GSE Cats and Dogs
Except for low unemployment (which is good news), most US economic indicators are showing downturns and sector declines, whether it is revenue to the Treasury (certainly as compared with what’s is flowing out), December consumer spending, Toyota, Honda, Chrysler-Fiat new car and trucks sales down, and softening in manufacturing, and related manufacturing jobs.
Much of this is blamed on the government shutdown and the Trump trade war with China and Trump tariffs targeting other nations.
My point here is not to beat up on the POTUS, but to help answer a GSE matter which came up last week in an exchange I had with a GSE friendly interlocutor.
The guy quizzed me about a recent Dick Bove column in which Bove suggested giving into Mark Calabria’s opposition to fixed-rate financing could jeopardize the US economy.
My buddy was worried that Calabria may back away from things that support the GSEs, i.e. Fannie and Freddie as a consistent source of fixed-rate financing in all US mortgage markets, etc.
Without chatting up Bove, I assured my inquiring friend that I interpreted Bove’s Odeon column thusly. Bove’s entry back into the world of GSE analysis featured his GSE buy recommendation and his veteran observation that any Administration seeing what Bove considers an economy starting to wheeze (see comments above), would want to resurrect Fannie and Freddie—as rumors to that effect swirling around inside-the-Beltway, based on statements and indications coming from Treasury Secretary Steve Mnuchin, his top GSE aide Craig Phillips, and acting FHFA Director Joseph Notting, who is the current Controller of the Currency (the national banks top regulator).
I supported my argument, as I have with you readers in previous blogs, suggesting no matter what Mark Calabria thinks about the desirability of adjustable rate mortgages (ARMs) over fixed-rate mortgages (FRMs)--which doesn’t make him a bad guy or a bad regulatory candidate, even though he doesn’t have Senate approval, yet, but should shortly—unless President Trump decides he doesn’t want to win the 2020 GOP presidential nomination, he won’t endorse any FHFA or the big bank unending demand to curtail GSE fixed-rate financing.
I doubt if any politician seeking office in 2020, all 435 in the House and 34 (counting the McCain seat) US Senators, would support that very, very voter-unpopular stance!
So, when and if there is an Administration GSE regulatory reform package, there will be few Treasury and FHFA opponents and certainly not vocal ones, or they won’t have their jobs very long.
I will offer one assessment—which you have seen from me before—it’s actually the ying to the no-FRM yang.
I still believe because of the Fannie/Freddie (GSE) continued support for the consumers’ fixed rate loan preference, whichever political party can claim credit for freeing Fannie and Freddie from their current FHFA bondage, i.e. tight credit boxes and high always lender fees, always-passed-onto-borrowers, can reap great political benefits in 2020.
Chair Maxine Waters (D-Cal.) schedules exclusive HBC March 12 Wells Fargo hearing
Strap on your big-boy pads Wells Fargo, when your execs go before the House Banking Committee (HBC) and its new Chair Maxine Waters.
This won’t be a Jeb Hensarling love fest as often has been the case, since the bank’s highly questionable and proven illegal low-income mortgage lending to minorities and others with lesser incomes.
Wells home mortgage and auto lending deliberate “mistakes, such as not offering available loan modifications screwing low income and military members from taking advantage of Wells’ loan modifications making a Wells borrower’s debt more affordable.
I’ll bet some bright and well informed HBC member even could ask the Wells witness or witnesses to identify all of the DC lobbyists and consultants who might wander into their congressional offices and advocate the Wells position on pending legislation?
That would be very useful/helpful information for all of the HBC freshmen. Or those MoCs always could ask their GOP committee colleague, former SBC staffer cum commercial banker-- Rep. French Hill (R-Ark.)-- who might have those names in his Rolodex….or maybe not? (Just trying to help the rookies, French!)
How about, while they are at it, asking that same witness how many of the “do away or otherwise hobble Fannie Mae and Freddie Mac,” legislative proposals, Wells employees or bank lobbyists helped write.
