Turn those eyes back on Calabria

“Liar, Liar Pants on Fire”

The GSE Conservator and Safety and Soundness Regulator, Mark Calabria, seems driven by Fannie-Freddie ill-intent.

His recitation last week to the Credit Union National Association (CUNA) annual conference makes my point.

Regularly, he tries to rewrite history, resurrect old fabrications, and wittingly or unwittingly dampen investor hopes about future GSE values.

The last one is super ironic, especially because he needs Fannie and Freddie securities offering financial hope, not regulatory doubts, when “Conservatorship” ends, so the two can attract investor capital, reduce risk,  and carry out their mission, whatever he allows them to do after his GSE winnowing??

(Of course, by that time, our new President—elected this coming November—long will have suggested Mark C. pursue his life interests elsewhere.)

Calabria wants people to forget the past—when his buddies, the large banks, fought tooth and nail in Congress and in financial regulatory agency offices—to keep small banks and credit unions under thumb, let alone competing with the behemoths to make mortgage loans.

I worked on the Hill and later for Fannie and, in both places, I was witness to those industry disputes. I’m sure MC was a bank ally when he was a Senate Banking Committee staffer.

Four decades ago, GSE business recognition of the credit unions and other small lenders helped build their business, stand up to the big banks, and make a viable option for consumers and an alternative to bank offered mortgage financing.

As reported by Inside Mortgage Finance, at the CUNA event, Calabria seemed to forget (Ooops!) that Fannie and Freddie sloughed off big bank hatred of competing against credit unions and approved the much smaller "common bond" lenders as GSE “seller servicers,” providing a coveted commercial lifeline to those institutions, giving them and their members huge liquidity and a cost-saving mortgage financing alternative to bank loans. (GSEs siding with the credit unions and giving them business access is another historic reason big banks and the GSEs have clashed.)

That is just one of the reasons why the credit union trade groups and the Independent Community Bankers of America (ICBA)  always supported the GSEs.

The Director’s CUNA comments seem a microcosm of his laments.

Last week, Calabria again bemoaned the “GSE business model,” while suggesting Congress grant him additional authority (presumably so he could add to those 600 FHFA current employees who failed to put together a risk based capital draft rule, causing him to go outside and spend millions on consultants).

Ahem, Mr. Director, do you mean the business model which allowed the GSEs to earn well over $200 Billion for the Treasury and the federal government since 2013?

That business model?

It seems the Director’s external (and internal?) agenda is to make up a lot of GSE crap, cast himself and FHFA as avenging/refurbishing angels,  and hope most people won’t call BS on him/it because he’s the GSE Conservator and Safety and Soundness regulator and should know stuff.

Rhetorically, has anyone—since Calabria has taken over—heard him praise the GSEs for anything?

Has he said any good things about the GSE mission achievement, their exemplary low credit losses in their only permissible business product, or homeownership success in helping low income families? How about their revenue generation?

IMO, the plummeting values of Fannie and Freddie stocks have less to do with the internationally threatening coronavirus, but more to do with Calabria’s angry babbling to this or that interest group.

He should want the GSEs bright, shiny, and very investor attractive, so they can raise capital. (I also don’t see other federal financial regulators denigrating their regulated  wards, as Calabria does.)

The FHFA leader’s  continued knocks and negative observations about Fannie and Freddie--the two major entities he oversees (since nobody counts the Bank System), don’t promote what’s needed unless he is competing against himself in some weird three dimensional chess game using a multi-level board.

 (Mr. Director, the next time you crack wise at an industry event using Angelo Mozilo as a cudgel, you might check Wikipedia, first, to see what it says about Countrywide and one of your most senior and recent hires. Your presentation faux pas is on you not him.)

For a long time, I’ve blogged there is nothing in Calabria’s charge that prohibits him from promptly ending Conservatorship. Yet—to employ a favorite DJT construct, “many people agree”--it looks like the Director Calabria still wants to throw sand in the GSE gears and drag the process out for years.

Take your thumb off the scales, Mr. Director.

Maloni, 2-27-2020

Keep an eye on Calabria

2020, a Major Trump Year and some GSE Politics

Hello, F&F fans, I am back.

I’ve been GSE silent—IMO---because nothing of major import has transpired with Fannie and Freddie.

I also admit to being mesmerized and, ultimately, disgusted with how the weeny Senate Republicans—save Mitt Romney-- pissed away their honor and civic duty, blowing wet kisses to our President when he deserved serious Senate sanction and possibly impeachment for his constitutional violations.

I hope all of those who disagree with me on this are watching the megalomaniacal behavior of the man who uses the word “King” about himself and vows he’s above the law—as you and I know and accept conventional legal behavior—and can do whatever he likes on any matter.

BTW, those of you buying this front page “spat” between AG Barr and the POTUS are candidates to buy some nice Florida wetlands or the Brooklyn Bridge.

If Bill “The Tool” Barr truly is/was offended because the President big footed his departmental operations, he would resign. Except like many of his fellow travelers in the Senate, Barr doesn’t want to leave the Trump bosom, so he’ll orate emptily but do nothing.

