit profile and down payment—and qualify for a GSE mortgage.

But an additional way to achieve what we want—since I’d rather have four hundred PO’s Senators and Congressman—is to do your “education” effort with every Senator and House Member showing them exactly what the GSEs do in the piece of the United States they care about the most, i.e. their state or congressional district where their voters reside.

I discussed this idea two blogs ago ((”I have an idea”), bringing back the document which Fannie used to publish every 90 days—at that time to improve understanding and support--but which the Federal Housing Finance Agency, the GSE regulator no longer permits because FHFA considers it lobbying, which thye prohibit.

When properly prepared (think graphics, local pictures, and detailed hard numbers, i.e. the gravy), those reports take (took!) an amorphous, foreign, funny sounding operation (Fannie Mae or Freddie Mac) and give them an important and very valuable a back home identity --often involving hundreds of millions of dollars—in happy new home owners, indigenous investments and untold dependent local jobs, both direct and derivative employment..

“So that’s what Fannie does.”

I’ve send that open eyes and make opponents advocates, because most know they are clueless and dealing with buzz words, i.e. “Fannie and Freddie.” In the past—since they all want to get re-elected—they welcomed the information and often (with a little help from their friends) figured out a way to associate with it, if not take credit for it.

It explains what the GSEs do and where their benefits fall. No GSE shareholder is sharing in the cash Fannie and Freddie generates, just the Treasury…for now.

If you break that down in numbers of homeowners created, and the multitude of jobs which go along with maintaining, furnishing, painting, landscaping, plumbing, electrifying, etc. etc. you get an entire new appreciation for the GSEs, especially if someone is threatening to disrupt that activity with no guarantee than GSE services will be replaced by anything but banks.

Suffice to say, there is a small group of GSE-advocates pursuing this idea.

Anonymous said...

Bill, I think a reform bill in 2018 has ZERO chance. Do you agree? A reform bill might be possible in 2019 or 2020 if Dem or Rep controls House and 60 seats in Senate.

Bill Maloni said...

I think I answered that above, noting I think the companies (and their shareholders) would get far more from a Mnuchin regulatory arrangement later this year, after the Congress fails to produce a "reform" bill.

If the D’s did win control, opening wide the GSE charters--who among D's would stop that--IMO will produces a whole set of other problems; small changes in the current oversight of the GSEs, allowing them to go forward, as shareholder owned (either corporations or utilities) is most desirable, keeping their earnings to build capital, seems to me more useful exercise.

Letting the R’s--who would be vengeful or the D’s, who would insist on being socially responsible with little shareholder concern-- produce two extremes to be avoided.

Bill Maloni said...

Robert Peebles--

An additional thought on your ad campaign suggestion.

I don't roll with the hedgies or communicate with the reported "big GSEs investors," but I don't want to throw cold water on you--or other GSE supporters--reaching out to the Berkowitz-Ackman-Paulson-Icahn crowd or their lawyers and suggesting your ideas to them.

Every good idea comes from somewhere and someone, if not us, who?

So, I encourage you to not stop wiht my answer, take your shot, and act on your good advice.

But, make sure you think through the very specific actions you advocate (an ad campaign to say what aimed at whom to achieve what?), the response sought from your audience, and the inevitable next steps.

Good luck.

Bill Maloni said...


About Crapo, sorry I missed that part of your question.

If the R's control the Senate in 2019, "yes," Crapo could still have Banking, but that selection will depend if he qualifies, by seniority, to chair another committee which he thinks is better for his political career, policy interests, and aspirations.

But, as committee go, Banking is a huge campaign fund generator, which allows him to bring in a lot of money for himself and for those colleagues he smiles on

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