Some GSE pluses this past week

Welcome Back Dick Bove...
with his strong GSE stock review

Richard X. “Dick” Bove has been a successful Wall Street financial services analyst for multiple decades and he’s recently gone to work for the Street’s Odeon Capital. Dick is a renowned big bank expert, but has covered the GSEs before and now has authored a new Odeon investment piece on Fannie and Freddie.

Bove and I discussed his work, shortly after it was published and I promised to feature it in my next blog.

Readers can see his positive advice, linked below, but I ask you to focus more on the logic behind his investment logic, with which I agree (but which doesn’t mean others “inside the Beltway” feel the same, although they should).

https://bit.ly/2DjNs0e

Here’s my synopsis of Dick’s GSE longer positive guidance, adding a Maloni major political belief at the end of Bove's excellent economic, financial, and demographic perspective.

Bove posits the following:

-----  Near term the U.S. is facing an economic slowdown;

-------Homeownership demands are rising among a growing and important demographic US residents aged 25-40;

----- Housing/homeownership is a critical segment of the economy and, historically, has helped boost GNP when facilitated;

-----The GSEs have been critical to the latter factor and are necessary to make that happen going forward;

-----Executive or regulatory action to loosen the GSE shackles is likely the most efficient way to make this happen;

---And I add this to Bove’s thinking: Whoever can take credit for rejuvenating Fannie and Freddie should earn major political kudos going into the 2020 presidential and congressional races, garnering major support from low, moderate, and middle-income families who would benefit the most from greater access to GSE mortgage credit. 

(I hope to add a brief “Bove one-pager” for those who want to share his newest work with colleagues, Members of Congress, policymakers, media, and others.)

Other Fannie-Freddie items worth noting:

Tim Howard’s latest blog is a three year, retrospective, a look at everything Tim's written, broken down by subject and is an excellent substantive primer for all seeking to understand—in detail—the many bizarre, audacious, and harmful machinations GSE opponents and their business, congressional, and Admin allies waged against Fannie Mae, Freddie Mac and their shareholders. (Check out the personal huzzahs from Tim’s regular readers.)

https://howardonmortgagefinance.com/

GE, subprime chickens coming home to roost in a corporate carcass? 

When the long knives came out for the GSEs more than 10 years ago, General Electric subsidiaries, especially GEMICO their mortgage insurance unit, was in the forefront financing and pushing the “FM Watch” group to attack and debase all things GSE. 

That cabal and its principals—which still operates under user-friendly names—couldn’t hurl enough diatribes and innuendo at the GSEs. 

But what goes up can also…….!

GE, the longtime gigantic financial/manufacturing conglomerate, has fallen on very hard financial times; sold off a lot of its corporate pieces; seen its stock fall precipitously; and this past week made public that it expects to pay a $1.5 Billion fine to the Justice Department for subprime lending conducted in 2005-2007 by its now-closed WMC lending subsidiary.

That dozen years ago is just about when GE was leading/financing the GSE lynch mob through FM Watch, with the help of some big banks and others.

Now, in 2019, the GSEs likely will earn near $20 Billion or more; still are breathing, experiencing stocks price increases, producing coast to coast mortgage financing through their secondary mortgage market operations; and government policymakers are making positive sounds about Fannie’s and Freddie’s future operations (without any need for a "bright line!").

This gloat is directed at the old "still workin' it" FM Watch alums..."How about them apples?" (With all due respect to Matt Damon, Robin Williams, Ben Affleck, and Minnie Driver.) 

Good Governance folks want to know, 
who's lobbying their Senators and MoCs?

Is Parrott legit or acting on the sly and for who/what?

Fair question put to me by a friend: "Why is fellow-traveler, anti-GSE Jim Parrott on the Hill lobbying Senators and Members for the old "Jumpstart bill" to help the big banks in a last-ditch effort to grab the US secondary market, when he is not registered to lobby?" 

Shouldn't responsible Hill offices and staffers ask Parrott--before engaging with him and risking personal trouble or media grief for their boss--if he, legally, is authorized to lobby and signed up with the Senate Secretary and the House Clerk? 

Shouldn't those same conscientious Hill offices also demand Parrott tell them who he represents?

And if not, why not? 

Just asking folks, Jim? Wells Fargo's a big bank, right?

Last item. Get ready to unload on me, but…..

I know it’s been some long lean years for most non-hedge fund investors—and ”no,” I’m not sitting on a ton of F&F stock hoping my reverse JuJu will make me rich-- but everyone wants to jump on the latest news (and gaffes) coming from the Hill, Mnuchin, Otting, others and get giddy or angry.

But  those—who seem to care more about financial returns than the national value of returning the GSEs to operating an efficient, fair, honest, and diverse secondary mortgage market, where all participants, lenders,  Realtors, builders, and can succeed and generate income—please hold off your crazy predictions about when this ephemeral gold mine will hit.

I sense you all are agonizing over these peaks and valleys as the stocks rise and fall with each GSE belch.

Nobody knows, given court schedules, Administration and congressional political priorities, delays, judicial vacations, and competing cases, when something good or bad will occur, despite all of the rampant and largely uninformed speculation.

My advice is to save yourself some high blood pressure and gray hair.

Also, at the end of the day, it might not be a gold mine at all, just another five or ten years of slogging through Conservatorship.

Speculate all you want, but there is not a soul who knows, exactly, when or what any final GSE chapter looks like or when/if that curtain will go up—and that includes this Administration. 

Stay well, healthy, and happy!!!

Maloni, 2-10-2019