Monday, October 1, 2018

Yay Lamberth, Giggles for French Hill???

Did the “Good Guys” Finally Get a Court Win??

It would appear that way.

Yay Judge Lambeth…I think.

Last Friday, Judge Royce Lamberth—the infamous and original “GSE Hanging Judge” rejected three fresh plaintiffs’ arguments in his latest ruling but OK’d sending a fourth to trial.

OK, but bang the drum slowly!

Lamberth was a little murky in his overall commentary, yet he did open an important door to a possible resolution—the possibility that a jury will reach a different conclusion than the previous GSE cases heard by a single judge or appeals court judges

I am admitted cynic about legal GSE victories—because they’ve been absent or pyric-- and I don’t pretend to comprehend the interstices of what Lamberth decided, except for sending one issue to trial where plaintiffs’ facts heretofore denied by the federal government can be presented.

One way to share/explain what happened with Lamberth—which still is open to some confusion, save for the future trial—is to post a link to Tim Howard’s blog where questioners and Howard have commented in rich detail on Judge Lamberth’s finding.

My one true, additional offering, based on what some smart people have told me this past weekend, is that there are major investors who are ecstatic about this latest Lamberth action. (They trust juries more than judges.)

Some GOPers Never Get Any GSE Smarter, Just IQ-Molt in Place

I first met French Hill when he was a Senate Banking Committee staffer in the early 1980’s, working on GSE issues for Sen. John Tower. Hill was a smart, affable, bubbly fraternity guy (like so many Republicans), but dead set against anything Fannie /Freddie and active in his efforts to throw as many obstacles as possible in our way (“our,” since I was an active lobbyist back then, working with Hill and others).

After French left his committee job and worked for a while at Treasury and elsewhere, he went back home founded a bank in Arkansas, later sold it for a huge profit, and got elected to the House of Representatives.

I lost track of him until he returned as a Congressman from Arkansas a few years ago and wound up on the House Financial Services Committee, still dogged and ineffectual in his opposition to all things GSEs.

Recently, this former Senate staffer, Treasury official, and banker, penned this article--sometime before last week’s GSE Committee hearing—to which I wrote the following response (that appears here as an “original” because Hill’s chosen venue had no section for comments).


My French Hill response. 

Poor French has been on this "kill Fannie and Freddie" kick since he was a Senate Banking Committee staffer for Senator John Tower (R-Texas) in the 1980”s.

He's was wrong then and continues to be factually wrong today. Plus, it appears as if he's failed for more than 35 years in his quest to abolish the GSEs from the nation's mortgage finance scene.

Let me employ some of his own written words to show you how vacuous they are and he is, worse now that he's a Republican Member of the House Financial Services Committee, which among others things has GSE jurisdiction..

Here's a sentence/paragraph Rep. Hill wrote:

"The longer they (the GSEs, Fannie Mae and Freddie Mac) sit in conservatorship, the more taxpayers must pay."

Really French, really??

Someone might want to clue this self-appointed mortgage finance solon that: 1) the GSEs—not the government, pay for their own overhead, and 2) since 2013 Fannie and Freddie have pumped some $270 Billion into the US Treasurynot the reverse--more than repaying the $190 Billion forced on them in 2008 by Treasury Secretary Hank Paulson and the Bush Administration, under very questionable surroundings. (See recent Paulson comments below.)

Those circumstances still are the subject of several large and outstanding federal lawsuits against the Treasury and the GSE regulator, the Federal Housing Finance Agency (FHFA). (Re-read Lamberth comments above.)

The single year borrowings to which the Congressman Hill refers, came as a result of the massive GOP tax bill--which lowered all corporate tax rates including those the GSEs pay—and caused a variance and temporary GSE tax restatement from past years (because of the higher rate they paid earlier), an anomaly which quickly righted itself once the new lower corporate tax kicked in and the GSE profits continued, with even more cash going to the US taxpayers.

In a bizarre way, Rep. Hill easily could blame Congress and its rush to cut corporate taxes for that brief GSE tax glitch.

If French was honest, he would note the GSEs are the most tightly regulated mortgage finance entities in the nation and have de minimis mortgage credit losses, numbers that are the envy of the nation's largest banks, which still produce mortgage banking red ink multiple times larger than the GSE numbers. (Their rigid oversight has been one of the reasons the GSEs have been effective, profitable, and able to pay back the taxpayers so much money.)

Plus, in the 10 years, Fannie and Freddie have been in conservatorshipevery single busy deal or operational matter has been approved by their regulator, the FHFA, including blessing Fannie’s new building (for which Fannie is paying) that so rankles the Arkansas Congressman. He should know, there is no significant management discretion any longer nor GSE lobbyists making his current job more difficult.

It's a shame and indicative of his bias and his one-sidedness that a sitting US Congressman—who serves on the House’s most noteworthy financial committee--needs those facts pointed out to him.

Was Hank a lying manipulator and conman?

HANK PAULSON’s 10 YEAR PERSPECTIVE (He now admits the GSE business model worked/works!)

I hope Mnuchin and Congress realize Paulson’s perfidy by now

Treasury Secretary Hank Paulson looks back to 2008

"I would say this that when we nationalized Fannie and Freddie no one thought at least I didn't think that they're going to continue in their present form right ... because it was a flawed model and no one was defending it at the time.  But frankly it works so well that there was no ... no compelling reason to change things and as you said once they were stabilized they generated income  ... which helped reduce the deficit ...(and) went into the national coffers  and so you know am I unhappy am I surprised that there's been no permanent reform put in place yes ...”

ICYMT, Some logical advice from Landon Parsons, Moellis & Co.

Maloni, 10-1-2018


G. Buckman said...

Bill, thanks for your continued efforts in keeping us informed on all things GSEs.

It's very much appreciated!

Bill Maloni said...

Thanks, G--

But did you hear the one about the Orange=haired siding salesman......??? ;-)

Anonymous said...

These people definitely heard about the Orange=haired siding salesman!

Bill Maloni said...


Can't open link; what is it?

Anonymous said...

GSE Historian. Honest and accurate. We need you.

Anonymous said...

Bill, if GSE issue not resolved before 2021, a Dem admin inherits the issue. A few GSE haters in Obama admin may join new admin.

Bill Maloni said...

(Thanks to both for reading and commenting.)

Anon #1--

if you are describing me, the comment makes me feel old, but it's more accurate than not.


Anon #2---

That could be a problem, too, and I've alluded to it in the past, too many "hands in the kitchen," people trying to socialize the GSEs rather than having smart people--with hearts and freedom of entrepreneurial action--running them to do what F&F, with thoughtful regulation, have done best.

Your result also would stop the "abolish them" threat.

However, in the past Democrats have been more favorable to the meaning of home ownership which would be a positive and support what that has meant: betters homes for families and children; homeowners with a stake in the community are more civic-minded, join PTAs, vote more often; equity/family wealth accrues and rises, etc. etc. Kids seek to emulate.

Having said that, it's possible--as some are whispering--that Mnuchin sees some hand writing on the wall and decides to move with an executive action which largely frees them up and converts the government's GSE stake into billions more for the taxpayers.

I can live with the latter, if done properly.