Monday, September 25, 2017

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.
"As you both have made clear on numerous occasions, housing-finance reform must go through Congress to create stable, sustainable housing markets that best serve our nation's communities,” the trade groups said in a letter to Treasury Secretary Steve Mnuchin and Federal Housing Finance Agency (FHFA) Director Mel Watt.
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