Bill Maloni's GSE Blog

Don’t Despair; Hope for GSE Friends

Today’s rushed and out of sequence blog is dedicated to all of those anxious and unhappy F&F investors—which initially included yours truly—smacked in the chops by the Appeals Court decision and Judge Ginsburg's apparent chameleon routine, changing from an intellectually GSE friend to foe—if any jurist could be labeled as such based on his hearing comments and questions.

Apparently, Ginsburg stepped to the dark side and—as I joked with a notable conservative GSE critic—Fannie friends have video and audio of someone who looks like Ginsburg “seeking asylum at the AEI headquarters and later GMU’s Mercatus Center mumbling that he wanted to immigrate to Russia!”

No truth to the rumor Judge Ginsburg has retained Mike Flynn and Paul Manafort to manage his safe transit “over there.”

Today, why should pro GSE folks and allies feel at any optimism?

Reason #1

First, housing can't be ignored and driven by available and well-priced mortgage financing—especially when it’s inclusive of all eligible borrowers—powers something like 20% of our national GNP.

That’s still what Fannie and Freddie do and better than all others, no matter what the NAR/MBA think.

People still will want homes, but the process could be more efficient, cheaper, and timely if some of the systemic shackles were removed.

So, it’s crucial for the United States to have builders, Realtors, lenders, borrowers on the same page and pooling their efforts to satisfy the business and social needs of everyone in that homeownership chain. It also drives the carpentry, painting, roofing, electrical, home furnishings, landscaping, housing emoluments dependent industries which employ tons of Americans and tons more when times are flush. That spells JOBS.

The Trump Administration likely understands that it doesn’t have to do very much to activate that pent up housing demand also triggering the jobs it promised during the campaign.

Reviving Fannie Mae and Freddie Mac—which it has the executive authority to do—to quickly produce a “Wham, Bam, thank you President Trump and Secretary Mnuchin” financial and economic boost, that also would be a major nod for President DJT’s “forgotten people” if they take some wraps off the GSEs.

Reason #2

The Appeals Court decision was “&^%#@* up!” May sound like a loser’s lament, but you don’t have to be a lawyer to see it.

(Read Judge Brown’s minority views to see why the above statement is accurate.)

https://www.cadc.uscourts.gov/internet/opinions.nsf/66A4E1FEF4BB8401852580CE005620C3/$file/14-5243-1662090.pdf

It was if the two majority judges (Millet and Ginsburg) made up their minds that the GSEs were the “Devil” (see Maloni’s inside the beltway “GSE Shit Wall” beliefs), and then looked for arguments to support that.

As my friend and superb lawyer Gwenn Hibbs pointed out, this decision had far reaching implications beyond the GSES and should make any investor think about buying into any financial services company if federal financial regulators truly have the latitude Lamberth and the Appeals court gave them to injure shareholders and take actions without any judicial review.

Ironically, President Trump’s immigration travel bans gets initially rejected by federal courts, but the Treasury/FHFA can do whatever it wants to Fannie and Freddie without any judicial review suggested/screamed the Appeals Court yesterday.

I suspect plaintiffs will seek a Supreme Court review unless there is an agreement between the Administration and investors within the next few weeks.

Reason #3

The remaining court cases, including the major one in Judge Margaret Sweeney’s Court of Claims, plus a few lesser ones, now are clearly in the hands of Trump executives in Treasury and the Department of Justice.

Judge Sweeney is going to rule on the 2012 Treasury “sweep,” and she potentially also holds Fannie’s and Freddie’s future in her judicial hands.

There are 11,000 orphan documents in Sweeney’s court still are seeking a “Daddy.” Will those Papas be Jack Lew/Eric Holder or Steve Mnuchin/Jeff Sessions?

Again, if the Trump Administration wants to saddle itself with Obama errors and mistakes, all it has to do is emulate the BHO stance on these matters and stonewall and obstruct.

If it doesn’t, it should distinguish itself and do something different.

Reason #4

Obviously related—and while I don’t know exactly who is friends with whom or who owns what--but if all of the rumors about major GSE investors having ties to DJT, Steve Mnuchin, John Paulson, Gary Cohn, Carl Icahn, etc. are accurate, I would think that this Administration would try mightily to do well for the American people--and good for their friends--by carrying through on Mnuchin’s desire to get the GSEs out of the government and back into private control, capitalized appropriately.

The well-schooled on mortgage finance and securities issues Treasury Secretary Mnuchin says he wants to get the GSEs out of government management and into private ownership doing what they have done best---and, time for a commercial--arguably better than all the rest of the big banks and amalgamated Frankenstein parts their opponents would wish in the GSEs place.

Give the GSE stallion its lead Mr. President and ride it to economic, social, and political success.

Yippee Kiyay, Mr. President, ride that horse!!!

Maloni, 2-22-2017