My Greatest GSE Fear--People Will Forget GSE Achievements
Nobody should be surprised by what I write or my feelings.
I coined the term “GSE Shit Wall,” signifying the great height and depth of Washington DC opposition to recapitalizing and reviving Fannie and Freddie.
I have little hope that the courts suddenly will reverse Judge Lamberth and believe the last four Administrations (starting with Bush/Paulson) royally screwed the GSEs, for different reasons.
The Big Lie of GSE culpability, greed, arrogance, or irresponsibility has blinded virtually all to their virtues of systemic, operational efficiencies, reliability, low consumer costs, willing/capable industry leadership across demographic and income levels. The latter is part of why they both are envied and despised by their opponents.
Over the past two weeks, I was reading a lot about the 10 year anniversary of the 2008 financial debacle, its related fallout and principals’ ass covering, and came across this thought about another institution, not a GSE, which no longer exists.
I’ll shorthand what one writer said about a certain financial institution (paraphrasing), “Washington insiders will not let anyone they think bore responsibility for the financial devastation to walk away unscathed and/or benefit.”
We can argue all day—and I do and have--about why big banks or other Wall Street firm CEOs never did time or were ousted, but the facts are 10 years ago the GSEs were falsely labeled as being responsible for mortgage failures—despite all the bank botched PLS-- the GSE story was loudly underscored and repeated by their ideological, business, and political enemies for a decade plus.
Consequently there is nobody today around the Capital’s corridors of power or policy making who doesn’t believe it’s true—besides Tim Howard and a few more.
Yes, we have the CMLA and the community and low income groups, Investors Unite, and major hedge funds and other investors, but no constant communicators who rival the constancy, variety, and pitch of the opposition.
I’ll conclude with what I’ve said before, only Steven Mnuchin—or possibly—a Democrat House and Senate—for wildly different reasons can overwhelm the GSE Shit Wall, but it won’t be easy.
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One definition of crazy is doing the same thing, time and time again but expecting different results.
Color me crazy.
This past week, the Washington Post had a lead editorial endorsing a new Jeb Hensarling (R-Tex.) “I’m leaving town” GSE reform bill, which gives the mortgage world to the not so worthy Michael Bright and Ginnie Mae, as well as—naturally—the big banks.
It took me about two minutes after reading the latest commentary to respond, sending a letter to the Washington Post editor based on the paper’s Hensarling proposal ratification. (Linked below.)
Editor:
Yawn, yawn, the Washington Post editorially pounds Fannie and Freddie, yet endorses an inefficient replacement arrangement which still has Uncle Sam--via Ginnie Mae--picking up the tab for a bank-centric model, that claims to have private mortgage insurance taking major first losses.
Before such a rabid endorsement, the Post should realize that Ginnie is part of HUD--not the sharpest agency in town--has little experience/talent in managing conventional mortgages--meaning non-government backed--which most Americans have. Ginnie has several hundred employees while combined the GSEs have some 12,000 managing their large mortgage-backed securities portfolios, which need close and deftly supervised oversight, "stress tested" multiple times per day as rates and strategies constantly change?
Does that sound like an easy HUD task to you?
Ginnie Mae, in the past relied both on Fannie Mae and Freddie Mac, to provide the agency's "back office," because the government’s resources and talent were so thin.
Ginnie--as the securitizer of FHA/VA loans, where lenders not Ginnie personnel do most of the work--also was in the middle of several major FHA problems, especially in inner cities where most government loans originate and abuses occur.
After deciding if Ginnie Mae truly is capable of operations envisioned in the legislation, the Post also might want to ask:
--Does the smallish mortgage insurance (MI) industry (a shrinking handful of companies)--which the Post says is part of the solution (to what?)--have or can raise sufficient capital, efficiently, to replace Fannie and Freddie??
--Also why has the MI industry historically had turmoil when lenders sought to get it to pay legitimate claims??
--Whether new Ginnie head Michael Bright is up to the task or merely is a one-trick pony, carrying water for the big banks, since no matter where he's toiled, he's always been associated with plans to do away with the Fannie Mae and Freddie Mac??
This latest legislative proposal will go nowhere because Congress isn't ready to spring on the American people the inevitable delays, inefficiencies, cost, and chaos, of a new mortgage finance system, when the current one working efficiently.
