Lots
of FHFA Action This Week
Some charged developments likely coming this week,
including possible Senate approval of Mel Watt to be the new Director of the
federal Housing Finance Agency (FHFA), F&F’s regulator.
Most people believe this now is a baked in concrete deal,
but there was an interesting wrinkle which came up at the end of the week.
Reportedly, Mr. (Congressman) Watt, who loses the title
officially if he takes over the agency but in fact never gives up the
honorific, asked Ed DeMarco, the current acting Director, to stay on board
awhile in a transition.
I hope that’s not true.
Mel Watt might want the helping hand that a departing
DeMarco could offer, but Ed reportedly has “civil service status,” which means
he can’t be forced out of the agency and the last thing Watt needs is his
predecessor still around with the guy’s former staff paying obeisance to him.
Congressman: Even if it leaves you feeling a little exposed, remove your predecessor ASAP; make the FHA staff understand
that there is a new sheriff in town, and just learn on the job, as many of us
have in the past when given grander responsibilities.
Better to arm yourself with a solid assistant or
two—brought in from the outside (not the Hill), with heavy mortgage finance and
securities experience—and look to them, first, before relying on what FHFA officials
tell you, until you know enough to trust those you find there.
You don’t have to show off for anyone. You are the boss,
you make the rules, and you ramp up at the speed you need, and don’t let anyone
— especially inside— measure that pace for you.
Look querulously at any FHFA staffer who starts their
sentences with, “What you have to do Mr. Director is…….!”
You are smart enough to know that you have a lot on your
plate and while a dose of DeMarco might seem soothing, it’s wiser to lose him
as soon as is seemly and get on with your education and administration of the agency.
Frankly, what I don’t know is how much you are going to
be your own man, making your own calls on issues that—while you may not
understand down to the last comma--you instinctively know are right or wrong.
That’s why you have one or two strong deputies to work
over those matters, whose loyalties are to Mel Watt and who won’t spill your
business in the FHFA hallways and cafeteria.
It’s going to be difficult for you, but that same logic
applies to your keeping at arm’s length your White House sponsors. They chose
you. They made the decision, the Senate will have approved it, and now use your
brains, skill, and experience you brign through the door.
The
Common Securitization Platform (CSP);
“White
Elephant” Requiring Major Oversight
Another event possible this week is FHFA and the
same Ed DeMarco announcing the name (s) of the individual (s)—there are
vacancies for a CEO and President--who will head the Common Securitization
Platform (CSP), which I consider an outrageous waste of taxpayers’ money and an
expropriation of Fannie and Freddie resources not quite as egregious as the
2008 “takings”--now being litigated in 17 different lawsuits--but, it’s close
enough.
The CSP is a new Delaware chartered narrow casted entity,
which neither Fannie nor Freddie—who were forced by their regulator to create
it--or most lenders want.
However, acting Director DeMarco believes strongly in
this unwanted scheme to develop an independent mortgage underwriting platform, which
DeMarco gratuitously funds with Fannie and Freddie (taxpayer) revenue.
FHFA has rented Bethesda
office space for CSP, is building CSP a boardroom for its yet to be named board,
will hire a couple of bigwigs (see above) and then bring in some duplicative worker bees
(how many?).
$500
Million, Really??
The rumor is that DeMarco’s eventual cast of CSP merry
men and women will blow up to $500 Million on this puppy.
That’s right Congress, $500 Million, which could/should
be Treasury-bound and deficit reducing.
This scheme has no independent oversight or design, just
a DeMarco mandate to create something which likely already exists in one or
both of Fannie and Freddie.
Mel
Watt, are you or someone close to you reading this? Make yourself an instant
hero, ask the vainglorious (in its own mind and congressional reports) FHFA IG
office to investigate the CSP thing, “right #$@&^%*$ now!”
Congress once used the GAO to eviscerate these soft
projects, maybe some curious/outraged D or R might ask it to so with this one.
I want
it now, whine, and cry!
The common platform has had a quiet evolution and has escaped
a lot of outside attention, despite how brazen it is.
Essentially, Ed DeMarco decided that the mortgage banking
world—most of which already is attached to one or both of the Fannie Mae or
Freddie Mac underwriting platforms--requires a third.
“For whom” is a good question, especially if Congress is
going to do away with the two and keep or sell off all of their assets
(including their platforms)?
Industry’s public comments didn’t seek this because it
realizes some inherent legal risks which lenders don’t need given their other
regulatory and judicial concerns.
DeMarco’s judgment is to give this project to the world
(he didn’t bother to answer who might pay the taxpayer back for his gift?), no
matter the viability and necessity.
Think about it, who but F&F--and maybe one or two
banks--have that type of system demanded, which they keep market contemporary?
Where will the CSP, board and employee go for input?
I know, I know, in their hostage’s cupboards!
Clearly this pig, no matter how much lipstick is painted
on it, still will look like a sow. When all is said and done—if an intervention
can’t be put together—the CSP will use the standards and systems which F&F have
developed, remembering these two entities—over which FHFA has conservatorship
authority--will continue their automatic improvement.
What
is the CSP Going to Seek and Where?
Demarco does not
conserve F&F resources and assets with this exercise.
The CPC will harrumph and call for studies and reports,
go on field trips, maybe visit overseas, and then take the active information
from Fannie and Freddie, dress it up and pretend that it’s a new creation.
There is precedent for this audacious thievery. Since its
early days and I suspect still, OFHEO/FHFA would demand detail rich reports
from F&F, then some FHFA apparatchik would publish the info, suggesting the
research was done, independently by the regulator.
It’s stealing, but gobbling up F&F possessions
doesn’t seem to bother Congress.
I suspect, the CSP intellectually will cannibalize some
sensitive operational parts of F&F, so some bureaucrat can pretend he/she
found out a new way to underwrite loans.
I’ve suggested that FHFA bag the new corporate façade, the
titles and expenses, and just name 10 bright people from each entity and a half
dozen of their own staff and do the work in house.
If it takes any more than that, then, once again, FHFA is
“$%$#@* up!”
Careful
Sen. Mark Warner (D-Va.), Mr. 30-1
Weekend report that Republican lobbyist Ed Gillespie
might run against you in your next election.
With your constant dissing of them, I am sure the thousands of Freddie Mac employees living
and voting in Virginia, as well as their Fannie neighbors who reside there,
too, would be happy to put putting their voices, wallets and energies behind Eddie G.
What
Others Are Saying/Writing
The WSJ's Nick Timiraos offers his thoughts on what Mel Watt might do at FHFA.
Tim Howard does TV interviews re, “The Mortgage Wars.”
Yahoo looks at Wall
Street and ethics.
Maloni,
12-8-2013
