Sunday, November 26, 2017

What's On my Mind!

Caution, Caution Anti-GSE Forces

What goes around comes around, unless Donald Trump’s Administration is going to unbalance the world order and prevent those timely reoccurrences.

Former Fannie CFO Tim Howard believes the US mortgage finance system’s future is hazy--at best--if the federal government fails to address the GSE investor claims they were Shanghaied by the US Treasury, first in 2008’s “conservatorship” in demanding a 10% GSE repayment from them (banks only paid 5%) and then again in 2012, when the Treasury changed the settlement plan demanding every penny the GSEs earned going forward.

Treasury now has collected @$265 Billion from the two since 2013, for the $187 Billion infused.

As I have written on several occasion, I believe the current GSE mortgage reliant system—with a few alterations—is the most efficient and fairest (for the public, the lending industry, and its builder, Realtor, insurer components) of all the multiple “successor to the GSEs” options being pushed.

Not surprisingly the “kill the GSEs” sponsors and advocates mainly are the foremost financial interests and ideologues that covet Fannie’s and Freddie’s market position and revenue. (Psst. The “GSEs set the broader rules on loans banks sell the public. That fact chafes lenders.)

Howard’s Opinion

But, as Howard wrote to me, “A legislative reform plan that does not deal with the uncertainty surrounding the current lawsuits is going to face a challenge of getting the requisite amount of capital into the envisioned new system.”

“If Fannie’s and Freddie’s regulator legally can force them into conservatorship when they meet all of their regulatory capital requirements, then —once they return to profitability—seize all of their profits in perpetuity, why would potential investors in successor entities not fear that the same fates could befall them?

It would be shortsighted to ignore those possibilities for future mortgage market players if Fannie and Freddie do get offed with no relief for their investors.

If I was a surviving mortgage market player (or their friends/patrons), I would worry about their own coming “day in the barrel” (look up the old joke), when the inevitable inheritor to the Trump Administration and this Congress emerge.

Since, at some point—sooner or later-- there will be a successor to the current regime.

The next congressional/WH  political winner/winners easily could lust after the behemoth bank income and market position, just like the “Too Big to Fail” institutions and their political and industry toadies have pursued Fannie’s and Freddie’s for the past 25 years.

Will/Can WH Support the Rule of Law?

If the Trump Administration fails to support the “rule of law,” except when it can be twisted to support its non-mainstream policy choices—and screws GSE shareholders--where does that leave us as a law-abiding nation?

See the succinct answer the esteemed Professor Richard Epstein delivered to a recent financial forum on the issue of “takings.”

It’s relevant because our Constitution (remember it?) prohibits government takings.

Let’s Play “What If?”

When the political tides turn and the sides get switched, how lame will the TBTF banks sound saying, “It isn’t fair what the government is doing/did.” (That’s just what the GSE investors have been saying for years?) 

All of those banks and the bank allies hoping/trying to rally around the MBA or Milken “kill off Fannie and Freddie” legislation should remember one salient fact, despite their GSE ideological blindness. Nothing is forever.

If the Congress, trying to write legislation or the WH considering some new regulation--does not figure out how to mollify GSE investors, who have a variety of legitimate lawsuits against the US Treasury--the US could face monstrous mortgage system challenges, beyond the chaos, uncertainty, and delay in implementing future models in a $10 Trillion mortgage market.

The first will be Tim Howard’s, i.e. from where does any new mortgage money come?

Which rational investors will risk their dollars when a new Congress in 2018 or 2020 or a new Administration in 2020—either or both of which could be more progressive--decides the post Fannie and Freddie mortgage system sucks and works only for the big lenders but not for consumers?  

The Big Banks and their friends may argue Constitutional “takings,” but will sound foolish and tawdry when—because of their support—the government’s taking of hundreds of billions of Fannie and Freddie investor dollars got ignored.

A Future Admin and Congress?

Do you think President Cordray or Kamala Harris, or Senate Banking Committee Co-Chairs Sherrod Brown and Elizabeth Warren, let alone or Treasury Secretary William “Torch Them” Maloni, won’t use all of the GSE precedent the big bank and bank-lovers endorsed against the likes BoA, Wells, Citi, Goldman, et al.

