Cats
and Dogs
Much happening. I’ll try to hit as many as possible and
keep the commentary short.
Conservatives
Fear FHFA’s Watt
The Right seems very upset about Mel Watt’s appointment as
the new Director at the Federal Housing Finance Agency (FHFA) succeeding their
hero, Ed DeMarco. (Although who knows if,
when and where Ed will go, since he does have some Civil Service protection.)
If you can believe all of the Starboard side worries, the
world has come to an end and Watt is going to revive Fannie and Freddie, with
doom and pestilence sure to follow.
Teahadists and friends, it was just coincidence that Watt--in his
first day on the job--sought meetings with David Maxwell, Jim Johnson, Frank
Raines, Jamie Gorelick and Tom Donilon…..Ah, just teasing!
But, we know they are partly Right (pun!).
Taxpayers
Lost Money on GM
The US lost money on its investment in GM, which
doesn’t mean it wasn’t the right thing to do, but the taxpayers will not lose money on their investment in Fannie
and Freddie.
In a few weeks, when the fourth quarter 2013 earnings
are reported, the Treasury will realize billions more than it invested in the
two mortgage giants and that number only will grow rapidly as 2014 unfolds.
Senators Corker and Warner, along with Ed DeMarco can
deride and putdown the financial productivity all they want, but the facts
speak for themselves as does Treasury’s coffers.
How much will the taxpayers get over and above the $187 Billion infused in F&F, depends on how long
Treasury Secretary Jack Lew insists on collecting 100% of Fannie/Freddie
earnings, in addition to their minimum capital requirements. Lew can change
that arrangement via regulation and not even bother the Hill.
(Maybe all of those Rightwing concerns are fearful of
Treasury cutting a deal with the F&F preferred investors--who are staring
down Treasury’s throat via their 17 “takings” lawsuits--to creatively apply the
preferred investments to revive and capitalize the two, with the “new owners” agreeing
to provide additional capital?)
If revitalized and allowed to flourish, Treasury’s
80% senior preferred stockownership—treated as their GM investment (sold off
over time)—could produce hundreds of billions for the General Fund.
That makes a lot more sense than tearing up the mortgage
market’s fabric with a new federal agency, forcing new business relationships
on all of the current participants, raising doubts about future market
effectiveness, and guaranteeing that Congress—which never does anything simply
or correctly—can succeed in a cobbling a new national primary and secondary
mortgage market seamlessly.
New Job for AEI’s Ed
Pinto
Huzzah, Ed Pinto has been given a new portfolio by
the American Enterprise Institute (AEI). He is heading the AEI’s International
Center on Housing Risk.
Although Ed and his posse have chosen to debut their new show
Germany, I would hope his new international perspective allows him discover something
he and his AEI colleague, Peter Wallison, have apparently overlooked or more
than likely ignored because it is so inconvenient.
That’s the more than $2 Trillion in subprime private
label securities (PLS) issued by Wall Street and the big banks during 2005-2007,
which they vigorously marketed overseas, making the US real estate setback an
international debacle, when between 40%
and 50% of those bonds failed!
Ed and Peter (the latter as recently as about a month ago
in an NAR sponsored conference in San Francisco) pretend that PLS garbage
wasn’t created and sold because it ruins their “The federal government and Fannie
and Freddie were responsible for the 2008 meltdown” story.
Just check out the numbers guys!
The “incidence and severity” of PLS defaults and failures
were gargantuan compared to F&F MBS losses.
Look for the right time to admit it, fess up, and then
get on with your new international sandbox; hopefully you’ll be more honest
with those folks than you have with your fellow US citizens, with your gross distortions
of Fannie Mae’s purchase in the 1990’s, which the Federal Reserve staff and the
President’s Financial Inquiry Commission—naming you—a conclusion reached by
about a dozen other very credible observers.
Gretchen Morgenson,
NYT Columnist
Gretchen Morgenson, an AEI Pinto-Wallison acolyte, wrote a deeply flawed book about Fannie Mae lending in the 1990's when Jim Johnson was Fannie's Chairman.
Thanks to the well-placed mortgage for reminding me what Gretchen wrote in March of 2013, suggesting just how GSE
perceptive she is (not!).
Gretchen wrote:
“Let’s begin with the status quo. The taxpayer rescue of
Fannie and Freddie in September 2008 has cost $137 billion so far. While this
has been paid down from an initial $187.5 billion, taxpayers aren’t likely to
get their money back anytime soon. Last fall, the regulator charged with
overseeing Fannie and Freddie estimated that the taxpayer bill for the
companies could be $200 billion by the end of 2015.”
Wrong Ms. M,
the taxpayers are getting paid back, probably in a few short weeks, and the
surplus to the Treasury will grow geometrically at that point, barring some
change in the “dividend” arrangements (as I noted in the above segment).
Quick Notes
Volcker Rule/Seer?
Before its
final regulatory approval last week, almost four years ago in my Feb. 8, 2010
blog, I called for okaying the “Volcker amendment” and identified many of the things
the big banks and their allies would do and argue to forestall this logical
reaction to their rapacious behavior.
Small Lenders F Fees
How many times
do F&F officials have to hear that they are screwing small lenders,
when they charge the little guys higher guaranty fees?
I know current
management can’t act in their own self-interest politically, but the community
bankers have been among the most stalwart F&F allies over time inside the
Beltway.
F&F are
making money now and they should give some back to the little guys, using
whatever rationale needed.
The small guys
require all of the help they can get to withstand being swallowed by their
larger competitors (no matter what the ABA’s Wayne Abernathy claims), which
also is good for consumers.
I am sure
Director Watt can/will more easily understand that posture.
What Others Are Saying
David Fiderer returns, bigger and bolder than ever. See his
latest, including the first link which will appear this week in National
Mortgage News and his second, a commentary on PLS bank lawsuits.
NPR
transcript on FHFA, F&F
New housing finance regulatory
terrain gets discussed on NPR.
Go
for it, Tom!
For the erudite
and thoughtful. FDIC Director Thomas Hoenig in Dublin last week, discussing the
goal of disassembling behemoth financial conglomerations.
His conclusion: “In
the quest to improve financial industry stability, behavior and performance, it
is unfortunate that we choose complicated administration over structural
change.
Let us kiss
you, Mel
The Mortgage
Bankers Association seems to be “romancing” Mel Watt with its self-serving welcoming,
indicating the association’s agenda and for its members and the big banks which
own them.
To be read as:
“Congratulations Mr. Watt and by the way, now we want and expect…..”
http://www.mbaa.org/NewsandMedia/PressCenter/86529.htm
Maloni Kudos to Pope Francis for standing up to your
Church’s Neanderthal elitists/reactionaries and displaying your piety for all to see and
Speaker
John Boehner for calling out the crazies in your party.
2 comments:
Recently, I wrote that the F/F mortgage ceilings still could be subject to a scale back in 2014, despite the decision last week to keep them in place.
Today's Inside Mortgage Finance spells out why a reduction still could occur.
Is it the "curse of the departing DeMarco?"
http://www.insidemortgagefinance.com/
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