Monday, December 31, 2018

Could Steve and Louise be the next to leave DC???


Happy 2019 everyone and put on your big boy pads
Because I expect a hot time in the old town next year

Some GSE-related opinions.

As we’ve come to learn, nothing—or nobody-- is forever in Trump world.

DJT’s cat on a hot roof approach to policies and personnel, i.e. trying to jump from one hot surface to somewhere cooler is S.O.P (Standard Operating Procedure) for this President who pretends he is blameless and innocent amid all those executive transgressions where he is and deserves major blame. (Has he ever apologized for anything?)

Nobody ever has been totally sure what this White House’s Fannie and Freddie GSE policy is; everyone and their brother and sister analyst--including me--offers guesses not always guided by Admin direction, let alone insight.

But, we have known who the principal actor is on those matters, Treasury Secretary Steve Mnuchin.

Although, Mnuchin is prone to offer lots of fungible/generic “Fannie-Freddie speak” to whatever tune his institutional and orthodox audiences want to hear, i.e., “We want to free them and reduce taxpayer risk GSE; we want a fix and more private capital; regulation is easier than legislation, but we want a bipartisan agreement on Fannie and Freddie.”

Did you ever hear such confusing and shapeless bullshit? It’s kind of like Mnuchin himself?


 Time for a commercial: This past week’s American Banker asked how to diminish federal government risk in the mortgage market? How about dramatically reducing deposit insurance or making the banks which get it pay closer to what is the true value of the subsidized coverage they receive from Uncle Sugar???
Too novel, too creative??

Now, Stevie M. could be history because—when POTUS-dispatched Mnuchin to calm big bank nerves about shaky Trump policies--the Secretary managed to expound/freelance on “adequate bank liquidity” supplied by the Treasury and Fed which none of the bankers thought ever was an issue.
Oops, Steve—not the sharpest orator in town, either personally, politically or linguistically—IMO really stepped in it and "*&^%$#@ up," big time!
Asked to tranquilize the markets, specifically to convince seven big bank CEOs that all was fine with DJT’s bizarre Twitter dealing with China, tariffs, deficits, trade policies, etc., Mnuchin unknowingly “cried wolf” —with his dumb “liquidity” ad-lib and in effect said--“This Admin wants to assure you none of your girlfriends or mistresses still have STD’s.”

Except, until Mnuchin’s mention it, none of the financial behemoths worried about liquidity, usually a matter precipitated by panic and a rush by depositors and businesses to liquidate hard assets for cash, i.e. very major bad news for bankers.
Market response to Mnuchin’s embarrassing glaring flub, the Dow dropped the most in a day since the Great Depression or close to it. Trump rages at his dumb Secretary and covers it with some additional abuse thrown at the Federal Reserve’s Jay Powell.

Fed Chairman Powell has been doing what Fed Chairs do, i.e. worry about inflation and try and stop it before it starts.
Powell’s job is secure from our reality TV President, unless Powell chooses to bag it.

But when the President sends a third tier Administration economic voice out to tell the world the POTUS has faith in Mnuchin—who just threw gas on burning embers with the bankers-- I strongly would advise the Treasury Secretary to not foul up again and also to see that hollow WH endorsement as a signal not to buy any green bananas.

It could have been worse, the POTUS could have asked his hatchet woman “Scowling Biscuit” Sanders to send that message.

What could this mean for the GSE debate/discussion?

Clearly, it's not good to get on President Trump's bad side, since past obeisance is no guarantee of future Trump fealty.

And Secretary Steve still could survive his stumble

However, if Mnuchin gets dumped, someone else will be the chief GSE policy maker, who—unless that person is very F/F  verbose—hasn’t said very much about the GSEs and may not be as close to the POTUS, causing the market to revert to trying to read the entrails of goats to check what Trump wants to do with Fannie and Freddie.

Could a Mnuchin’s departure raise Craig Philips to #1 White House GSE guru or even Treasury Secretary, except that CP reportedly was a Hillary supporter in 2016? (I guess Jeb Hensarling is available, but he still pronounces the “t” in mortgage!)

Watch and see Mnuchin’s fate, when he and his Scottish actress wife, Louise Linton—also not considered a DC charm machine--return from their brief post-banker gaffe holiday break to Mexico's  Cabo St, Lucas (you know where so many other just-like-yours middle-class families go for a break from the harsh/cold Washington climate).

As Maloni opined, cheating is in the big banks’ DNA!!

Wells Fargo, again!

And Wells operatives and consultants are in the forefront of most “get rid of Fannie and Freddie” schemes. (Also, check WF’s connections to the “Gang of Six” featured in my last blog. Then connect the dots!)

Chairperson Maxine Waters, House Financial Services Committee
GSE fans should understand that the new House Banking Committee (as Wiki and I call it) Chairperson Rep. Maxine Waters (D-Cali.) will face institutional obstacles to her long-held support for the GSEs and, primarily, their low-income housing finance role.
Senate Republicans will frustrate her legislatively, as their House counterparts engage in guerrilla warfare (as Dems did for years), while the Administration will contest most things she champions or advocates.
As true as those matters are, don’t politically underestimate her and her multiyear Republican frustrations, not to mention the impact of her very personal spat with our President who insulted her deeply, every chance he got.
I would be shocked if she doesn’t involve herself and her Committee in what will be a House multi-committee campaign to make public the President’s tax records to determine if there are major conflicts with his past (overseas?) business partners, loans, and money-laundering, all of which have been hinted in reports of the Special Counsel Mueller’s inquiry.
It won’t be a dull 2019 in the House Banking Committee’s Rayburn Office Building hearing rooms.

Maloni, 1-1-2019

Political Cartoon