End of August “Cats and Dogs”
I don’t Tweet, as I’ve often said, and am
not really sure of how people connect and maintain “Tweetosphere”
connections.
What happens for me, as occurred this past
Friday, is people send me copies of others’ Tweets and responses.
Wall Street Journal reporter Joe Light tweeted
the MBA’s David Stevens, about whom I wrote last week when Stevens suddenly (in
my view) came out supporting Fannie and Freddie retention and recapitalization.
I expressed my blog doubt about Stevens
veracity because the he and MBA had been so adamant about support this
Administration and various Senate legislative vehicles, first Corker
(R-Tenn.)—Warner (D-Va.) and later Johnson (D-SD.)--Crapo (R-Idaho) all of which
would have blown up F&F, substituting a new mortgage system—likely
controlled by the nation’s largest banks—but using the GSEs as an interim
support system host until the new beast could come on line.
Light asked Stevens the following
“pass/fail” question.
|
|
|
|
@DavidHStevens @MBAMortgage So if you were on Senate Banking Committee, you
would have voted against J/C?
|
|
Joe or somebody, let us know when David Stevens
answers and then ask David if he will debate Josh Rosner?
Why the White House Counsel Got Involved in the GSE Cases?
As most people know, about 10 days ago,
the White House Counsel’s office requested access—via the US Court of Federal Claims
(Judge Margaret Sweeney)—to documents filed by the defendants in the Fairholme vs U.S. case. Plaintiffs did not
object to giving the WH access to the information, some of which has been
labeled by the DoJ or Treasury as “privileged.”
"Pursuant to paragraph 7 of this
Court’s Amended Protective Order dated July 29, 2015 (ECF No. 217), defendant,
the United States, respectfully requests that Jennifer O’Connor, James Walsh,
and Allison Murphy be permitted access to information protected by the
Protective Order. All of the applicants are attorneys representing the United
States within the meaning of Paragraph 4 of the Protective Order, and work in
the Office of the White House Counsel. Counsel for the United States has
consulted with counsel for plaintiffs, Fairholme Funds, Inc., et al.
(Fairholme), who has indicated that Fairholme does not oppose these
applications for access to protected information."
Why the WH sought this info remains an
outstanding question and there have no official explanations, just a lot of
guesses and hopes (mainly by plaintiff interests that the action reflects some
pending maneuver by the government to reach an accommodation).
I’ve heard many of the guesses, i.e. the
WH always gets involved when the president’s name is mentioned; probably didn’t
realize how much Treasury and DoJ screwed up and the WH might need to bail the
Admin out; WH needs to know what’s been said before it seeks accommodation;
appeals court suggested the WH consider arbitration, which requires
understanding the messy legal terrain agencies created: this is SOP at some
point in any judicial hearing involving the federal government.
I’ve also two things on this matter: if
something dramatic is brewing behind the scenes, we’ll all soon know because
there are very few “domestic policy” secrets in DC; since I am a cynic and
don’t believe in miracles or Leprechaun pots of gold, I suspect the true reason
is somewhat mundane, pedestrian, likely bureaucratic and non-thrilling.
That doesn’t mean the courts won’t find
for the plaintiffs, but I think it still will be a lot of slogging.
Bethany McLean’s Latest GSE Book
This is not a review of Bethany Mclean’s latest GSE book, “On
Shaky Ground, the Strange Saga of the U.S. Mortgage Giants,” because I
am not allowed to do that until after her book officially comes out.
But, having read it and spoken with the
author, who will be starting a book tour (she’ll be in DC in a few weeks), I
will highlight out two salient facts.
Ms. McLean is supportive of the Fannie and
Freddie going forward operationally and believes they are a necessity in the
mortgage market to balance the large commercial banks mammoth market power.
Also coming this week on F&F….
On September 4, Judge Margaret Sweeney
will conduct a “status conference” and I am sure it will cause much early
consternation—since it is closed to the
public—but that won’t stop stories/developments from post facto discussion.
What
Others Are Saying
Fannie
& Freddie Corner
Investor’s
Business Daily (IBD) editorially dumps on FHFA new GSE housing
goals
Center
for American Progress says “Good job Fannie.”
The “Right”
weighs in against F&F recap
Dick Bove—on CNBC--why the WH’s
is interested?
