Friday, January 5, 2018

Get ready to r-u-m-b-l-e in 2018!!





GSE Outlook: cloudy, foggy, with rain, sun, or …!!




Staring at the entrails of this old GSE carcass, I am confused/bewildered as ever.

Fannie and Freddie may record $20 Billion (speculation this week from Inside Mortgage Finance, quoting a Keefe, Bruyette, Woods report) in annual revenue in 2018, minus whatever the tax changes wreak on them, but will be hassled by the usual suspects.

I have very smart friends, better GSE connected than I, who believe there is no way Congress--meaning Senators successfully can/will move against the GSEs legislatively.

My friends don’t believe the votes are there. 

Indeed, with Roy Moore (D-Ala) the GOP Senate chamber margin becomes tighter and doesn’t allow the R's too much room to turn the real estate mortgage market upside down, with any of the several schemes to put the big banks in control of the both the primary mortgage market as well as the secondary mortgage market, where the GSEs now hold rein.

As long as the GSEs secondary market underwriting rules govern what the big guys and their mortgage banking allies might want to introduce into the market, Fannie and Freddie can continue to frustrate that bank desire to “control.” One would think those lenders just would be happy making all that money, but that’s not how banks think!  More, I want more, give me more, gobble, snuff, and grunt!

As I wrote ending last year,  Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.) still will push their legislation to neuter the GSEs, keeping them alive as buttresses for the blood ghoul “new mortgage Guarantors” the two would create.

The C-W legislation also would add new federal bank guarantees for their Wall Street Frankensteins, which the TBTF  financial services industry giants and their ilk don’t  need but all want.

In spite of my friends’ assurances, I remain skeptical because the GSE opponents are working so hard and have major resources.

The bank advocates will continue to drive the false meme the GSEs were failures, have a bad business model, can’t raise their own capital, or work successfully on behalf of the American people.

All falsehoods and dishonesty, but standard fare for this cabal.

Actually, to aid my readers--and the public--I should distill the bank fiction into the (understandable) 2018 Bank GSE Political Reality Pledge (BGPRP), i.e. pronounced BigPerp.

“Because of their history, success, positioning and consumer popularity of the %&$#@*&^ GSEs, we commercial banks cannot impose our will on the mortgage markets, plus--really--we covet the GSE revenue and their domination.

“We hope we have paid off enough of our congressional and think tank allies, finally, to blow up these public-friendly mortgage operations and get repaid for our anti-GSE campaign largesse, so help us, Wells Fargo.”

GSE investors

There appears to be some GSE investor movement away from common stock toward preferred shares. I am not smart enough to be able totally to dissect that move, but I imagine if something “good” happens for Fannie and Freddie both types of equities would benefit, albeit maybe not in the same multiples. But, up is up!


The Administration and the GSEs

Does the Trump WH/Treasury value the $100 Billion plus waiting for them on a silver platter, if they just exercise their 79.5% ownership warrants on Fannie and Freddie?

We’ll see. That’s a very attractive haul staring it in the face but as dozens have observed, it means keeping the GSEs alive and functioning as shareholder owned entities (which could mean in a “utility” mode).

If Treasury Secretary Steve Mnuchin is going to go this route, he may want to hasten his actions before the broader public sours on his massive tax effort and start turning on him.

But, 2018 is an election year for all House members and a third of the Senate, with retirements being announced weekly, it might be a politically lousy time—as I’ve written often—for the congressional GOP to try and scuttle/murder the mortgagor friendly GSEs and throw another major victory to the rapacious nation’s largest financial institutions.

Again, some in Congress will try but how hard will be dictated by what else is on their very full agenda; where the Treasury decides to land on the question; and even Donald Trump’s relationship with Senators and Congressmen.

The Courts and the GSEs

I’ll make this quick, so you all can get on to my DJT observations (sorry, Anon but I can’t pass without commenting on what he’s said/done the past few days)

The courts: Fuggedaboutit!!


Our President in this New Year…so far


Trump's bigger Nuke button??

Clearly, with the POTUS size does matter, whether it’s his inaugural crowd, his hands, or his US ”nuclear button,” which he assured the world is bigger than Kim Jong Un’s. (Maybe both just should drop trou and show us, to end this dangerous spat?)

Sigh!

BTW. Vice President Pence wants all Americans to know that he is ready—if called upon under the 25th Amendment—to lead our nation boldly into the 19th Century.

Steve Bannon

So, Steve Bannon—like the special prosecutor-cooperating Mike Flynn—was a low level staffer who had no major influence on Trump or the 2016 election, but just this week, with the released excerpt releases of Michael Wolfe’s new DJT book Bannon is a “liar who has lost his mind?”

The same Steve Bannon DJT brought into the WH as his chief strategist?

Bannon, the once and now again Breitbart guru, former Wall Streeter, movie producer, and author of dozens of hateful statements and advocacies about minorities--Bannon who seemed to appear in every WH photo op (always scruffy)—is suddenly Trump persona non grata, because he attacked the President, DJT's adult sons, as well as Jared and Ivanka or “Javanka.”

Maybe Bannon was right saying those DJT relatives should not be part of the White House and federal decision making?

But what about all of those other non-Trump families who Bannon figuratively poisoned or Bannon otherwise disrupted their lives with his hateful policy inclinations (and that barely includes Bannon’s campaigning for Roy Moore)??

SB doesn't deserve a pass for any of that. But Bannon and Trump both soon will understand, "When you lay down with dogs, you get up with fleas."

First Amendment? Which one is that?

