“Liar, Liar Pants on Fire”
The GSE Conservator and Safety and Soundness Regulator,
Mark Calabria, seems driven by Fannie-Freddie ill-intent.
His recitation last week to the Credit Union National
Association (CUNA) annual conference makes my point.
Regularly, he tries to rewrite history, resurrect old
fabrications, and wittingly or unwittingly dampen investor hopes about future
GSE values.
The last one is super ironic, especially because he needs Fannie
and Freddie securities offering financial hope, not regulatory doubts, when
“Conservatorship” ends, so the two can attract investor capital, reduce risk, and carry out their mission, whatever he
allows them to do after his GSE winnowing??
(Of
course, by that time, our new President—elected this coming November—long will have
suggested Mark C. pursue his life interests elsewhere.)
Calabria wants people to forget the past—when his buddies,
the large banks, fought tooth and nail in Congress and in financial regulatory
agency offices—to keep small banks and
credit unions under thumb, let alone competing with the behemoths to make
mortgage loans.
I worked on the Hill and later for Fannie and, in both places,
I was witness to those industry disputes. I’m sure MC was a bank ally when he
was a Senate Banking Committee staffer.
Four decades ago, GSE business recognition of the credit
unions and other small lenders helped build their business, stand up to the big
banks, and make a viable option for consumers and an alternative to bank offered
mortgage financing.
As reported by Inside Mortgage Finance, at the CUNA
event, Calabria seemed to forget (Ooops!) that Fannie and Freddie sloughed off big
bank hatred of competing against credit unions and approved the much smaller "common bond" lenders as GSE “seller servicers,”
providing a coveted commercial lifeline to those institutions, giving them and
their members huge liquidity and a cost-saving mortgage financing alternative to bank loans. (GSEs siding with the
credit unions and giving them business access is another historic reason big banks
and the GSEs have clashed.)
That is just one of the reasons why the credit union trade
groups and the Independent Community Bankers of America (ICBA) always supported the GSEs.
The Director’s CUNA comments seem a microcosm of his laments.
Last week, Calabria again bemoaned the “GSE business model,”
while suggesting Congress grant him additional authority (presumably so he
could add to those 600 FHFA current employees who failed to put together a risk
based capital draft rule, causing him to go outside and spend millions on consultants).
Ahem, Mr. Director, do you mean the business model which allowed the GSEs to earn well over $200
Billion for the Treasury and the federal government since 2013?
That business model?
It seems the Director’s external (and internal?) agenda is
to make up a lot of GSE crap, cast himself and FHFA as avenging/refurbishing angels,
and hope most people won’t call BS on
him/it because he’s the GSE Conservator and Safety and Soundness regulator and
should know stuff.
Rhetorically, has anyone—since Calabria has taken
over—heard him praise the GSEs for anything?
Has he said any good things about the GSE mission
achievement, their exemplary low credit losses in their only permissible
business product, or homeownership success in helping low income families? How
about their revenue generation?
IMO, the plummeting values of Fannie and Freddie stocks have
less to do with the internationally threatening coronavirus, but more to do
with Calabria’s angry babbling to this or that interest group.
He should want the GSEs bright, shiny, and very investor attractive,
so they can raise capital. (I also don’t see
other federal financial regulators denigrating their regulated wards, as Calabria does.)
The FHFA leader’s continued knocks and negative observations
about Fannie and Freddie--the two major entities he oversees (since nobody counts the Bank System),
don’t promote what’s needed unless he is competing against himself in some
weird three dimensional chess game using a multi-level board.
(Mr. Director, the next time you crack wise at
an industry event using Angelo Mozilo as a cudgel, you might check Wikipedia, first, to see what it says
about Countrywide and one of your most senior and recent hires. Your presentation
faux pas is on you not him.)
For a long time, I’ve blogged there is nothing in Calabria’s
charge that prohibits him from promptly ending Conservatorship. Yet—to employ a
favorite DJT construct, “many people agree”--it looks like the Director Calabria
still wants to throw sand in the GSE gears and drag the process out for years.
Take your thumb off the scales, Mr. Director.
Maloni,
2-27-2020