The ABA, Financial Services Roundtable, Mortgage Bankers Association and other bankers wrote that playbook.

Hey big Bankers, want to see my financial regulatory “fastest draw in Washington D.C? Want to see it again, heh, heh?"

Be careful for what you wish and what standards you support.

If those who chose to ignore the Constitution and ideologically steamrolled GSE investors, there certainly will be future consequences for bank advocates.

Look around you at what’s happening (beyond Virginia and New Jersey politics) and see what "trends" may be trending?

Except for a shaky current GOP congressional majority and the souless and “just focus on me/DJT” administration, those abandoning GSE shareholders and expropriating their funds could be seeing their future, no matter what they call the mortgage entities they hope to dominate, once Fannie Mae and Freddie Mac are scuttled?


Anything done legislatively can be undone by a new D-controlled or just progressive Congress and that includes passing new laws which expand previous SCOTUS decisions and, in effect, overturn those high court verdicts.

Be careful--when you bet your federal banking charters and back extreme legislative or regulatory action--the same fate won’t happen to you.

It could.

My latest letter to the Washington Post, unprinted by the newspaper

President Donald Trump says:

"A pedophile is a better Senate choice than a liberal Democrat.”


"I believe President Putin that Russia did not interfere with our elections.”

“When hearing him say these things, what else do the American people need to conclude that Donald Trump-- and his acquiescent congressional allies—have failed to represent the best interests of the American people?”

Wm. R. Maloni

Russia Had/Has Leverage Pressure over Trump??

Why the GOP Tax Bill Deserves Senate Defeat: It’s a fraud built on a Lie: Our kids will pay for this corporate giveaway, which will not and never has produced the GOP–predicted historical gains (NYT-Editorial)

Maloni, 11-26-2017

Sunday, November 19, 2017

The GOP/DJT way: "We don't need no stinkin' rules"

Not the GSEs, but the GOP;

Don’t like the facts, change the rules

(by Dana Milbank, 11-19-2017 Washington Post)

Forget alternative facts. We’re now in an alternate reality.

In the beginning, there were alternative facts. Now we are being governed in an alternate reality.
Heading toward approval of their tax bill this week, House Republicans had a teensy problem: Their vaunted tax “cut” actually was a tax hike for millions of Americans. It lowered taxes by hundreds of billions of dollars on the wealthiest, but it raised the lowest tax rate and, official congressional arbiters determined, raised taxes on a good chunk of the middle class, as well.

Awkward! Particularly because a long-standing House rule, put in place by Republicans after Newt Gingrich’s 1994 takeover, requires that any “income tax rate increase may not be considered as passed ... unless so determined by a vote of not less than three-fifths of the members voting.”

So Republicans did the honorable thing: They snuck in a provision that allowed them, with a simple majority vote, to declare that the three-fifths requirement “shall not apply.” Problem solved.

This is but one example of an unnerving trend in the Trump era: Ignore the rules and disqualify the referees who were put in place to enforce standards of integrity.
Tense exchange between Hatch and Brown over tax cuts
Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) and Sen. Sherrod Brown (D-Ohio) had a tense exchange during a markup of the GOP tax bill on Nov. 16. (Senate Finance Committee)
Just two months ago, President Trump promised that “the rich will not be gaining at all” under the tax bill and “it’ll be the largest tax decrease in the history of our country for the middle class.”
It is exactly the opposite. The bipartisan Joint Committee on Taxation found that the rich would get a handsome tax break under the House bill, but those earning $20,000 to $40,000 and $200,000 to $500,0000 would get an increase. On Thursday, the JCT, the official congressional arbiter of tax legislation, determined that the Senate version of the bill would give large tax cuts to millionaires but raise taxes on families earning between $10,000 and $75,000.

