GSE Cats and Dogs and One Big Turkey
While the GSE legal wheels grind ever so slowly and we’ve just had a major congressional election in which House Democrats keep adding to their 2018 winning totals, as the Senate GOP added to its don’t look for much generic legislative action in the coming lame duck session (ending @Dec. 15).
Everything starts all over again after the new crew (and the winning incumbents) are swoon in January 2019.
The Senate R’s--for the rest of this year only--have a 2 vote spread and who knows how Senators Flake (Ariz.) and Murkowski (R-Alas.), or even Collins (R-Me) will vote on anything President Trump wants?
Susan Collins likely has politically taken on the “dead woman walking” stance, given all of the Conservative and GOP adulations she earned with her vote for Judge Kavanaugh to the Supreme Court. Maine long knives appear out for her in Maine’s 2020 Senatorial election as her state and the entire New England region take on a distinct blue political hue.
I assume Rep. Maxine Waters (D-Cal.) will be voted Chair of the House Financial Institutions Committee, a large, sprawling matter with some 75 members.
The exact Banking Committee member total won’t be revealed until the two party caucuses in January decide committee membership and the freshmen Members test their likes and dislikes of their committee assignments.
One small positive I do know is some new Members, interested in GSE matters, are “seeking” service on the Committee just to pursue Fannie/Freddie matters.
That’s helpful, just having attentive new women and men is very positive.
But, just as in high school, they still will have little authority and need spend time learning their new “trade,” but trying to understand Fannie/Freddie mortgage issues is better than just consuming the standard anti-GSE pablum that’s been spun for years by the institutional bad guys and R Committee leaders.
FHFA Capital Regulations
Most of those commenting on the Federal Housing Finance Agency (FHFA) proposed GSE risk-based capital regulations have filed their opinions. People smarter than I are parsing them and—I am certain—soon will issue their interpretive synopsis in a way that most of us can grasp them.
A simple test for all comments (whether trade group, think tank, or individuals) is if—as most GSE critics do—the position guilelessly proposes higher Fannie Mae and Freddie Mac capital levels, i.e. equal to commercial banks or higher, their agenda is not positive or productive.
At the more moderate end is Tim Howard who believes that “risk-based” means risk-based and the GSEs exclusively acquiring or securitizing variations of single and multi-family mortgages have easily definable risks, with precise predictable data captured via the voluminous loan performance history and comprehensive tracking of the credit and interest rate risks the two take.
That element/resource, alone, should produce capital levels below that of commercial banks.
Tim’s thinking—which I support--swims a little uphill when for competitive or political reasons, FHFA and other policymakers –camouflage their true intent-- by falling back on the ass covering meme “more capital is better.”
But, there is a cost—in this case higher mortgage rates and less affordability—with inflated GSE capital requirements.
The RBC regs and related matters all will be tied up by the WH seeking a successor to current Director Mel Watt, whose term ends next year in early January. (Mark Calabria, the VP's economist had his name mentioned as a possible successor, again today, by Inside Mortgage Finance.)
John Carney and Breitbart…strike again
Rattling around the dark corners and annexes of Breitbart News, John Carney still is aiming his poison darts at the GSEs and anyone he deems evil enough to support their operation.
Most recently he went after “hedge funds.”
Carney’s current outrage is aimed at the “Moelis plan,” a GSE reform proposal, birthed on Wall Street, which has been circulating inside Washington for the past year, and has picked up quiet bipartisan support (and to Carney’s horrors, some in the Trump Treasury), which among other virtues contemplates support for GSE low income family lending.
Here’s the article's link, but let me point out some continued blind spots for Mr. Carney which seem to never get printed under his name as if acknowledging them undercuts his value to naysayers.
Carney, while brutalizing the GSEs, never mentions the far greater, commercial bank private MBS (or private label securities) actions, which tried to clone GSEs success but with less responsible products and services, and produced a far greater hit to US taxpayers in the 2008 financial debacle.
How can John indict one and ignore the far worse bank “other” or fail to mention that the banks had much deeper emergency financial relief, estimated in the $Trillions, at both Treasury and the Federal Reserve??
The larger bank failures disgorged buckets of red ink, but the GSEs had less friendly support in Treasury and—as the many court cases he disparages—suggest, TreasuryFHFA actively manipulated Fannie’s and Freddie’s books to make them appear financially far weaker than they were.
If Carney were not writing only for a slow-witted a scalawag group, he openly and honestly would discuss the nation’s largest banks. His bank friends were charged only half the repayment rate (5%) by the friendly Treasury Secretary Hank Paulson that forced twice that toll (10%) on Fannie and Freddie. (See any slant/preference there, John?)
As the GSEs recovered, the Obama Treasury manipulated the original repayments scheme in 2012 to confiscate all future GSE earnings, save a capital sliver, let me repeat “all future GSE earnings”—so that they original GSE debt of @$190 Billion now has generated @$280 Billion for taxpayers….and the payback still is increasing in perpetuity??
How little is Carney aware or is it just plain dishonesty, when he also disparages the GSEs but extolls poor Wells Fargo Bank and says they’ve stayed out of most inside the Beltway machinations.
Wells has been dancing in an out of their own lawsuits for years, while working quite assiduously—primarily through the Mortgage Bankers Association (MBA)—to develop its own "cripple the GSEs scheme," far friendlier to the nation’s biggest banks than to the nations’ consumers.
Treasury does own 79.9% of the GSEs, and that money and possibly more, easily can wind up back in the US Treasury serving US taxpayers, if Admin gets behind a plan (Moelis?) which keeps the GSEs alive and be a superb resolution for the nation’s consumers.
DJT offers up a real leadership Thanksgiving “Turkey”
It’s OK President Trump to break tradition, refuse to travel to any combat zone and visit US Troops—since walking from the plane could irritate your bone spurs--but instead take the easy way and substitute a telephone call, made from your safe, warm, palatial Mara Lago resort property.
Proceed briefly to thank the troops and then boorishly switch and talk about yourself, your personal priorities, and your self-analysis of your perceived successes.
I am certain your expert bloviating kept our kids safe and our Al Queda, ISIS, North Korean, Russian, Iranian military opponents quivering in hiding, too frightened to engage, wound, and kill these G.I.s serving worldwide, while you eat turkey, Big Macs and play rounds of golf with Jack Nicklaus.
In the immortal words of George W. Bush, with a huge dash of sarcasm thrown in, “Good work, Brownie!” (Get someone to explain that reference to you, sir.)