All the good guys have left town, leaving just the GSE vermin.....

More Hot Summer GSE Cats and Dogs

FHFA’s Mark Calabria is fast running out of time to prove he is anything more than a doctrinaire GOP anti-GSE traditionalist, who occasionally says something surprising about running Fannie and Freddie’s regulatory operation (the Federal Housing Finance Agency or FHFA), but otherwise hasn’t provided much hope that he’s any different than his Republican predecessors.

This past week with an unrequested letter to the Clerk of the Court of the Fifth Circuit Court of Appeals, FHFA (Calabria) changed the agency’s formal position—most recently established by his “acting” predecessor and the current Comptroller of the Currency, Mark Otting—on what largely has become a non-issue, i.e. whether the FHFA, created in 2008 by the HERA bill, is constitutional or not given the regulatory agency’s unique structure. 

But since that fact is a part of the Collins en banc appeal—which is six months into consideration--it could rear its head, but if it did, it’s unlikely Calabria’s late letter will matter. 

What’s more unlikely is that after three flip-flops, the Fifth Circuit suddenly would say,” Oh the Admin previously was wrong the first two times and now it’s "right," because Director Mark Calabria said so!” 

Here is what the Johnny-come-lately Calabria’s team wrote to the Court to change the record. (Bolded emphasis is mine!)

“Under its new Director, FHFA has considered (don’t you mean re-considered?) this issue. FHFA now advises the Court FHFA takes the position going forward that HERA’s structure is constitutional (even though we argued before it wasn’t). FHFA respectfully requests that the Court consider the arguments on that issue presented at pages 46-56 of FHFA’s Panel brief, and pages 10-15 of FHFA’s en banc petition, as presenting FHFA’s operative position. FHFA withdraws the statements relating to this issue at page 3 of FHFA’s supplemental en banc brief and to similar effect at en banc argument. FHFA respectfully requests that, to the extent the Court finds it necessary to reach the constitutional issue, the Court uphold FHFA’s structure and otherwise affirm the judgment below as to the Third Amendment.”

Why do that, MC? Why was it needed, legally, when more significant challenges face the agency, like the crucial establishment of reasonable GSE capital standards? 

Is Calabria seeking to make a GSE name for himself by trying to plug and paper over errors made by those who came before him and—in many instances—colluded with Treasury creating the circumstance over which the Treasury was sued by so many GSE shareholders? 

Is he seeking to prevent future legal infections by using this lawful but ultra-thin prophylactic??   

Here is a more pithy analysis sent by Cooper and Kirk partner Attorney David Thompson to the Clerk of the Fifth Circuit Court.

Dear Mr. Cayce:

It is no coincidence that since the current President took office the Department of Justice has had one position on FHFA’s constitutionality and FHFA has had three. FHFA’s latest switch, prompted once again by a change in leadership at the agency, only further underscores how this agency’s novel structure places vast executive power in the hands of a single individual who is wholly unaccountable to the President. Humphrey’s Executor (case referenced by FHFA letter) blessed the FTC’s independence because in that case independence—combined with leadership from a commission whose members serve staggered terms—was thought to promote continuity and expertise at the agency. In FHFA’s case, independence achieves the opposite of continuity by leaving critical policy decisions up to the whim of whichever individual happens to sit atop the organizational chart of an agency that answers to no one. FHFA was right the second time, not the first or the third. 

respectfully submitted,

/s/ David H. Thompson 

Skullduggery! No, Treasury is not slow walking or creating obstacles for the Court, Judge (which is as believable of the POTUS’s declaration that he’s not a racist as he tried—for the past several days--to Tweet-maim four minority Congresswomen because they disagree with him and his policies). 

Here is Peter Chapman’s review of a recent that Fairholme letter to the Court. 

Fairholme delivered a motion to Judge Lamberth today seeking to compel Treasury to share non-privileged documents Treasury doesn't want Fairholme to see.  Fairholme complains to Judge Lamberth that Treasury has "decided effectively to excuse itself entirely from the discovery process" notwithstanding "Treasury was one of the architects of the Net Worth Sweep and has a direct, and massive, stake in the litigation and resolution of the implies covenant claim."  Fairholme asks Judge Lamberth to direct Treasury to comply with the subpoena it served on Treasury in full without further delay.   

My fanciful thoughts to explain stuff we are seeing this summer? 

There is no hard evidence for any of this, save my devious mind tied to various GSE facts, rumors, and the determination of so many to neuter Fannie and Freddie. But, they sure would explain some murky things happening.

Calabria’s regulatory behavior. 

He’s a poser, self-inflated, who misrepresented himself during his nomination hearings (which happens so often these days, nobody wants to bother tying what nominees said to what they then do). Despite claiming to disagree with the net worth sweep and Fannie’s and Freddie’s nationalization, he’s a secret admirer because now he benefits from their financial GSE burden and gets to play GSE Commissar.

 Mnuchin’s GSE reticence; they're squeezing him 

Calabria sees Treasury Secretary Mnuchin has so much on his plate (and that doesn’t include Louise Linton’s latest movie) that SM's GSE promises as no longer priorities (no matter what some fourth level Admin flack says). Also the Secretary severely was weakened when Graig Phillips, his assistant hailing from Wall Street, was forced from his team and out of his Treasury post. 

Calabria has stepped into that vacuum and has started to flex his jurisdictional muscles, challenging Mnuchin’s much greater access to the President and superior GSE plan to end Conservatorship.

The betting is the Phillips-Mnuchin proposal, is getting pummeled by Calabria/Kudlow and Mnuchin doesn't have the time or wherewithal to deal with it.

Steve Mnuchin hasn’t been around enough—nor seems to possess the knife fighting qualities--to know how to play the "Inside the Beltway" bureaucratic game and step on minor officials barking at his ankles and seeking to steal turf, even when those folks are not nearly as close or as important to the President and shouldn’t be able to outmaneuver the Treasury Secretary. 

But we may be seeing that happen. 

Maloni, 7-16-2019