Monday, June 17, 2019

Dad said it's my turn to drive, not yours; it's mine; No, Dad said.....




Mark, Steve, maybe Edith (?),
Who’s leading this GSE dance?


It’s fun and enlightening to read the various GSE blogs, websites, and commentary to read the intensity of the many folks who just flat out disagree with each other over what is or may happen, but are certain that their view of what’s coming is the correct one.

On any one of them you can read a gauntlet of opinion, from hugely optimistic to “bigly” pessimistic, with nobody consistent in their position, plus hoping people won’t remember what most said a week or a month before.

The bottom line on GSEs seems to be that nobody knows who has the cudgels or what’s going on within the ADMINISTRATION, WHICH IS WORRISOME.

I got that vibe last week in talking with some GSE “thinkers” and media, whom I consider well-tuned into the various shakers and movers on both sides of the GSE question.

I’ve blogged before about the various red flag stances of Treasury, the FHFA via Director Mark Calabria’s latest public rhetoric, which has produce d a lot of hot air, but no action.

Plus, we had the President’s near vacuous comments/promises when he appeared at the NAR conference postulating how important Fannie and Freddie are and the need to fix them. Still waiting.

Using the only measuring tool the average man or woman has—stock values—the current look is a bit bleak, as last week GSE stocks showed red ink, after weeks of forward movement.

People are asking themselves—and speculating—“What in Calabria’s statement and those of Mnuchin have I missed?”

You could start with both of them calling on Congress to act, when the world knows Congress ain’t acting on any GSE legislation as we cruise into an election year?

As one very bright/capable GSE solon said of the Administration and their business ideological, business, and media allies, “They don’t give up, do they?”—since most of the recent reporting has been GSE-negative.

Nope, my friend, they don’t.

Maybe, the nation/world needs a bold, new book, which convincingly shows Fannie’s and Freddie’s public and systemic value??

Looking back, I had and still have a feeling that Treasury’s Steve Mnuchin had (and still possesses), a pragmatic, workable, mostly cooked GSE fix which might have been dealt some blows when his deputy Craig Philips was dispatched and Mark Calabria arrived. Pretty suddenly, the new FHFA Director showed himself to be much more pro-big bank than most of us hoped (Mnuchin, too?).

Have the GSE stocks hit a stone wall?

It doesn’t take much of Calabria talking/preening attaching bank size capital for the much lower risk GSE business activity—indicating his bias-- or asking, not so slyly, for more congressional-mandated power, all of which screams to investors and others--“PROCESS SLOWDOWN, TAKE YOUR MONEY AND RUN!”

With no powerful political "housers" demanding an end to conservatorship, you get delay which means different things to people, depending on whether you are pro-GSE (bad) or anti-GSE (good).

If the more pragmatic Mnuchin prevails and there is an end to conservatorship, I believe Calabria and friends still will seek to create as many operational impediments as he can, obstacles to GSE success as his sentiments clearly communicate.

Remember, there is nothing clean in DC where one side prevails and their very powerful opponents get totally shut out.

It’s not difficult to see Calabria publicly wishing/hoping to end conservatorship but, simultaneously, seeking GSE operations-killing bank capital as well as a bunch of new competitors, so he can light his victory cigar.

[Quick non-GSE comment. Not dumping of the POTUS (Anon1!) but there appears to be a lot of major issues—far more compelling than the GSEs--where nobody is sure who is in charge and what is the plan, with Iran, China, Russia, immigration, healthcare, abortion, being just a few of those. It’s how business gets done or not done, today.]

But, will Calabria’s ideological leanings cause him to gloss over and ignore other systemic problems/inefficiency/delays his possible actions might produce?

That’s why some people in those senior managers often are called ideologues!

What I would love to see is Director Calabria appear on a panel of two, debating with a capable GSE advocate, in a true test of who best can make their case and/or factually blow holes in the other guy's position.

But that won’t happen, since a legitimate open forum and debate would reveal the emptiness of some of the Director’s ideas and the inherent market principles clash or unworkability of what he promotes.

For instance, clever people are doomed when they seek to attract “new money” (as if institutional investors are broken into young and sophisticated and old and dumb) to their future mortgage finance system while waxing about their real preferences to deep six the model they’re pitching!!

Possibly, House Banking Committee Chairwoman Maxine Waters (D-Cal would be open to hosting this exchange/discussion?

I keep sensing Calabria daily is playing mental tennis with his policy and political choices, going back and forth in his mind  where to lob his next shot—or offer his latest pronouncement--and still uncertain where he wants it to bounce.

Adding to the uncertainty is the much-discussed Fifth Circuit Court hearing on the Collins appeal, the size and scope of which is unknowable, yet, but which could give Mnuchin cover to push his GSE hope.

Much of the speculating on the en banc panel focuses on the leadership of Judge Edith Jones and her history of expertise on FDIC matters of conservatorship and receivership—which are the Collin’s case core issues--that could produce a dramatic, timely, and consequential decision rewarding plaintiffs and pre-empting Administration options or at least making them tougher.




Maloni, 6-17-2019







12 comments:

TruGld said...

Post this under curious and nice timing?....
https://www.wsj.com/articles/goldman-sachs-to-combine-private-investing-arms-11560715048

Stormyweatherahead said...

The GSEs need more capital. Why not start now by ending the Net Worth Sweep? Easy as pie.
Sadly, inaction is the problem here. The words have come out but Trump, Mnuchin, Calabria and possibly more have entered the government world of paralysis.

