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