___________________________________________________________
Bloomberg, quoting WSJ’s Joe Light, says WH GSE interest is
SOP
http://www.ibloomberg.net/white-house-request-to-review-fannie-freddie-documents-was-standard-market-talk/
********************************************************************
Pershing
Square Shareholders letter from Bill Ackman
Fannie Mae / Federal National
Mortgage Assn Fannie Mae (OTCBB:FNMA)
(FNMA) / Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)
(FMCC)
Fannie and Freddie reported another strong quarter. These
results further corroborate our thesis that both entities could recapitalize
and safely exit conservatorship if the Net Worth Sweep (the U.S. Government’s
expropriation of each quarter’s net worth by extraordinary dividends) is
eliminated. During the quarter, there were a number of positive legal
developments in the shareholder litigation against the U.S. Government
expropriation.
In the D.C. Court of Appeals, the plaintiffs filed a strong
appeal brief against the decision last September dismissing their claims that
the Net Worth Sweep violated applicable statutory restrictions. Numerous amici
(friends of the court) briefs were filed in support of the plaintiffs, two of
which are worth highlighting.
One came from several parties including the Independent
Community Bankers of America and William Isaacs, the former FDIC Chairman, who
during his career personally oversaw the conservatorship or receivership of
hundreds of banks during the S&L crisis. The brief argues that Fannie and
Freddie’s conservatorships were modeled word-for-word on FDIC conservatorships,
and that the Net Worth Sweep is both unprecedented and inconsistent with the
goals of conservatorship as understood and implemented for over 80 years. If
allowed to stand, the brief argues, the Net Worth Sweep will cause providers of
capital to financial institutions to question whether the rule of law and the
established hierarchy of corporate claims can be preserved in conservatorship.
Banks rely on low-cost debt and preferred stock financing in order to provide
low-cost loans to consumers. If the courts allow assets of a private financial
institution to be expropriated during conservatorship, there will be few if any
lenders willing to provide financing to financial institutions, particularly
during a time of stress.
In his amicus brief, former
Fannie Mae CFO Tim Howard offered an accounting-based analysis that
questioned the necessity and motives behind the Net Worth Sweep. During
conservatorship, the FHFA changed the GSEs accounting policies, accelerating
non-cash charges, generating paper losses, and leading to a substantial
majority of the Treasury’s $190 billion preferred stock investment. From 2008
to 2011, Mr. Howard shows, the GSEs’ actual credit losses were exceeded by
their cash profits, while the non-cash charges that necessitated the capital
injections have largely been reversed, leading the Treasury to “sweep” away
almost all of the GSEs’ capital since 2012.
In the Court of Federal Claims, plaintiffs have filed
redacted documents that suggest that their discovery process has uncovered
evidence that contradicts the government’s defense of the Net Worth Sweep and
calls into question both its necessity and true purpose. Although these
documents are filed under seal, Judge Sweeney has allowed them to be used in
related cases in the District Court and Court of Appeals.
______________________________________________________________________
“Rule
of Law Guy,”
writing in Seeking Alpha; Please read
this excellent explanation of some of the nuances in the court cases and the
plaintiffs’ arguments and amici briefs. After page 1, there is a free sign-up
to continue to read this analysis.
__________________________________________________________
Presidential
corner
Trump
and Fox’s Ailes, Kiss and Make-up, again…..
Read:
Trump versus Bush is a Family Soap Opera
______________________________________
Troubling
Signs for Jeb??
___________________________________________________________
John
Podesta on
possible Biden run.
Gov. Walker is a “crony
capitalist”
http://www.politico.com/magazine/story/2015/08/scott-walker-corporate-ties-121735.html?ml=m_pm#.Vd5uqflVhBc
__________________________________________________________
Big
Bank Screw Up Corner
New
England Judge looks under Royal
Bank of Scotland’s kilt, F&F lawsuit won’t be dismissed
____________________________________________________________
Gretchen in NYT: SEC
to Citigroup: Who done it? “It wasn’t you, it
wasn’t me, must be the fellow behind the tree.” (With apologies to the late
Senator Russell Long (D-La.).
http://www.nytimes.com/2015/08/30/business/sec-settlement-with-citigroup-holds-no-one-responsible.html?ref=business&_r=0
Iran
Deal Corner
CNN—What are the Iranians Building at Parchin
Site??
Bull
Pucky Corner
I’ll willingly sign it, but will HBC Chairman Jeb
Hensarling (R-Tex.) or presidential candidate Sen. Ted Cruz (R-Tex.) secession
petition?
Someone should ask them?
______________________________________________
Panda
Corner
Washingtonians have been mesmerized for the past two weeks
about the stories of the impending Panda Mommy’s birth, and her delivery of twins, one of which—the
smaller of the two—unfortunately didn’t survive.
Alexandra
Petri, a regular Washington Post columnist, who often
pens fringy, offbeat, sometimes humorous op-eds on sensitive issues, found
something in this saga worth noting.
_________________________________________________________
Good GSE
info site
Maloni,
8-31-2015
