Thursday, March 21, 2019

SBC GSE Hearings, which tough questions should/could be asked and issues explored?

Yawn, yawn, Ho Hum, Gag, Yak, Barf!!

In an email exchange with a reporter the other day, I announced what he already knew—pointing to next week’s Senate Banking Committee hearings on GSE reform--“GSE season is back!” (See latest witness list below for the SBC’s two hearing.)

Banking Committee Schedule for Week of March 25, 2019


Full Committee Hearing: “Chairman’s Housing Reform Outline: Part 1.”

Witnesses: Ms. Sue Ansel, President and CEO, Gables Residential, on behalf of The National Multifamily Housing Council; Mr. Edward J. DeMarco, President, Housing Policy Council; Mr. Greg Ugalde, Chairman of the Board, National Association of Home Builders; Mr. Mark M. Zandi, Chief Economist, Moody’s Analytics; Mr. Hillary O. Shelton, Washington Bureau Director and Senior Vice President for Advocacy and Policy, NAACP; and Mr. Adam Levitin, Professor of Law, Georgetown University Law Center.

Time and Location: 10:00 a.m. in room 538 of the Dirksen Senate Office Building.


Full Committee Hearing: “Chairman’s Housing Reform Outline: Part 2.”

Witnesses: Mr. Michael Bright, President and CEO, The Structured Finance Industry Group; Mr. Robert D. Broeksmit, President and CEO, Mortgage Bankers Association; Ms. Lindsey Johnson, President, U.S. Mortgage Insurers; Mr. Vince Malta, President Elect, National Association of Realtors; Ms. Carrie Hunt, Executive Vice President of Government Affairs and General Counsel, National Association of Federally-Insured Credit Unions; and Mr. Michael D. Calhoun, President, Center for Responsible Lending.

Time and Location: 10:00 a.m. in room 538 of the Dirksen Senate Office Building.

Note: All hearings are webcast live on and archived video will be posted on

Looking at the (usual) witnesses as well as the last 8 weeks of “all over DC GSE dialogue,” my media friend asked me why Senator Crapo (R-Idaho) was wasting his time  trying to move legislation (based on his previously published principles which have yet to morph into Crapo legislation—but which several of the witnesses have their version and could discuss their ideal evolution of those anti-GSE principles) didn’t have any chance of passing the Senate or emerging from a House-Senate conference if Chair Maxine Waters (D-Cal) drove her ideal Fannie-Freddie legislation through the House???

After telling him: because 1) Crapo can; 2) Crapo’s ego;” and 3) Crapo proving to the big money financial interests-- which bathe the committee Senators with contributions--that he can deliver.

Beyond those, I had no good answers for the reporter because—once again—this GOP effort is not about preserving or enhancing Fannie and Freddie or improving the mortgage finance system, but paving the way for the nation’s largest financial entities to replace Fannie and Freddie. 

The Crapo schemes have little/nothing to do with supporting the GSEs but a lot to do with replacing them. The Chairman does nothing to allow the GSE to retain capital or to enhance their ability to do that which has made them indispensable, i.e., the fair, efficient delivery of billions of dollars of home financing--more easily than any potential competitors. 

Why do you think "GSE Reform" has not happened for the past 11 years, despite when the GOP held control of all three elements of government?

And please don't utter a word about "GSE subsidies" until you measure what impact on big bank working capital operations cheap federal deposit insurance has? (Psst, banks have a lower cost of funds than the GSEs, although most of that is wasted in big bank brick and mortar overhead.)

Back Home

The GSEs no longer provided this information with regularity, but some SBC member should ask the GSEs to provide 5-10 years’ worth of their business data showing how much mortgage capital they supplied in each state represented on the Committee and how many mortgagors (family households) 
Fannie and Freddie have helped with those mission investments.(Remember, Senators, many of those constituents are voters and would be most PO’d if you voted to hamstring the nation’s primary and secondary mortgage markets by endorsing these contemplated massive Crapo changes.)

Once the FHFA supplies the SBC with this important "back home" mortgage data, at least all Senators could see what the near term effect would result from Crapo’s “principles” to diminish GSE services or do away with the GSEs themselves, while he claims to reduce taxpayer risk. (Most of which already has been eliminated by the past 10 years of tighter regulation.)

Senators new to the committee—and those older—just should “follow the money” and ask their favorite witness who—he or she—believes likely gets the GSE revenues, now going to the Treasury, if Crapo and his allies succeed in their campaign?


In addition, and just for perspective some thoughtful Senator or his/her staff should research or just ask those witnesses their familiarity with what role Wells Fargo Bank—whose financial infamies must be fresh in Senators’ minds from the Wells House Banking Committee testimony about a week ago—played in the various “kill the GSE bills,” which have shown up formally before the SBC or are implicit in the Chairman’s “GSE principles?”

Ginnie Mae

Also, a curious Senator might ask Mr. DeMarco to explain exactly what he was doing--as the GSE's acting Safety and Soundness Director--when another witness, Michael Bright, wrote recently how he and DeMarco at thast time wrote proposed GSE legislation to euthanize Fannie and Freddie?

Senators you'll have both of those gentlemen in front of you next week, ask them about their plan to make Ginnie Mae, Ginnie Mae--a division of HUD with a few hundred employees, replace Fannie and Freddie with their 12,000 workers, most of them VIRGINIA residents, Sen. Mark Warner (D-Va). Of course that plan was hatched when Bright was headed to work at Ginnie.

I've written this line before in a previous blog, but if you missed it, I doubt even Idahoans would like to see this headline.

Think about this possible headline. "GOP Senator Crapo gives HUD $$ trillions to manage US mortgages." 

That story could get you un-elected, not re-elected, even in Idaho!

Ask the tough ones, don't play along

Where warranted, tough witness interrogations—at the end of two days—might well find answers to “What happens to the public and to my state if the Crapo principles become law; which institutions benefit from that same action; and who/what has been driving this “solution without a problem,” since the mortgage finance system—with Fannie and Freddie in the lead—has been working well with no explicit help from a government that has aggrandized all but a sliver of Fannie’s and Freddie’s business revenue (some $290 Billion) for the past 6 years. (Gee, doesn’t all/most of those $Billions represent lost protective capital?)

Or just ask those question to Chairman Crapo, himself? I am certain he is completely conversant in all of the operational implementations, and logical consequences of his ideas??

Oh, most of these Crapo-chosen witnesses  expect a lovefest (or he would not have invited them), but if some hard driving take-no prisoners Senators refuse to play the “nice-nice game,” they could benefit by avoiding 2 hoary days of:
"Yes sir and thank you, Chairman Crapo, for holding these important hearings and for your introduction of these GSE postulations leading to possible legislation...gag, yak, barf!! You'll hear no harsh language or disquieting opinions/analysis from us.....of course, we can't be sure of the law guy or the NAACP woman, but “Messrs. DeMarco, Zandi, Bright and we trade peeps, won't disappoint you. Did you read our Otting letter, your Sirness?"

Maloni, 3-21--2019