Friday, May 17, 2019

Waiting for the Fifth Circuit and Goodbye Craig Phillips




Perdue and Menendez, for the people!

At least, a bipartisan set of Senate Banking Committee members, Sen. Sonny Perdue (R-Ga.) and Sen. Bob Menendez (D-NJ), have recognized the BS in using GSE revenue to fix non-GSE-red ink in the mammoth deficit budgets—which didn’t start with President Trump (originally that was President Obama’s DNA on them), but certainly they have grown larger under the Trump administration. 
However, the problem is this legislative idea is too much "good government," which means its unlikely to get considered. 
Although it’s a righteous idea, I doubt if this proposal passes de novo (especially not if the White House still has plans for that roughly $20 Billion or so they collect annually from Fannie and Freddie for other budget costs) or attached to some other piece of must-sign legislation.
I only hope these two SBC warriors are doing it for the reasons they claim so that G-fees (which are set not by the companies but by the Treasury/FHFA based on capital requirements) don’t rise and push would be mortgagors outside the necessary homeownership income requirements. Also, that the Senate pair stay “GSE friends” if a plethora of related matters come before their committee. 
Mark Calabria from Mt. Olympus!!
The new FHFA Director, speaking earlier this week at the National Association of Realtors (NAR) conference, hurled some headline-making lightning and thunderbolts which got the mortgage financial world’s attention, especially his declaration the Admin really doesn’t need Congress to seek GSE changes (um, who didn’t know that?) and Fannie and Freddie could IPO or start searching for required capital by early 2020 (that’s assuming the executive’s magic GSE reform package is implemented by FHFA and Treasury, to which Calabria now claims in these matters he’s equal)! (I wonder if Mr. and--certainly--Mrs. Mnuchin think that way? Don‘t assume the boss’s wife isn’t important here!)?
Thursday's Inside Mortgage Finance (IMF) reported that some economists in attendance, sharply disagreed with the Director,  apparently after Calabria departed.
Since I couldn’t get/read a copy of that IMF story, I’ll need to see a more fulsome report of those opinions before I can comment. 
Let’s hope a few of those economists--I suspect not one a GSE fan--pointed out the capital flaws in Calabria’s plan; the BS about multiple guarantors if the Treasury still threatens to do away with the GSE charter (what would investors buy?); and the same question, if the WH doesn’t settle with current GSE shareholders. 
Who is going to put money into anything, where that is the risk, along with the chance some future Administration mirroring Bush and Obama chose to aggrandize all of the future profits of the “new mortgage finance system?” 
David Stevens said what???
My friend David Stevens authored a piece worth reading. But it won’t be surprising, the man who spent several years in league with the large TBTF banks, or  “Too Big to Fail,” now argues any Trump regulatory effort should be avoided because it won’t help the GSEs just the behemoth financial institutions.
Say again?
It’s all conjecture on David’s part tied into the belief that GSE mortgage-backed securities (MBS) will lose their national and international investment profile because of the absence of an explicit federal government back up. 
Unfortunately, DS appears to be running with the same old anti-GSE crowd, with his report offering support from “the old AEI fellow traveler” Jim Parrott and then a Moody’s analysis (say, isn’t that Mark Zandi's employer, whose DNA is all over the hugely inflated of bank PLS ratings form 2007-2008).
Dave is and will be a smart guy and I guess his prognosis is no worse than mine, when I say any massive restructuring of the GSEs will produce a slow, cumbersome inefficient set of bank-connected replacements which will cost US consumers tons of money. 
But, I think it easier to look at his column realizing he seems to oppose anything which holds hope for the GSEs returning closely to their former operational roles and with more freedom of movement than they've enjoyed in 10 years. 
On the good side, he did acknowledge that 4.5% GSE capital would be very expensive (and in Tim Howard’s view more than double what’s desirable or necessary).
Stay healthy and well David!
Craig Phillips
Yesterday brought the news that Treasury Secretary Steve Mnuchin’s GSE counselor, Craig Philips, will be leaving his job (which the Admin quickly reported would be when the current GSE housing reform project is completed, which could be “never in God’s lifetime.”)
Thank God, Sarah Sanders didn't say, "Mr. Philips wants to spend more time with his family."
Some Reasons Why CP bagged it?
My analysis of why Philips is leaving, based on my well-known GAPDP (“generally accepted political departure principles”). 
One: he’s tired of his Treasury take-home pay, eating in the Treasury mess, and, publicly tackling the flag, daily, to show his patriotism. New York restaurants and compensation look so good in comparison. Not to mention the low key hum of daily Manhattan indifference. 
Two he’s PO'd having to deal with political buttheads—downtown and on the Hill (can you say Kudlow and Crapo?)--who still pronounce the “t” in mortgage. Phillips can’t understand the reason Treasury is holding back on its perfectly sound GSE reform plan which he helped polish and lock down weeks ago? 
He keeps repeating, “I don’t understand, we didn't operate that way on 'the Street.'”
Three: his third cousin is Judge Margaret Sweeney and he worries if he doesn’t get out of DC “Right &^%$#@* now, his picture will join hers on area milk cartons.
Four The obvious, given the timing, is he thinks he’s smarter, more capable than new FHFA Director Mark Calabria, MC's team and a lot of others who claim to understand the Fannie-Freddie issues and wish to make GSE policy. CP's past few weeks just reinforces that fact.
Good luck, Craig Philips. We hardly “knew ye” and don’t let the GSE door hit you on the way out.
More recent info. Strong rumor is that Phillips lost an internal battle and took the honorable way out, i.e. financial/political DC hari-kari! But, I predict he’ll still have plenty of cache when gets back to the Big Apple.

Maloni, 5-17-2019