Turn those eyes back on Calabria

“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