Stewart Warns GOP Not to Pass Gas and.......

 

 

 

“Don’t Fart and Blame it on the Dog!” 

http://www.huffingtonpost.com/2013/10/09/jon-stewart-calls-out-republicans_n_4069528.html?utm_hp_ref=mostpopular

 

In the above video, Jon Stewart—with humor and facts--says it as well as anybody commenting on all the federal shutdown BS, which now has been wrapped in a political death march to increase the government’s debt limit. 

The “Teahadists” may think they live in a protective political cocoon, because of their gerrymandered congressional districts, but the Republican Party is exposed and likely will suffer (and has if recent surveys are accurate). 

Yes, voters do forget and their memories sometimes are short when things get back to normal and improve, but some things are not easily forgotten with round the clock 24-7 news, amplified by social media.

Because of so many idiotic GOP statements and offensive allegations, anyone running as a Republican better be prepared to defend this partisan hyperbole for a long time (meaning through next year’s election cycle). 

I still am sticking to what I said will be the near term resolution. It will be some short term debt limit extension and a deal to work on some spending issues. 

But, this can will be kicked down the road again because the Tea Party won’t settle for anything but complete surrender by a bipartisan numerical majority who are not as Teahadist naïve, disbelieving, and destructive. 

Warren Buffett

“To tie [the debt ceiling] to something about whether you break the promises of the United States government to people all over the world as well as its own citizens, just makes no sense. So it ought to banned as a weapon, it should be like nuclear bombs, basically too horrible to use.”

— Warren Buffett, in an interview with FORTUNE, posted Oct. 4

 

 

U.S. Treasury

"A default would be unprecedented and has the potential to be catastrophic: Credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.”

— U.S. Treasury report studying impact of debt ceiling brinkmanship in 2011, published Oct. 3

 

Ted Yoho

“I think, personally, it would bring stability to the world markets.”

— Rep. Ted Yoho (R-Fla.) on what happens if the debt limit isn’t raised, The Washington Post, Oct. 7

Senator Ted Cruz (R-Tex) 

Most people think that “Teddy Bin Laden,” as one conservative columnist referred to the junior senator from Texas this weekend, is a major political winner in the current fight over first Obamacare and currently the debt ceiling. Some observers say the positive attention from his right wing supporters is fueling Cruz’s presidential aspirations. 

I think Cruz may get a presidential nod in 2016, but only from a third party which splits off from the traditional GOP and fields its own candidates across the board. 

That would be the best political development to happen in and to the United States in a long time.

The Teahadists have captured the traditional GOP—or at least rendered it operationally impotent--and the TP “fringies” feel policy constrained by the party’s shrinking, but still important, “country club” element, also known as the wiser, saner heads.

Spew that venom Ted, capture the Right, drive it from the GOP over relentless backward looking demands, and pave the way for moderate control in both houses of Congress and the White House. 

F&F Court Cases, Redux

Last week, I sent to a number of regular blog readers a separate missive discussing the latest on the 10 lawsuits brought against Treasury over its 2008 Fannie and Freddie takeover.

Those legal challenges will move at whatever pace the courts set and I don’t look for Congress, statutorily to try and pre-empt any of the plaintiffs’ challenges, because that would bring additional lawsuits on whatever bill they would employ. 

Given the dollars involved, any decision likely will be appealed, ultimately to the SCOTUS, and we’ll see what our nine solons have to say about Fannie and Freddie “takings” and related issues. 

I don’t believe David Boies and Ted Olsen, two of the most successful and well known American lawyers, normally don’t lend their prestige to cases they might lose.

I suspect  the plaintiffs’ attorneys in these cases have some reason to believe that Bush Treasury Secretary Hank Paulson screwed up around the issue of whether Fannie and Freddie were privately held companies or simple wards of the government that politicos easily could disdain and violate. 

The problem is—just as in my 21 years at Fannie--there is substance and facts for people to argue both sides of this question.

Including this lovely bon mot from a court decision last year, “Because conservatorship is by nature temporary, the government has not acceded to permanent control over the entity and Fannie Mae remains a private corporation.”

 

Corker-Warner, cum Johnson-Crapo 

There is a funny/ironic story circulating about the efforts of Senate Banking Committee chair Tim Johnson (D-SD) and his ranking Republic Mike Crapo (R-Idaho) to produce their bill.

It’s reliably reported the two senior guys are basing their draft on the C-W bill. But recent requisite staff meetings to develop the proposal have been choppy and poorly attended because Corker and Warner staffers are observing the federal shutdown and there literally is a law which prohibits them from engaging in these behind the scenes talks.

Go ahead, laugh. I did, too, when I heard it. 

