Sunday, March 25, 2018

The more things change, the more they stay the same

Same-o, Same-o

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

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

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

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

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

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

Whatchu talkin’ bout Eddie?

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

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

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

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

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

Sigh, sigh!

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

GSE Lawsuits

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

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

GSE La-La Land

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

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

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

And in related legal news…..

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

Michael Avenatti

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

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

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

From Wikipedia.

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

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

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

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

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

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

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


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

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


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

Maloni, 3-25-2018


Paul said...

Thanks for your consideration to Trump loyalists. We understand. Thank you for all your work on GSEs. Much appreciated.

Bill Maloni said...

Thanks, Paul.

It's tough, but if I expect others to do something, I have to try and roll that same way.

(Now, as per Rick Santoturm, if I just can find a seniors CPR class that will teach how to use the "paddles of life" on myself....?)

Anonymous said...

Will Trump nominate a conservative FHFA director who will kill affordability fund contributions?
(i think Watt made a mistake in making GSEs to contribute to the funds given they don't have enough capital.)

Once out of conservatorship, they may be required by law to do so.

Bill Maloni said...

Anon--Truth, I have no idea, but....

If you force me to pick I would say "Yes" Treasury/Trump will opt for someone we "good guys" won't least initially.

Not that Mel Watt is capable of violent/sudden action, but the law does give the FHFA Director power to act dramatically, if he/she chooses.

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