And so Orrin G. Hatch (R-Utah), author of the Senate tax bill, attempted to discredit the bicameral, bipartisan JCT. “Anyone who says we’re hiking taxes on low-income families is misstating the facts,” he said.
And Hatch is the vice chairman of the JCT! The chairman is also Republican, as are a majority of the members.
Leaving aside Hatch’s particular dispute (about whether to count a loss of Obamacare subsidies as a tax increase for those who opt out), there is no denying the larger point in the JCT’s calculation: Whether you technically classify certain things as taxes or not, this “tax cut” would have the effect of making the rich richer and a large swath of the middle class poorer. Instead of acknowledging that, Republicans are attempting to disqualify the umpire they put in place.
Something similar is happening now with the nominations of judges. In all administrations since Dwight Eisenhower’s (except George W. Bush’s) the American Bar Association (ABA) has vetted prospective judicial nominees’ legal qualifications before they are nominated. Now the Trump administration is ignoring the ABA pre-screening, and the Senate Judiciary Committee is no longer waiting to have nominees’ professional qualifications vetted before confirmation hearings. The New York Times reports that the White House is “weighing” telling future nominees not to cooperate with ABA evaluators. And this week, the White House issued a news release highlighting an editorial saying “the Senate continues to give the lawyers’ guild too much sway.”

When the Trump administration and congressional allies aren’t attacking the JCT and the ABA, they’re attacking the CBO — the Congressional Budget Office, the bipartisan arbiter of how much legislation costs, now led by a Republican appointee. When White House budget director Mick Mulvaney earlier this year didn’t like the CBO’s “score” of health-care legislation, he asked: “Has the day of the CBO come and gone?” Trump ally Newt Gingrich wanted to “abolish” the “totally dishonest” umpire.

The White House did its utmost, as well, to undermine the Office of Government Ethics, blocking its access to ethics waivers granted to former lobbyists in the administration. The director of the office ultimately resigned.
Now, some Republicans are attempting to do the same to the special counsel. After Robert S. Mueller III’s recent indictments of Trump campaign advisers, three House members introduced a resolution calling for Mueller’s resignation.
And of course, there is Roy Moore, who has responded to voluminous accusations of impropriety with children by attempting to discredit the press — dovetailing with Trump’s “fake-news” attacks.
Should Moore make it to the Senate, we can expect worse. He openly defied the U.S. Supreme Court when he was a state judge, and he has made clear he believes the Constitution is subordinate to his interpretation of God’s law.
As Trump and his allies lay waste to their own rules, the media, the CBO, the ABA, the JTC and the courts, let’s ask ourselves: After they’ve disqualified all arbiters of truth, what will we have left?
Twitter: @Milbank

Maloni, 11-19-2017

Monday, November 13, 2017

Things I am Thinking!!

GSEs and Lots of Trump Stuff….but first, I need to talk about the POTUS, sorry!

Before writing the following GSE segment, I had a lengthy indictment of the months since Donald Trump was elected.

But—you’ll be happy to know—I shelved virtually all of that anger to concentrate on the bizarre, appalling, and blind ass-sucking and kissing DJT did with Russia’s Putin this past weekend to make my case how lame he is as our President.

No matter their political party or ideology, every American President for the past 75 years has mistrusted, seen through, or just detested the governments of the Soviet Union and Russia with great cause…except for our current President.

Those Oval Office tenants found Russians to be perennial liars, cheats, duplicitous, disingenuous, jealous, literal and figurative thieves, and anti-American thuggish troublemakers.
Foreign policy experts on both sides of their aisle, plus the media have compiled fact after fact of Putin’s interference in our 2016 elections and other anti-America machinations going back long before Donald Trump thought to run for office.

But Donald Trump believes Vladimir Putin and Russian are innocent of that corrupt action?  Maybe because he won the Electoral College votes owing to Russia’s help or because Trump Inc. is closer the Donald’s long time commercial lust to do business with Russia, build hotels, golf courses casinos, and sell them Trump tchotchkes?

Donald Trump has been a presidential disappointment on so many levels, but the American people have some choices before he runs again in 2020, the primary one being to vote against any official seeking public office who acts as a Trump enabler or backs DJT’s pugnacious and virulent nationalism and USA-weakening policy choices.

It‘s easy watch what those candidates do and say. Once noted, follow your instincts at the local, state, and federal levels and vote accordingly.

Can readers honestly say they ever have seen so much internecine US hostility and anger in our system of government, at every level?