Don’t You Dare 

Fifteen DC based housing and mortgage finance trade groups roused themselves to jointly send a letter to the Fannie/Freddie regulator, the Federal Housing Finance Agency (FHFA), asking it not to lower the Fannie/Freddie mortgage ceilings while the mortgage marketplace is still sensitive and adapting to regulatory changes from other statutes.

http://mail.aol.com/38099-111/aol-6/en-us/Suite.aspx 

This does not make all of these business interests F&F fans, although some are. It just shows that it is easy to sign a letter but tough to actually work the Senate and House over substantive legislation.

 

However, if a Corker-Warner or Johnson-Crapo bill comes out of the Senate and some/many trades don’t like it, they are tough groups to ignore when you are running for reelection as everyone in the House is and a gaggle of Senators are in 2014. 

In the House, you still have the Hensarling mortgage reform bill, which has no federal role in it unlike what exists on the Senate side, but still lacks support from a majority in House.

I still don’t see the Congress approving any major mortgage reform legislation until 2015 at the earliest, because next year is a congressional election year. 

Other Fannie/Freddie Stuff

 

I should have noted that the mega commercial banks trade association, laughingly—in my view—called the Consumer Mortgage Coalition, also sent a letter to FHFA opposing lowering the F&F mortgage ceilings. The bigs spend most of their time trying to throttle F&F and when a regulator seeks to shut down a small piece of the market and allow everyone but Fannie and Freddie to go after it, the banks complain because that means more competition and—more importantly—no Fannie and Freddie mortgage security guarantees on the bonds into which those loans must be turned for easy trading. Hello, again, the private label security (PLS) experience which those same banks screwed up so famously in the build up to the 2008 financial meltdown. 

The American Securitization Forum, which once numbered most of the bank and investment bank usual suspects—but recently split over association executive control and compensation issues—also sent FHFA a letter seeking a “marginal reduction” in the F&F loans limits. Not sure who belongs to the ASF but it’s depository members, if there are any, can’t be happy with that communication and position. 

Lastly, the American Bankers Association (ABA), the grandfather of the banking trades, says it’s just been slow with its letter to FHFA asking it to hold up any changes. 

Given that about 100 MoC’s also have asked FHFA not to cut the ceilings, it will be interesting to see how Acting Director DeMarco responds.

Common Platform; Déjà vu, Again!!

 

Quietly, almost stealthily, FHFA has mandated that Fannie and Freddie give way to a common securitization platform which the agency claims is necessary/desirable for the nation’s future mortgage finance system.

Huh and why? 

The dirty little secret, which is not so secret, is that for 30 or more years, Fannie has had the superior mortgage backed security which is recognized and market preferred (and one of the reasons Wells recently dumped Freddie?).

 

http://www.mortgagenewsdaily.com/channels/secondary_markets/05152012-fannie-freddie-price-dislocati.aspx

 

Fannie pays their MBS investors sooner and there are more Fannie mortgage securities outstanding which means greater liquidity and better price. 

Freddie’s security implementation is similar to Fannie’s but not identical and does not trade as well. 

However, IMO, the slight difference between the two either didn’t dictate such an elaborate and wasteful bureaucratic exercise calling for a third model. 

But, apparently, that’s not the FHFA way. It now has chartered a Delaware limited-use corporation, with its own board, its own building in suburban Maryland, and a head hunter looking for its CEO, and all of the bells and whistles that FHFA believes is necessary to put together this “common securitization platform.” 

Why can't their regulator just pick one of the two existing platforms or even figure out a way to meld them? 

Why go through all of this silliness with a new government created company, a board, senior officials, blah, blah, blah?

It is so reminiscent of when FHFA’s predecessor the Office of Financial Housing Enterprise Oversight (OFHEO) was created in 1992 and mandated to develop a risk based capital oversight model, since both F&F had invested in and were operating their own state of the art RBC systems. 

Rather than chose one or the other, an amalgam, or just employ an oversight supervisory look at what capital each was establishing, OFHEO insisted on building its own RBC system—which the statute permitted and gave the agency two years to do—but took 10 years, finally, to produce. 

Naturally, F&F paid for all of that and will pay for all of this new time waste. 

See linked below FHFA’s latest press release describing its success. (Always beware of government agency press releases which include self-laudatory adjectives.)

 

http://www.fhfa.gov/webfiles/25553/JointVentureRelease100713final.pdf

Related/Unrelated

 

I love all of the recent talk about the big financial behemoths being dismantled into some of their component parts.  Unfortunately, it’s all just talk, but that’s the single best way to end the “Too Big to Fail” distinction. And, no policy maker anywhere should fall for the bogus line, “But if you make us smaller, we won’t be about to compete with our foreign competition.” 

Watch any financial services exec who makes that statement and see his or her nose immediately get longer! 

What Others Say 

http://www.realclearpolicy.com/articles/2013/10/09/a_failed_model_for_gse_reform_681.html

http://www.nationalmortgagenews.com/features/Change-Fannie-Freddie-in-Name-Only-1039339-1.html

 

Maloni, 10-14-2013