Now Trump wants to ban the Michael Wolfe book, “Fire and Fury,” in which Bannon gets his mad off and is so critically quoted on Trump, his campaign, staff, and family dysfunction.

How ironic and laughable that a President who spent his election campaign and his first year in office insulting, demeaning, castigating, mocking, treating viciously various men and women, as well as ethnic groups and US institutions, now should want to stop publication of a book which mirrors his actions, satirizes, and impugns his motives, his success, and his and his team’s shock at winning the 2016 presidential election.

Guffaw, guffaw, guffaw.


The reason, IMO, that the President has looked so bad is that virtually all of his constant messes are self-inflicted,  he puts himself in horrible situations with his ridiculous statements and tweets.

My advice to DJT is he just should stay quiet and do his job, without daily commentary.


What’s a few hundred lies/deceptions?
But that just was last year……




Maloni, 1-5-2018

11 comments:

Bill Maloni said...

Mr Fidlstix (who is part of the blog production team, whether he'll admit it or not) reminds me that $100 Billion will build lots of needed US infrastructure...if the Admin opens its eyes!!

Unknown said...

"I have very smart friends, better GSE connected than I, who believe there is no way Congress--meaning Senate D’s successfully can/will move against the GSEs legislatively."
That said, Warner ( and I suspect other D's) will be behind the C-W bill and likely they may have a few D votes. The question is will they garner enough R votes from the more liberal republicans. Perhaps the same ones that prevented the repeal of Obamacare. 1/3 of the Senate is up for re-election and legislation that will favor the Big Banks and Wall Street ,such as C-W (?) wind down of the GSE's, may not go well with the public opinion and that will be indicated in the election results.
Do you have more thoughts ,from your connected "friends" in this regard.( As already the tax legislation is being seen as more of a gift to Wall st., the wealthy and people invested in stocks as opposed to the average person.

Bill Maloni said...


If I did, I would share.

I believe those smart people think THE BAD GUYS don't have the support to unravel the GSEs, legislatively.

I can't quite endorse that totally because as I've stated, colorfully at times, "The congressional GSE shit wall is so high."

But, no secrets, I think my friends base their position on 2018 being an election year and the House and Senate both within "turnover reach;" tougher rules in the Senate to pass legislation—meaning easier to block--especially big dramatic upheaval stuff; plus the "warrants” matter and what that possible fresh revenue can mean to a Trump Admin desirous of spending on other priorities.

Doesn't mean they are right, but that's what they see.

Unknown said...

Thank you. I guess we shall see if the support is there or not! Agree though, why give up ,as you say , 100 plus billion on the warrants, to set up a system without potential legs from a political standpoint and having a great functional secondary mortgage market, especially when you have a system in place already working. Would seem almost a no brainer . Unless of coarse ,as you mention "the shit wall" is really that high!. Funny thing though, for most of my life , I believed in the government to do the "right "thing. It is only during the last 10 years and my reading about the GSE's that I have been constantly re-amazed on how deeply corrupt politicians really are and more importantly , to what extent they will exploit that corruption at the expense of their constituents.

Bill Maloni said...

HW--

Unfortunately, I have to agree with you.

But to be fair to someone I consistently beat on, it started long before Donald Trump chose to run for the presidency, although his proclivities seem to make it easier for most pols to show their more base natures.

Emmily said...

Hi Bill,
I own common shares. I heard common will be worthless under the new plans or new proposal by Corker. Several famous investors suggest to sell common and buy preferred. what's your view on common? Thanks a lot.

Bill Maloni said...

Emmily--

I don't want to get into the touting of GSE shares, preffered or common. Too many people have too much invested for them to listen to me...a non-financial expert. (For what it is worth, Tim Howard I believes feels similarly about questions like yours.)

I'll try and stick with what I can observe and feel comfortable sharing, which coudl cut in either direction.

As I noted in this week's blog, if something "good" happens (this year?) to the GSEs then I think both common and preferred will benefit, albeit not necessarily by the same multiples because of the contractual nature of the preferreds.

By the same token, if the Congress, the White House, and/or the Judiciary really have it in for the GSEs and their investors, they'll figure out a way to screw everybody, especially if the courts--as they appear to be--are not GSE sympathetic, i.e. a microcosm of what's happened since "Lamberth."

Bill Maloni said...

One additional thought for Emmily (and others)..

There is no formal C-W bill yet, while there reportedly are drafts circulating the Hill and downtown.

Wait until you see what any GSE legislation looks like and the reaction/respionse before assuming anything either god or bad.

Bill Maloni said...

It's says "god," but we all knwo Maloni can't type.

"Good or bad."

Anonymous said...

Kirsten Sutton Mork, a longtime Hensarling aid, will become the chief of staff at the Consumer Financial Protection Bureau. Mork had served as staff director after McGahn’s departure and was previously the committee’s deputy staff director and policy adviser to Hensarling.
======

Why did Mork leave? IMO, Dem will be House majority in 2019. She would likely lose the job. Why not act sooner?



anonsaid:January 7, 2018 at 9:01 pm
McGahn left Treasury, most likely she (and Hensarling too) have diff idea about housing reform from Mnuchin’s. So different she feels she cannot effectively represent Mnuchin.

Finally, no one in the admin expressed his opinion publicly on reform. IMO, they are unanimous. They stand on sideline and watch the Hill Dem fight Rep resulting in deadlock.

Bill Maloni said...

Anon--

I assume as long at R's hold the WH she'll have that job and they'll soon put a partisan there so what-his-name can go back to OMB, unless he likes it at CFPB so he can frustrate consumers on behalf of the banks and chooses to stay.