Hypocrisy, Hypocrisy, Hypocrisy, Hypocrisy, Hypocrisy;
DC Trades Pretend They Aren't Dancing to Bank Tunes
Don’t worry, this is
not a full time return of my blog, just a comment on the ongoing efforts by
major Washington DC trade groups to convince policy makers—once again--to get
rid of Fannie Mae and Freddie Mac anoint a new, untried, but undeniably questionable
group of GSE successors, without concern about market place cost, inevitable
inefficiencies and delay/confusion for consumers.
Scotsman Guide (9-22-17):
Trade groups fret over
fate of GSE reform
Large mortgage-banking groups and other trade associations
urged the Trump Administration this week to stay the course on allowing
Congress to reform Fannie Mae and Freddie Mac, saying that they are growing
increasingly concerned about “efforts to derail” comprehensive reform.
The groups, which includes the Mortgage Bankers
Association (MBA) and American Bankers Association (ABA), said the Trump
administration should resist the temptation to privatize the
government-sponsored enterprises absent significant reforms first by Congress.
The industry’s letter did not elaborate on why
the groups have become concerned. MBA and ABA spokespersons didn’t immediately
respond to a request for comment.
Recently, however, the Republican National
Committee adopted a resolution that the GSEs should be capitalized and
privatized. This resolution adopted language from a June blueprint for reform
that was bankrolled by GSE private shareholders.
RNC’s resolution, for example, gets behind the
shareholder’s privatization plan for Treasury to exercise its GSE warrants, and
then sell its shares in the enterprises. The shareholders believe that this
would generate $75 billion to $100 billion for taxpayers. Their plan envisions
that $180 billion in capital could be raised by the GSEs through retained
earnings, and existing and future shareholders.
(Entire SG article linked below.)
Maloni’s
Take:
I responded in two publications with my views of the whys
and wherefores of this letter driven by the Mortgage Bankers Association and
the American Bankers Association. Below is a slightly expanded version of my
thoughts.
****************************************************
The positional and policy gossamer
these groups spew is their feigned ignorance (“There’s gambling at Rick’s?”) that
the primary beneficiaries of their efforts will be the nation's largest banks
and their minions (see who signed on).
Last week’s letter is similar to several other
near identical tomes written over the years by the same interests seeking the
same thing. (Google it, to satisfy yourselves.)
Yet, the letter writers preferred system of
mortgage lending stewards is the main reason their repeated efforts to do away
with the GSEs have failed.
Nobody
trusts the forever scamming banks and why should they?
Yet the same people keep going back to the same
big bank solutions which the Senate Banking Committee rejected when it just was
the Corker-Warner bill.
Since the financial unraveling almost 10 years
ago, since 2008, the banks—to which the letter writers want to extend total
mortgage market control--have rung up more than $250 Billion in federal
financial regulatory fines, most for damaging business actions, i.e. screwing consumers, unrelated to
their equally thoughtless scaled back home mortgage lending.
What doesn’t change in all of these schemes is
the consumers get stuck with the “hind udder,” the big banks get fatter, and
various mortgage process middle groups will get their financial sustenance, but
much like crows do eating a cow's natural intestinal byproducts.
Other legislative schemes pile on even grander big
bank subsidies/federal guarantees than exist today. (See the MBA task force proposal
to guarantee bank securities losses.)
There is a reason why these Washington
lobbyists want the world to forget the outrageous and causative bank mortgage
behavior leading up to the 2008 crisis, when those institutions went
outside the GSE systems and
issued $2.7 Trillion in near worthless "private" (meaning non-GSE) mortgage backed securities (PLS), which quickly failed
and led to the taxpayers bailing out the banks with more than three times what
was infused in the GSEs ($187 Billion compared to $700 Billion for
banks). Whether the GSEs even required that 2008 forced government help is
being challenged in multiple federal courts.
Many of these association/signers want you and
Congress to ignore post-2008 GSE regulatory successes and—historically--the GSEs role in making the nation’s mortgage finance system
more efficient/friendly for borrowers and
acting as a needed rigorous governor on big bank mortgage shenanigans.
If the Congress, the media, and the public don’t ignore this financial history, grasp those facts, and then just "follow the
money," it will explain a lot of the names on this letter and their
apparent institutional amnesia.
At the end of the day, a simple reworking of
the GSE charters, Fannie and Freddie keep their earnings and
resume their traditional mortgage finance role, is much of the
right answer for the American people.
Maloni,
9-25-2017
