Monday, November 26, 2018

Mainly GSE observations, but one Trump pronouncement

GSE Cats and Dogs and One Big Turkey


While the GSE legal wheels grind ever so slowly and we’ve just had a major congressional election in which House Democrats keep adding to their 2018 winning totals, as the Senate GOP added to its don’t look for much generic legislative action in the coming lame duck session (ending @Dec. 15).

Everything starts all over again after the new crew (and the winning incumbents) are swoon in January 2019.

The Senate R’s--for the rest of this year only--have a 2 vote spread and who knows how Senators Flake (Ariz.) and Murkowski (R-Alas.), or even Collins (R-Me) will vote on anything President Trump wants?

Susan Collins likely has politically taken on the “dead woman walking” stance, given all of the Conservative and GOP adulations she earned with her vote for Judge Kavanaugh to the Supreme Court. Maine long knives appear out for her in Maine’s 2020 Senatorial election as her state and the entire New England region take on a distinct blue political hue.

I assume Rep. Maxine Waters (D-Cal.) will be voted Chair of the House Financial Institutions Committee, a large, sprawling matter with some 75 members.

The exact Banking Committee member total won’t be revealed until the two party caucuses in January decide committee membership and the freshmen Members test their likes and dislikes of their committee assignments.

One small positive I do know is some new Members, interested in GSE matters, are “seeking” service on the Committee just to pursue Fannie/Freddie matters.

That’s helpful, just having attentive new women and men is very positive.

But, just as in high school, they still will have little authority and need spend time learning their new “trade,” but trying to understand Fannie/Freddie mortgage issues is better than just consuming the standard anti-GSE pablum that’s been spun for years by the institutional bad guys and R Committee leaders.

FHFA Capital Regulations

Most of those commenting on the Federal Housing Finance Agency (FHFA) proposed GSE risk-based capital regulations have filed their opinions. People smarter than I are parsing them and—I am certain—soon will issue their interpretive synopsis in a way that most of us can grasp them.

A simple test for all comments (whether trade group, think tank, or individuals) is if—as most GSE critics do—the position guilelessly proposes higher Fannie Mae and Freddie Mac capital levels, i.e. equal to commercial banks or higher, their agenda is not positive or productive.

At the more moderate end is Tim Howard who believes that “risk-based” means risk-based and the GSEs exclusively acquiring or securitizing variations of single and multi-family mortgages have easily definable risks, with precise predictable data captured via the voluminous loan performance history and comprehensive tracking of the credit and interest rate risks the two take.

That element/resource, alone, should produce capital levels below that of commercial banks.

Tim’s thinking—which I support--swims a little uphill when for competitive or political reasons, FHFA and other policymakers –camouflage their true intent-- by falling back on the ass covering meme “more capital is better.”

But, there is a cost—in this case higher mortgage rates and less affordability—with inflated GSE capital requirements.

The RBC regs and related matters all will be tied up by the WH seeking a successor to current Director Mel Watt, whose term ends next year in early January. (Mark Calabria, the VP's economist had his name mentioned as a possible successor, again today, by Inside Mortgage Finance.)

John Carney and Breitbart…strike again

Rattling around the dark corners and annexes of Breitbart News, John Carney still is aiming his poison darts at the GSEs and anyone he deems evil enough to support their operation.

Most recently he went after “hedge funds.”

Carney’s current outrage is aimed at the “Moelis plan,” a GSE reform proposal, birthed on Wall Street,  which has been circulating inside Washington for  the past year, and has picked up quiet bipartisan support (and to Carney’s horrors, some in the Trump Treasury), which among other virtues contemplates support for GSE low income family lending.

Here’s the article's link, but let me point out some continued blind spots for Mr. Carney which seem to never get printed under his name as if acknowledging them undercuts his value to naysayers.

Carney, while brutalizing the GSEs, never mentions the far greater, commercial bank private MBS (or private label securities) actions, which tried to clone GSEs success but with less responsible products and services, and produced a far greater hit to US taxpayers in the 2008 financial debacle.

How can John indict one and ignore the far worse bank “other” or fail to mention that the banks had much deeper emergency financial relief, estimated in the $Trillions, at both Treasury and the Federal Reserve??

The larger bank failures disgorged buckets of red ink, but the GSEs had less friendly support in Treasury and—as the many court cases he disparages—suggest, TreasuryFHFA actively manipulated Fannie’s and Freddie’s books to make them appear financially far weaker than they were.

If Carney were not writing only for a slow-witted a scalawag group, he openly and honestly would discuss the nation’s largest banks. His bank friends were charged only half the repayment rate (5%) by the friendly Treasury Secretary Hank Paulson that forced twice that toll (10%) on Fannie and Freddie. (See any slant/preference there, John?)

As the GSEs recovered,  the Obama Treasury manipulated the original repayments scheme in 2012 to confiscate all future GSE earnings, save a capital sliver, let me repeat “all future GSE earnings”—so that they original GSE debt of @$190 Billion now has generated @$280 Billion for taxpayers….and the payback still is increasing in perpetuity??

How little is Carney aware or is it just plain dishonesty, when he also disparages the GSEs but extolls poor Wells Fargo Bank and says they’ve stayed out of most inside the Beltway machinations.

Wrong, John!

Wells has been dancing in an out of their own lawsuits for years, while working quite assiduously—primarily through the Mortgage Bankers Association (MBA)—to develop its own "cripple the GSEs scheme," far friendlier to the nation’s biggest banks than to the nations’ consumers.

Treasury does own 79.9% of the GSEs, and that money and possibly more, easily can wind up back in the US Treasury serving US taxpayers, if Admin gets behind a plan (Moelis?) which keeps the GSEs alive and be a superb resolution for the nation’s consumers.

DJT offers up a real leadership Thanksgiving “Turkey”

It’s OK President Trump to break tradition, refuse to travel to any combat zone and visit  US Troops—since walking from the plane could irritate your bone spurs--but instead take the easy way and substitute a telephone call, made from your safe, warm, palatial Mara Lago resort property.

Proceed briefly to thank the troops and then boorishly switch and talk about yourself, your personal priorities, and your self-analysis of your perceived successes.

I am certain your expert bloviating kept our kids safe and our Al Queda, ISIS, North Korean, Russian, Iranian military opponents quivering in hiding, too frightened to engage, wound, and kill these G.I.s serving worldwide, while you eat turkey, Big Macs and play rounds of golf with Jack Nicklaus.

In the immortal words of George W. Bush, with a huge dash of sarcasm thrown in, “Good work, Brownie!” (Get someone to explain that reference to you, sir.)

Maloni, 11-26-2018

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