For me, it is very hard to disassociate those things we see daily from the poison and license Donald Trump has spewed into our culture in the past year.

Look at how the Conservative church-going folks of Alabama, sickeningly, are trying to twist the Bible to defend Roy Moore from charges of molesting young high school aged women? Is he really as some of those people claim, “Joseph” and the teenage girls are Mary?”

What hypocrites!!

How about “dating” teenage girls, when you are 32, and hanging out at “high schools and malls,” where those kids congregate, as one of Moore professional colleagues accused him? Are those habits disqualifying?

Those are hardcore Trump supporters who can see no wrong in Roy Moore and lots else around them.

Whomever objects to my Trump comments, please send me a list of things you believe he has done well for the American people in the past year, not his billionaire buddies.

Healthcare is a mess, we are not trusted by our historic foreign allies, who are essential if we want to maintain our world leadership; the President’s turning his back on our senior citizens; his treatment of minorities is outrageous, his has no intellectual challenge in his mindset, he cannot speak to the masses or orate and uplift; he just mumbles “great and wonderful” about anything related to him.

A story circulating in DC.

During a lull during a recent White House dinner, Melania Trump leaned over to chat with Secretary of State, Rex Tillerson.

"You know, I bought   Donald a parrot for his birthday in June. That bird is so smart, Donald has already taught him to say over two hundred words!"

"That's very impressive," said Tillerson, "but, you do realize that he just speaks the words. He doesn't really understand what they mean."

"Oh, I know", replied Melania, "neither does the parrot."

Fannie Freddie, listen to the air escape!

The air has gone out—only temporarily, I hope—of future consideration of the GSEs as shareholder owned entities.

That matter has been overtaken both by greater Trump political and revenue priorities and most GSE talk has been the virtue-less variety, see recent House Banking Committee hearing, where Peter Wallison strummed his shopworn “get the government out of the mortgage finance world”—to Committee Republican huzzahs--and the GOP committee members then found some virtue in the MBA’s plan (drawn up by Wells Fargo) to gut Fannie and Freddie and put the nation’s behemoth financial institutions in charge.

Those Congressmen and women clearly do not understand how the mortgage finance world works or even how consumer demand for homeownership operates. But they respond faithfully to the anti-GSE dog whistles.

You Hill folks. If you buy into Wallison, you won’t have the Red, White, and Blue mortgage finance vehicles which provide your constituents with most of their home loans, no FHA, VA, Fannie and Freddie, Farmer Mac’s Ag loans, the Home Loan Bank System.

If you differ with Wallison and the AEI and embrace the MBA’s scheme, you endorse a systemic giveaway to the big banks with new federal financial guarantees to insure against, i.e. bail out, bank mortgage security losses.

In saluting both PW and the MBA, this embarrassing display by the committee’s R’s establishes that they don’t understand the MBA would create a major new federal subsidy for big bank security losses. (What, there’s gambling at Rick’s??) Or that, inherent in the MBA plan—is a systemic destruction and chaos that would rattle the mortgage market for years and drive up prices for everyone and that’s before congressional Republicans screw over housing and homeownership in their respective tax bills—all, primarily, to give corporate America a major tax break it doesn’t need.

Excuse me, but what goobers! That’s the only word for those tasked with trying to design some new mortgage finance operational plan and struggling, because they refuse to consider or even understand the many virtues and strengths of the current system, which just needs some tweaking not destroying.

Please Congress remember: The big banks don’t do good things. They don’t do housing policy, are not illiamsibnary; they do things for money. There is nothing, nothing wrong with that but Congress shouldn’t’ confuse the major banks economic function and role, as well as their sorry history of violating federal laws and regulations in just the past 10 years. (See more than $200 Billion in fines and penalties.)

GSEs and the recent Election Results

Let me draw a small link between last Tuesday Democratic wins in Virginia, New Jersey, and elsewhere.

While wishing and hoping they are, I don’t think they yet represent a significant rising rejection of the Trump phenomenon, although it’s folly to ignore them.

Next year, 2018, is a congressional election year when every House Member is up, plus a handful of GOP Senators (and more Senate D’s).