Despite the sponsorship of Chairman Hensarling, who soon will leave the Hill, his scheme is far less efficient than the current GSE model and only gives the big banks a greater share and say in US mortgage decisions.
Lastly, nothing is happening before 2019.
William R. Maloni
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I was on a “Don Quixote binge” last week, tilting at anti-GSE wind mill operators, since I also responded via email to Daniel Press at the Competitive Economic Institute, who wrote an article picked up by “GSE Links,” blaming the GSEs for the 2008 financial meltdown.
"That housing collapse itself was a consequence of an unprecedented number of weak and risky mortgages, driven predominately by the government-sponsored enterprises, Fannie Mae and Freddie Mac. When many of these mortgage holders defaulted, the mortgage-backed securities held by financial institutions around the world also buckled, leading to the financial crisis."
(D. Press in Competitive Economic Institute publication)
How does all of that Rightwing Kool-Aid taste Daniel?
It must be flavor rich because you've been writing this drivel for so long, you obviously believe it.
I won't even cite the most recent substantive and total rejections of your "GSE blame game"....(oh drat, yes I will, the 2018 FDIC report on the 2008 financial disaster, Fed Report on same, Phil Angelides' Financial Crisis Inquiry Commission report). Few agree with you, save the AEI guys and many in the GOP.
But riddle me this Mr. Conservative Solon?
How do you explain--in your myopic 2008 scandal worldview--the $2.5 trillion in near worthless, commercial bank "private label securities or PLS" (not GSE) underwritten and originated 2006-2007, securitized with the banks' own flimsy guarantees, falsely rated with purchased agency ratings, and sold throughout the world to institutional investors, quickly gushing red ink everywhere when they soon failed????
Those weren't Fannie and Freddie bonds, which--if you ever were honest--you would note the GSE MBS performed geometrically better in incidence and severity than their ersatz "private label" clones.
C'mon Danny just answer me where those actions fit into your explanation of the era?
They were not costless since the US taxpayers paid out to the banks far more in TARP funds than was infused into the GSEs, an action several federal lawsuits have suggested wasn't necessary because both Fannie and Freddie had market access (and capital), despite Hank Paulson claiming they didn't?
You bank-apologists always seem to ignore that commercial bank episode of the 2008 debacle.
Pardon me for being sarcastic, but I have to wonder why so many of your ilk pay no heed to this financial perfidy?
(Bill Maloni email.)
Further evidence that the Community Reinvestment Act is hardly the burden the banks suggest.
https://www.nytimes.com/2018/08/28/opinion/trump-mortgage-redlining-cra.html?smtyp=cur&smid=tw-nytopinion
My letter/email comments above were offered to similarly themed recent posts. I sent them to various authors, generally Conservative, whose work appeared in different venues. But you get the flavor and feel.
Knowing the Post wouldn’t accept my letter, I shared a copy with Tim Howard. He responded this way.
“The editorial board has no understanding of what they're writing about; they just repeat what their "trusted sources" tell them. And I did see your response. But remember, you're writing to people who don't understand the subject matter and don't care to learn about it--they're just pleasing the "powers that be" that serve as sources for their news stories.”
(Me) Merde!!
Maloni, 9-20-2018
20 comments:
Yep, my cover email to those of you on my mailing list did say "New Bliog Out"; now you know why I seek your favor for typos!!
Ludicrous and hilarious--
In the blog above, I make light of HUD--which houses (pun intended!) Ginnie Mae--and the agency's history of poor leaders and lack of talent.
Last week, this predictable story appeared in the Washington Post.
https://www.washingtonpost.com/business/economy/ben-carsons-hud-political-loyalty-required-no-experience-necessary/2018/09/20/addb8e74-9b0c-11e8-b60b-1c897f17e185_story.html?utm_term=.897f77d70919
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To further underscore my point, late in the week, HUD Secretary Ben Carson--himself with no background in housing or mortgage finance, let alone politics--joined the fight over Trump's SCOTUS nominee Brett Kavanaugh, accusing the judge's opponents of being "Fabians."
That allegation sent head-scratching local crowds to the dictionary or "Google" to see what the term means, besides showing how erudite Dr.Carson is.
Here's the meaning.
"The Fabian strategy is a military strategy where pitched battles and frontal assaults are avoided in favor of wearing down an opponent through a war of attrition and indirection."