There is not a perfect plan for all parties.

I am also in favor declaring the debt paid, cancelling the SPS, and cancelling the warrants which I am assuming were collateral. I would love a positive ruling from En Banc declaring the the SPS and Warrants deals as null and void.

There is some language within the agreement which talks about conditions for nullification of the deal but I don't have this in front of me.

Bill Maloni said...

Tru--Thanks for reading and sending that.

*********************************************

Stormy--Thank you for reading and commenting.
There ARE answers, but no will to implement them.

I keep repeating, with nobody listening.
Whichever political party takes any action which proclaims its support for more affordable mortgage finance for all who qualify--and actively embraces it--it's a political winner as well as super pro-consumer.

But the ideologues on the Right and the timid on the Left aren't listening or are stuck in in the past.

ViperMk121 said...

Bill - can you elaborate on your “PROCESS SLOWDOWN, TAKE YOUR MONEY AND RUN!” comment? Are you thinking investors should be ready to get out of the GSE stocks because you think the writing is on the wall?

Bill Maloni said...

You are asking me to speculate stuff on which I have no inside view.

But, if Calabria is or gets contrarian and nobody steps in to stop him (since I expect only the President can do that) then events could get thrown into 2020 or later, where DJT wins a second term.

All of the discussion--before Calabria came on the scene was-- once MC's here the Admin plan will fly and matters will move.

Calabria's here, matters haven't moved, and that is worrisome as if he's dragging his feet on what Mnuchin (and Phillips) put together.

Take your own measure of that?

You've waited 10 years, what's a few more or are they just seeking a hollow headline plan because of internal GOP opposition??

What's missing--or one hasn't self-identified yet-- is a public GOP advocate for taking the GSEs out fo conservatorship, returning them to private ownership (which some on the Right claim is setting them up again to fail, again) and moving on with this soap opera.

Gustave H. said...

Hi Bill,

You worked as top lobbyist for Fannie. Would you say that the current alliance of animosity against the GSEs is tightly organized, or more loosely? Did they learn from the GSEs under Maxwell and especially Johnson? And what is your view of the rather defeatist tone of Parrott’s recent Urban panel with Demarco? It seems even Demarco and Kaplan couldn’t devise of any way to compete with the GSEs without Congressional charters or PLS SEC registration.

Anonymous said...

Bill, I start to think Calabria cannot find enough new investors. A question, would you think President Biden will fire Calabria?

Bill Maloni said...

Gustave--

Yes, I believe the GSE opposition, or Howard's "Bankistas" and my "GSE Shtiwall," is larger and has greater support, including think tanks, and lots of media supporting them, but while I could give you a list of names, I couldn't say which "Joe or Sally" is in charge?

There are people being paid--and have been paid for years--to cripple Fannie and Freddie, and their work--largely among the GOP--doesn't dissipate.

In the meantime, the GSEs have nobody on staff and few folks around town pushing back (all part of the conservatorship gestalt) or advocating, save the low-income groups.

But, operationally Fannie and Freddie work for the public and systematically, while currently being hindered by their government overseers, who--apparently would rather have the big banks exclusively--controlling the primary and secondary mortgage markets. not the GSEs.

You asked about the Urban Institute and its hardly objective recent campaign to endorse almost anything which would replace Fannie and Freddie. I believe that its institutional reputation has been shattered over these exercises, which produce plans and schemes that quickly get ignored by policymakers and politicians.

Another major chink in that anti-GSE institutional armor was revealed this week when Moody's analyst/writer Warren Kornfeld reported his opinion that the Calabria "multiple guarantor" position was ill-designed and unnecessary and would be harmful, not helpful, to
the nation.
I wonder how--frequent Urban Institute actor--and Moody's chief economist Mark Zandi, a major supporter of "anything-Calabria and everything anti-F&F" feels about his colleague crapping on Zandi's longtime personal mission???

They can't be happy meeting in that Moody's board room when that cavernous disagreement gets discussed?

"Well Zandi said, but Kornfeld pointed out...!"
Give it all time Gustave, hope for a Fifth Circuit Court decision which jumpstarts the Admin's groping and emboldens Mnuchin.


Bill Maloni said...

Anon--Shouldn't have to wait for next year's elections.

I am sure the Mnuchin and Phillips plan will do nicely.

It's just a matter of WH/Treasury will to implement and stand back and enjoy the applause.

But, in my near 50 years in this town, I never had seen important government business/issues conducted so haphazardly and that goes far beyond the GSEs.

Bill Maloni said...

If available to you, read Monday's Paul Muolo article in Inside Mortgage Finance about the
Kornfeld article.

I added my own Mark Zandi observation.

Bill Maloni said...

One added a comment to "Anon" above, re sufficient investors...

If attractively structured, i.e. no excessive capital; reliance on much but not all of the post-2008 regulation, thoughtful affordable housing goals, removal of imbedded charter threats, I believe GSE investor money would flow in like a downhill stream.

Calabria's public idealistic and ideological wishes are scaring people off. If he gets pragmatic (listens to MnuchIn), he'd be fine.)

Bill Maloni said...

Read the excellent discussion of GSE capital Tim Howard posted in his blog on Wednesday.

https://howardonmortgagefinance.com/

For those who aren't capital mavens, it's simple.

The higher FHFA mandates GSE capital requirements, the more GSE eliible borrowers will pay for a mortgage especially if the regulator relies on ideological justifications instead of the years and years of publicly available GSE credit and loan loss data available to his agency and himself.