“Jots and Tittles,”
F&F minutiae, and some GSE things
I think
For those of you who
read my blog's comments
section, you're aware that my major blog-friendly protagonist--Anon#1--and I
have agreed on a significant matter.
Based on history (my
rationale) and intuition (likely his reasoning), something BAD is due to upset the GSE applecart
which has been moving along quite nicely based largely on news suggesting a
pending Admin announcement of its plan to free Fannie Mae and Freddie Mac from
"Conservatorship."
Not sure exactly what will occur when, but I suspect Fannie/Freddie detractors will assemble a “not now” list and
pitch a “wait longer” agenda.
Last week, Sen. Sherrod
Brown (D-Ohio) suggested financial chaos if the Admin released the GSEs from
Conservatorship, although he and his staff must have missed the past 10 years’
worth of tight regulation and de minimis GSE credit losses as well as their superior
and low risk “stress test” result just reported by their regulator, the
Federal Housing Finance Agency and its new Director, Mark Calabria.
Plus, nobody I know recommended
getting rid of their regulators, as Brown suggested. The GSEs, Treasury, nor the Federal
Housing Finance Agency certainly haven't.
But, it is that kind of
off-the-wall bloviating which derails trains and schedules.
On the other side—far
more tactical than strategic--in a periodic development at which I often point
with greet glee** to showcase media hypocrisy, Fannie and Freddie, led the
Saturday (8-24) Washington Post stock market table of "local gainers and
losers" each with 24% percent growth over the previous week.
(**The Post for years
has been a GSE-opponent, often
arguing against the GSE mix of
public mission and private ownership--at least until the 2008 conservatorship, which took away most of
the GSEs private control--yet still
reports on them as if the two were totally shareholder-owned, in a way making
my primary point that their private ownership drives their success. The
alternative GSE replacement being some configuration of the nation’s largest
banks or some purely government HUD or Ginnie Mae concoction which for good
reason Congress rejected in 1979, when the original Fannie was recreated/rechartered, and I strongly believe would still do that today.
The horns of the Post’s
“dilemma” are not unlike the federal government’s own, because of the inconsistent
(“Are they government or not?”) longtime ideological treatment of the
GSEs. The Congressional Budget Office (CBO), a historical (and hysterical) GSE critic, still treats the GSEs as if they were part of the federal
government (“private shareholders, what shareholders?). While the
Office of Management (OMB)—which, is seldom GSE-friendly, and fashions the
Admin’s annual Budget—treats them as private entities, even after
the 2008 Conservatorship.
Welcome to federal government accounting schizophrenia GSE-style.
For more detailed understanding
of this bizarre ying-yang
treatment—which makes it easy for F&F critics to hide behind one or the
other formal mistreatments of
the GSEs, read the CBO document which elaborates on the
historic conflicting budget treatment. (This
doesn’t occur anywhere else with multi-billion financial institutions and the
Budget.)
Also, remember, if you treat
the GSE as one of Uncle Sam’s parts,
you would need to put all of their debt and MBS on
budget, which is a $5 trillion “add on” matter no pol wants to touch even
for consistent federal
accounting purposes.
Say it ain’t so
While shopping last week, I bumped
into an old acquaintance, who for the past 20 years or so has worked for
the GSE regulator at OFHEO/FHFA
and—as with most employed there---never has been a GSE supporter.
After making agency small talk with the person, I asked, “How is it working for the new Director, Mark Calabria?”
The concerning answer was, "Oh he's fine, reminds me a lot of Ed Demarco, touching this little thing and that, always trying to make small things work!"
In view of the fact that most people looking back
at Ed’s tenure think, “Only termites were more destructive to housing than Ed Demarco's GSE time,” I didn't react warmly to the veteran regulatory employee’s analysis.
Say it ain’t so, again (the Return
of "User Fees?")
A few years ago, the Obama
Administration started tapping the GSEs for
non-housing, non-GSE purposes, to
wage war against their deficit spending. It employed a 10 basis point
fee which went to the Treasury for deficit reduction purposes.
But one mortgage policy analyst, Cowen Associates’ Jaret Seiberg
believes the matter could get back into a Trump budget if the Admin needs
additional revenue to pay for an election-year tax cut.
JS says using the GSEs as cash cows, just as Obama did,
could be in the cards.
In my Fannie lobbying days when similar issues arose, we
coined the derisive term “homeownership tax,” to describe and
defeat (for several years running, every time it came up) a Reagan
Administration proposed 25 basis point fee on all Fannie and
Freddie debt and securities.
It was a very successful meme which
allowed us to rally housing organizations and consumer groups across the
nation--as well as the media--to denounce or
editorialize against any similar mechanism,
instantly making most in
Congress very hesitant to
endorse it.
Interestingly Cowen (Seiberg) quickly jumped to the same
conclusion/rationale we did --possibly because
he was around way back when and
saw it in use--when he wrote, “What starts as a temporary 10 bps
hike could become a material and permanent tax on housing.”
Also, remember, if you treat
the GSEs as one of Uncle Sam’s
ribs, you would need to put all of their debt and MBS on budget, which is a $5 trillion add on matter nobody
wants to touch.
Over the weekend, the Trump team
said a new tax cut was “off the table,” but I suspect that means for the
nano-second it took Kudlow and others to correct the POTUS.
New Fannie Board
Appointee
The Administration named
former FDIC head Sheila Bair to the Fannie Mae board, a collection which seldom
says anything or does anything for their $125K-$150K annual base comp (just
like their Freddie counterparts).
These rubber stamp entities
represent (R's and D's, when they hold the White House) sinecures to be ladled out
in return for past party allegiance, which is why—if Conservatorship ever
ends—new shareholders will elect different directors.
Maloni, 8-27-2019
(Thanks, again, MrF for your invaluable help; while "jots and tittles" is a phrase a brilliant former Fannie boss, Bob Zoellick, used to describe important but small details.)
(Thanks, again, MrF for your invaluable help; while "jots and tittles" is a phrase a brilliant former Fannie boss, Bob Zoellick, used to describe important but small details.)