Even without having to carry the Trump albatross, the GOP will be reluctant to risk controversy and dramatic change by further hampering Fannie Mae and Freddie Mac, wounding more the nation’s conventional mortgage finance system.

You can double underline that, if the tax bills tear up years of homeownership friendly provisions in current tax law.
A huge gaggle of House and Senate R’s will freeze, kick the can down the road—again—and will not move on killing or shackling the GSEs, more than they are now, when control of the House is at stake.

Certainly not because the MBA and others—including some Senators and Congressmen--push a big bank controlled “mortgage system pig in a poke,” which they’ll argue is better than what exists today because Fannie and Freddie largely controlling what occurs in the primary mortgage market, where borrowers go to lenders for loans, using the GSE secondary market guidelines for underwriting specs.

But that’s precisely why the current system is better, the GSEs do act as a governor on what the big guys would like to push onto consumers. But, to appreciate that, you have to understand how the mortgage market works and why borrowers make the loan choices they do?

Near term, I don’t believe the anti-GSE market destroyers will succeed. It won’t happen.

But that doesn’t make me happy, just disappointed in Mnuchin his pals and plans, which—as noted have been overtaken—by the many other higher priority items on his plate, like tax reform, the federal Budget deficit, helping the big banks, and a variety of international issues on which he must have an opinion.

Obviously, that leaves matters with the courts where things are moving glacially and most experts say we are two years from anything definitive, including a possible Supreme Court review.

But—as I’ve written before—if the Trump Administration finds it desperately needs a fresh $100 Billion or more, it has the Treasury warrants which gives the federal government  90% ownership of the GSEs and which could be monetized quickly into much needed cash, although at the expense of keeping Fannie and Freddie alive.

As the next few months unfold, the GSE issue—because of the “big casino” nature of the warrants—will be fascinating dilemma for Mnuchin and the POTUS. We all should hope they both are pragmatists not ideologues.

Tax Reform and housing issues

Here’s a suggestion which some major Republican might want to consider, plus it might add credibility to their tax efforts.

Yes, cut corporate rates but make it contingent on recipient companies, first, making the capital investments in plant, equipment, and technology which will produce the fresh new jobs they all promise. Let them take the mandatory steps to invest desired capital in people, process, and places and then reward them.

Pretend you are from Missouri and tell the major corporate recipients, “Show me” and then we’ll cut your tax rates.

Also, at what point—if Congress succeeds in cutting the MIDI deductions for most homeowners and doing away with the deductions for state and local taxes, and then also attempt euthanizing Fannie and Freddie, does the public stand up and say those anti-housing GOP policies aren’t’ going to help me buy a home or even keep the one I have, let alone live on any equity I have built up?

The National Association of Realtors sent a very strong letter to GOP Members last week opposing the tax provisions in the House bill.

The NAR and the National Association of Homebuilders each will have hundreds of their association member fly-ins this week, visiting every House and Senate office making their views known on these changes.

A Big GSE Loss, Gretchen Morgenson

When Gretchen Morgenson announced a week ago that she was leaving her “Fair Game” column on the front page of the Sunday New York Times business section—after 20 years--and moving across town to the Wall Street Journal, IMO, it was a trip of a million miles to a new publication whose editorial board vilified Fannie and Freddie for the past 25 years, with no let up.

The WSJ ownership and senior management will not look fondly on someone writing as constructively and insightfully about the GSEs and about what trials and tribulations they have faced at the hands of bad government policy as Gretchen has.

Morgenson’s a smart, powerful woman with a grand, hardnosed perspective, but the reality is that her new professional home won’t welcome her GSE sympathies nor should we expect her to continue writing about Fannie and Freddie as she did when working for the NYT.

We GSE fans should thank her for what she accomplished on our behalf for championing certain matters in her much read column.

To the world of journalism and journalists, currently there is a vacant media position at the top of the GSE heap, waiting for someone to seize that mantle and write accurately and forcefully about what Fannie and Freddie have offered and still can, if policy makers can cut through the Gordian knot of lies and falsehood which still surround them today.

Maloni, 11-14-17