In terms of that epithet's inside-the-Beltway impact, I would suggest the Secretary return to HUD's 8th Floor and keep looking for new office dinette sets.
Any other Black R’s you want to excoriate? Dr. Carson is there, what do you plan to do about it, shoot/euthanize/imprison them?????
Hypocrisy.
BHO, himself with no background in anything let alone politics--joined the fight over everything Trump, even if he needs a Majic Wand or lie if needed.
Anon #1
I've been consistent and said Ben Carson, from Day 1 at HUD, was out of his element and I believe his marginal record--to date--supports that.
Likewise, my comment was about his use of"Fabians" was not racial just chiding him for being obscure and therefore useless in the political fight to protect Kavanaugh.
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Anon#2 (if you are not #1)
I've said/written BHO was not a good politician, but also wasn't a bad man.
Feel free to report back on what you think of the movie? Last night, I saw the new Michael Moore movie, 11-9, MM is very hard on Obama.
Bill-
Here is what I don’t understand.
Who named their children Barack Husain in the 60’s?
Who were his High School and College friends?
How about those transcripts?
The hard left, who is against guns, but have guns and extreme violence in their movies?
How about that “N” Word in all the movies and videos?
What about the disrespect for women in their movies and videos as objects?
They are for all the poor children who are without their parents on the border yet openly feel it’s ok to abort a full term pregnancy?
Pretend to care about the poor and disadvantaged yet specifically have nothing to show for 50 years of the same song and dance?
Same with Union Members who’s Leadership finds the DNC yet did what for the members?
Same with Hispanics. Playing the same game with them. Want their votes for the next 50 years and then they will do the same as they did to the black community.
Veterans. Think back to the 60’s. You think those were conservatives at those protests disrespecting the veterans?
Any inner city struggling, controlled by Democrats. Yep. All of them.
What’s not to like about low unemployment, food stamp applications, Taxes, improved military, fair trade, etc. etc. etc., etc., etc. etc., etc.
MM? LoL.
Anon--
I just was adding the link below to your response to my reference to Secretary Carson
https://thehill.com/homenews/administration/407638-report-a-third-of-ben-carsons-appointees-have-no-housing-experience
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Michael Moore didn't do anything but gather all of the Trump excesses and lies and put them in a historical context. (It is worth seeing!)
Do you have a problem with people not naming their kids "Tom, Bob, Beth, George, Mary, or Harry)?
Yes low unemployment is good, more jobs for Black and Brown (and White) Americans is good, too.
But the nation is more than the economy and I pointed out either of us could have done the same if we had access (as Trump does and has) to our grandkids revenues and willingness to recklessly spend it, as he and the GOP have.
I am not sure about your military being improved, and our worldwide alliances which Trump insults on assaulting.
Abortion isn't mandatory, just available.
Where is the GOP on that money which should go to poor kids and the low income (hardly all Black and Brown) when they cut those HHS budgets? Where is that respect for the environment when the Republicans cut environmental safety, open federal lands for more oil, gas, and coal development?
Where is the respect for our nation's collective health with trying to end insurance for pre-existing conditions and other aspects of Obamacare?
Where are the President's morals or sense of community, our nation's history, our Constitution and its guarantees?
I can live without public/consumer access to automatic rifles and other weapons of war, can you?
Has any other President had "his junk" and sexual performance minutely described by a porn star, Stormy Daniels, in her first book???
Anon--I'll add one more item and hope to appeal to your native intelligence.
Have you witnessed all of the bizarre weather the nation/world has experienced in the past few years and not begun to wonder if there is something to "global warming" and humans poisoning the earth, water, and atmosphere on which we all depend???
But this science-rebutting WH crew refuses to acknowledge the possibility the earth is not nota forever limitless dumping ground, we're not all descended from Adam and Eve in a world God created in seven days!!!
I just heard there may be a third female Kavanaugh complainant.
Bill, thank you for your fighting for GSEs. You're not optimistic about legal battles. But far from over. A win may be around corner.
Question regarding global warming
How was the Grand Canyon formed?
We will never forget what the word is, is? That blue dress.
Native? LoL. Intelligence? Maybe not?
I could care less what name anyone uses. It was just a question.
Read the National Debt that the community organizer ran up and then complain about DJT. That would only be fair.