Or possibly, what role did those same Wells employees have in the less than successful Mortgage Bankers Association (MBA) “Task Force Report,” that contained and legislative reforms to cripple the GSEs which Senate GOP sponsorship quickly appeared. It was if the draft bill was written long in advance.
Here's a slightly dated list of Wells consumer violations.
https://finance.yahoo.com/news/every-wells-fargo-consumer-scandal-since-2015-timeline-194946222.html
David Stevens & Michael Bright (as my very young sons used to say, “Scawy Daddy, Scawy!”)
Old friend David Stevens now has become a man for all season, and “speaking freely”—if you believe the works of a colleague, since I can’t believe David would write the subject descriptors used in a recent Mortgage Media publication, which glorified a podcast Stevens produced with Michael Bright, former Corker Senate staffer, Milken Institute employee, to Ginnie Mae EVP, and now trade association head, and finally maybe a collaborator with a possible federal agency rule breakers. Oh, here’s the “gag me with a ladle” prose one of David’s friends must have written.
“You don’t get much more star-power in the mortgage industry than a conversation between Dave Stevens and Michael Bright. When the two recorded a podcast last week, they were speaking their minds freely – something that might not have happened as often in their previous roles. Not that you’d imagine they ever held back too much … you get the impression that their opinions have always been Housing gospel.”
Yak, gag, barf.
I won’t bother to pimp this article anymore. But the link is below so you can see my next point about Bright and his other friends.
What got my attention was Bright talking about how he and Ed DeMarco—in 2013 wrote the bill which became Corker-Warner and then Johnson-Crapo—and currently the Crapo 2.0 legislation, to replace Fannie and Freddie with Ginnie Mae (coincidence that MB put in time there?).
Oh and headline alert, headline alert to HBC wasn’t Ed DeMarco employed as acting-Director of the GSE regulator, the Federal Housing Finance Agency when he partnered with you on writing this legislation?
Was writing legislation designed to tank the two entities for which DeMarco was the chief "safety and soundness" regulator part of his government job or was he working for someone outside the government or just laboring to get his next better- paying position?
I'll bet some curious minds would like to know???
One last note.
One last note.
Hey Michael, what entity would guarantee the credit--as FHA and VA now do on government loans for Ginnie--for those multitudinous conventional loans which your fantasy has the "new Ginnie" wrap with its federal government guarantee??
I wish I could claim as mine this next line, but I can't. It comes from a wag who commented to me about David and Michael's Excellent Media Adventure.
"You don't get much more star power in the mortgage industry than a conversation between Dave Stephens and Michael Bright."
"I'll take 'Bullshit' for $1000, Alex."
Maloni, 3-4-2019
Bill, just as those that flock to read your blog, I'm sure your inquisitive buddy is extremely thankful to have such a knowledgeable and experienced sounding board.
ReplyDeleteThe care and passion you exude when dissecting all things GSEs is unparalleled, my friend.
G--Thank you for your kind words. I have my strengths, but it's less on the business side than it is on the politics and human behavior observations, which haven't changed much in the last forty years I've watched and worked with Fannie.
ReplyDeleteDear Bill,
ReplyDeleteI do not ever comment on your blog, but I do read every blog post you have made since you started.
I have learned so much over the past ten years and am clearly a better person for it all. One cannot put a price tag on this type of schooling in my view. This is due in large part to you as well as gselinks.com, and I thank you so much for all you do.
I also love your sense of humor and this last post was one of your best yet. Very entertaining (and sad at the same time). Keep it up!
Best regards,Y.C.L.
Anon--Thank you so much for your kind words.
ReplyDeleteI promise never to lose my sense of humor when blog writing or just observing the human condition. It's always been part of me.
Stay tuned, I still think it will be a definitive GSE year with the impetus coming from this Treasury Department and that's with or without a pro plaintiff's court decision.
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