This impacts Fannie and Freddie, so don’t click off now, because I think DJT’s mendacious and feckless actions have a major GSE lesson to them.

Back to why I am back blogging. Going forward this year, in addition to GSE talk, as an outraged voter, I intend to return to highlighting the President’s dystopia, all with my hope of defeating him in November with whomever the Democrats nominate (although I am not a Bernie or Warren fan).

Yep, I’ll be more political.

Simply put, I think Donald John Trump’s time in office has been cancerous to our nation, our international standing, our overseas allies, strangely super pro-Russian, and ruinous to our national institutional expectations of how the federal government should behave … despite how much some of you ignore his aberrance and only fixate on “his economy” or his Wall now being built with money stolen from the Defense Department.

So be forewarned. In the future, if you don’t want to read about our President’s lies, shortcomings, and leadership infidelities—as well as GSE matters--don’t read the Maloni blog.

That also will save me from answering your squawks.

Fannie Mae and Freddie Mac Issues

I don’t know what the final fates of Fannie and Freddie will be, but I am confident in my feelings that their safety and soundness and program director, the Federal Housing Finance Agency’s (FHFA) Mark Calabria will do his best destructive locust imitation to ground the GSEs into husks of their old selves and try to boost the nation’s behemoth banks because he and those same financial institutions still see Fannie and Freddie as “bank competitors,” despite the fact that not one major bank has entered the mortgage business as a national and commercially active MORTGAGE GUARANTOR, which is the only role now which Fannie and Freddie can have.

Hear this and get it Director Calabria, despite your odyssey from trade group to trade group forum, the GSEs have only the single secondary market home mortgage business line and can only operate on the United States.

Unlike major banks, Fannie and Freddie can’t make commercial loans, can’t operate overseas, are not the same or in the same business as the banks, no matter what you and your conservative Amen C Chorus sing.

Most observers realize that your words camouflage actions to make GSE operational and capital costs as high as you can get away with.

Mr. Director, you should be embarrassed that FHFA and you are12 years late in setting the GSE risk-based-capital rule and that you didn’t/couldn’t trust your own employees to produce; you needed to  hire outside consulting help to complete the capital rule.)

And, if banks ever do want to wander into this exclusive business, it’s because Calabria and his allies will have boosted GSE expenses and created F&F operational hurdles to make banks look envious at that secondary market function.

Of course, Calabria's would drive up mortgage finance costs across the board making consumers less able to afford their share of the American dream.

But I don’t believe Calabria and his posse care about that, nor do they care about balancing the playing field so that certain economic and racial/ethnic population segments get their shot at owning a home.

(Inside baseball, GSE style. Your government in action or non-action? Calabria has several hundred (600?) employees working for him, many of them new since FHFA was re-created in 2008; yet, the Director couldn’t find enough in house talent, with the skills and intelligence to design RBC standards for the only two institutions FHFA employees have been overseeing for more than a decade. Just what do all of those log rollers do, Mark? Follow Freddie's lead and cut loose about 200 or 300 of them. )

Let me add two items of some Washington reality to my concerns.

No matter what you read, FHFA is going to hold onto the GSEs for as long as Calabria needs to complete his hollowing out act.

Looking back, it’s only been Treasury Secretary Steve Mnuchin carrying the torch publicly and consistently arguing for ending Conservatorship, now in its eleventh year.

Many of us—me included—have tried to inflate an innocuous POTUS throwaway F&F comment to the Realtors last year into a full throated glowing endorsement for ending Conservatorship

If that was the case it was a very lukewarm one DJT never mentioned externally again.

Also, President Trump walks away from more promises than a sailor on shore leave visiting a women’s college. His broken vows with allies, trading partners, state and local governments, and the electorate litter the landscape as he lies about his plans and intent. So, I’m not holding my breath until he says something GSE positive about freeing Fannie and Freddie.

Mnuchin is the only senior official with GSE support on his record and I worry he is a short-timer.

He’s been in his cabinet job for the entire Trump term and generally is brushing against the normal planned departure schedule. His wife Louise hates DC and the DC crowd—with the suggestion it’s mutual-- and hopes to move permanently to LA/Hollywood, New York, or elsewhere. (Notice her opposition to the Admin’s climate change position, which promptly got taken down from Twitter.)
Who will carry the GSE when Mnuchin leaves? Nobody on the Hill has anything vested in Fannie and Freddie, although most would hope to use them if they survive their current unloved circumstances.

That leaves us with the courts and, ultimately the Supreme Court (SCOTUS).

For those who haven’t already read it, here’s a quality article by a very smart lawyer, who uses the nom de plume of “Rule of Law Guy,” and contributes regularly to Tim Howard’s blog.

https://seekingalpha.com/article/4324008-for-fannie-and-freddie-shareholders-road-to-litigation-settlement-runs-through-seila

Unless it is prohibited, even a positive court decision for the plaintiffs may not stop FHFA from its ideological GSE plastic surgery.

Maloni, 2-18-2020