Who said the President wasn’t a Player? No one.
All the bla bla bla about the Constitution and we are watching the loons deny a man of due process.
After that last breath we all take, we will immediately know God is who He says He is. Every knee shall bow.
Anon #1:
No, I am not optimistic about courts.
I hope more for a Mnuchin, pragmatic, executive/regualtory action.
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Anon #2 (my old friend):
Do you really want to argue Kavanaugh didn't get due process? Really?
If he (just like DJT) has nothing to fear, why not an FBI review of the latest two challenges? Wouldn't that clear his name forever and bring his weeping allies some solid arguments.
There are a dozen more like him in the GOP dugout and anyone of them could give Trump what he wants--a lawyer who thinks the POTUS is above the law--but the R's blind defense of someone who may be a liar who couldn't control his youthful sexual urges in high school and college, doesn't look good for the GOP, but then, what does?
Who is the Co-Chair of the DNC?
Are the Clinton’s & Obama’s still friends with Harvey?
Did Juanita get due process?
How’s that going with Mel Watt?
Hypocrisy.
Anon#1
I assume you are referring to Rep. Keith Ellison (D-Minn.), a Black American Muslim? Mel Watt, a Black former Congressman and now FHFA Diector.
What's your point or are you playing the GOP race card?
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Anon #2 (whom I think is #1, again)
There is a difference.
SCOTUS, SCOTUS, lifetime appointment, SCOTUS, SCOTUS, lifetime appointment. SCOTUS, SCOTUS a lifetime appointment.
Yep. Who cares what color they are? That Liberal racism bullshit is getting old and useless. Shows how empty the answer is.
Fact is fact.
Anon--
I worry about the world you seek to shape.
How are you feeling about the GSEs these days??
Don’t worry. I can’t shape anything. Just want the Constitution to be upheld for our grandchildren.
Great question.
My belief is right and wrong, evil and good, truth or lies. Truth over lies, good over evil and right over wrong will prevail at some time. Always has.
Corruption is on both sides.
Enjoy the banter. Don’t take it personally.
I completely blame our elected officials for this atrocity. No, I also blame the American public. 80% don't even know there was a Fannie or Freddie and the 20% that did, most of them didn't even know they were able to get a home loan because of the GSE's. The reason politicians won't do anything, because there is no public pressure to do so. I wrote my congressmen and received the obligatory standard form back "Thank you for your concern, blah, blah".
If this were GM, IBM, etc. that were held in purgatory as long as the GSE's, the outcry from the public would be deafening....Instead we get our daily politically motivated smokescreens like the Kavanaugh crap...He has set legal precedence and has done a mighty fine job. And he would do so on the SCOTUS.In fact, if you think about it, the SCOTUS only hears a small fraction of cases. By refusing to hear a case, they are automatically upholding the lower court's ruling. I'm sure Judge K. has had very few rulings overturned. Will the democrats try to force him off the bench if he is not confirmed? of course they won't. this isn't about him doing his job. this is about blocking Trump...no more, no less. Just like the GOP blocking Obama's nomination. They are all pigs eating in the same slop.
I did buy the FNMA stock to make some money. I'll admit that. But, I justified it to myself, that there was no way our government would keep a publicly trade company that provide the ability for million of people to buy their own home. After the banking fiasco, the public would demand that the banks could not be trusted to insure or guarantee their own loans. That would be ludicrous and it scares the hell out of me that our government may allow them to do so and I predict a much worse crisis should that happen. The banks will make a ton of money off of guarantee fees and pad the pockets of CEO's and the like....but when the shit hits the fan, they will cry and our government (which we allow), will spend 100's of billions, if not trillions, to bail them out. The American taxpayer gets screwed again
May God have Mercy on us.
Anon--
That's for responding and I take very little personally.
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JR--
There are some very smart people I know (who happen to be major investors) who believe strongly that--at the end of the day (no timetable offered!)--shareholders will be rewarded because, "There is no other viable solution."
My perspective is twisted--admittedly--by the various football "Charlie Brown kicks and misses" I've seen over the years, involving both parties.
As I always say, I hope I turn out to be wrong, less for the pennies I might earn as a shareholder than the fact I believe in the GSE mortgage model and its ultimate fairness and efficiency.
JR--
I should have made clear those are/were "GSE kicks and...."
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