To me, it’s cooked that Calabria goes for bank capital for the GSEs—because he’s a bank-backing believer guy

The D Primary Debates and Fannie and Freddie Capital Requirements

Here I sit all broken hearted, waiting for Sweeney or the Fifth Circuit to rescue the GSEs and feeling very thwarted. (Hold the applause for my creativity, thank you!)

I want to offer a few non-Fannie/Freddie political comments before I go full GSE. (Calm down, Anon#1, I’m going easy on your guy.) 

Joe Biden’s campaign may have been dealt a mortal blow in last Thursday night’s debate. A record is nice to have but the longer and deeper it is, the more targets it represents. 

Any prompt comeback will be a true resiliency test for the former VP!

The former VP looked uncomfortable and sounded bad when pinioned by those youngsters competing to represent Democrats next year.

 Andy Borowitz—the New Yorker’s sharp political humorist suggested after the D debate, DJT might want to make a major financial contribution to the Biden campaign to resurrect it and just keep Biden in the race for punching bag purposes.

Watch things change soon among the 23 D presidential candidates, whose names I couldn’t rattle off absent a pictured scorecard (and still I would misidentify a few)!

Based on the early D skirmishes, I look for Warren, Harris, and Buttigieg to strengthen their current positions while the remaining candidates flutter by the wayside.

That large wannabe gaggle is a natural response to the unconventional first Trump term and his “Here I am, warts and all” presidency—which, for many, cries out “anyone but DJT”—yet the POTUS insists on displaying his offbeat and classless presidential side every day (fighting with Megan Rapinoe and joking with Putin about US election interference, which many R's agree occurred; "Hey it's Saturday night, let's go to North Korea and shake some hands and spread some Kim compliments.") which breeds those potential replacements.

Interestingly, the D’s could produce an all-female ticket and ultimately tap Warren and Harris (in any order?) hoping that duo could garner 90% of the entire US college educated female vote and enough moderate D’s and R’s to deny President Trump a second term.

(Not an election recco!) 

It’s clear to me that a Harris/Warren or Warren/Harris ticket is intellectually more gifted than Trump/Pence, more policy-oriented, and more attuned to the lives and worries of those who are not among the nations wealthiest. But, is that enough?

Is the US ready for those smart Y chromosomes?

IMO, that D pair would be strengthened, tactically, if every time DJT uses the “Pocahontas” taunt against Warren—or whatever nickname he will fling at Kamala Harris--they would call him “the Orange Baby” or “a crotch-grabbing braggart,” just to see if he can take what he gives out?

Or, either might just read off the names of the 15 or so women who have accused the POTUS—before he took office--of various types of sexual abuse and at least two extra-marital affairs, since he married Melania Trump.

To gender-balance (and remove some of the white bread and mayonnaise) the presumed GOP ticket, will VP Pence “take one for the team” and sit out 2020 “to spend more time with his family?” Mrs. Pence may not cotton to that.

GSE Capital, calling BS now….

I’m not giving Mark Calabria and the Federal Housing Finance Agency (FHFA) time until they publish their GSE risk-based capital regs (for which the nation has been waiting for a decade or more) to call “Bullshit” on their product, since I predict it will be ugly for Fannie and Freddie and a delight for GSEs opponents. 

If I am wrong, there’s plenty of time to apologize. But, if I nail it now, I’ll be ahead of the curve in calling out their political bias!!

Despite engaging the Wall Street investment bankers who are considered experts in this tricky maneuver—which also will heavily impact how Calabria wants the secondary mortgage market to evolve—I believe the new Director still will try and hamstring the GSEs by insisting they become subject to bank sized capital requirements, not capital measures for what the two legally and practically have become, i.e. monoline insurance companies which only can securitize single and multifamily mortgage loans, with business risks far fewer than commercial banks that can lend domestically and internationally to a variety of customers.

The respective geographical limits, alone, i.e. bank commercial and international lending versus GSEs only financing US-based real estate assets, contains different and multiple unique bank risks that Fannie and Freddie never will/can have. 

Given that reality, alone, Calabria and his team should stop right there, but they won’t. 

Based on his professional history, I think Calabria will take the very political route and call for bank-like capital or something higher than historical GSE loss data indicates.

He also appears to be surrounding himself with a larger FHFA staff posse, part of his reported personal agenda (hubris?) to pre-empt Treasury as the final word on GSE policy. (Stevie Mnuchin, you really going to let that happen, under your nose/? Louise will be pissed!)

That allows Calabria to keep faith with his bank and rightwing allies and is easy to cover his intention by explaining to the Hill and media, “More capital is better protection because, sir….er, oh, and--just like you--FHFA and I want to protect the taxpayers.” 

When you know the answer to that Q in advance, it’s like asking Mike Pence if wearing two condoms, before coitus, is safer and preferable to one (or asking him the same question before going to the supermarket or a gas station). 

Will Anyone Stand Up and Explain, "There is a mortgagor cost to excess capital?"

Will every Senator and MoC suddenly get stupid and ignore mortgage cost reality, to the extent any of them understand it now?? 

Will any of them—any, on either side of the Hill, in either party—point out, if that becomes Calabria’s decision—he and FHFA will make every mortgage loan which Fannie and Freddie can finance more expensive for the mortgagor (the borrower) since higher borrowing rates is what his higher GSE  capital decision will produce?

Lenders will claim, “This loan might go to the GSEs—I don’t know yet—just in case, I have to build in their capital costs on each loan I make or acquire. If I ignore their capital needs, now, it could come later from my profits.”

Is that what it will take for Congress to finally grasp, “There is a cost to (higher) capital,” something most of them don’t seem to understand now? 

Yes, every one of those citizens—every one of those congressional constituents, every one of the mortgagors who vote—will pay more for their home loans if Calabria goes ideological and casts aside GSE loan loss records as the basis for his final F&F capital decision. 

Oh and watch him, the Director seems to support a new federal guarantee for the big banks—as if they weren’t bowlegged from the weight of their existing ones--to cover future private label securities (PLS) losses.

Once again, if he does advantage big banks by weighing down GSE pricing with higher capital, will someone on the Hill or in the media suggest Calabria’s forgotten the colossal 2005-2007 bank private label securities folly and recklessness, which cost the taxpayers more than $500 Billion (in 2009 TARP funds)?

It's curious the GOP and its business and its fellow travelers have the most difficult time remembering those pre-2008 facts. Likely because it blunts their claims that the GSEs caused the 2008 financial Armageddon. 

But for the past two years, lots of smart people—inside and outside of government—have belled that financial depository cat and placed responsibility for the 2008 economic mess at the feet of the nation’s largest banks, which created some $2 trillion of their own flawed subprime MBS and sold those soon-to-fail bonds worldwide, with inflated Wall Street ratings and insufficient financial insurance behind them. 

We have the same set of federal bank-coddling regulators in place now as were there in 2005-2007 and which--then-- overlooked/ missed all of the bank PLS follies, husbanding their regulated institutions not overseeing or spanking them. 

If you hamstring the GSE with unnecessarily high capital requirements, will the banks and their regulators—seeing a chance to kill the GSEs--be any more responsible regarding bank mortgage security behavior now than they were leading up to 2008???

Could I be wrong about Calabria and the FHFA when they publish the agency’s capital rules?

Sure, but I don’t think many leopards change their spots.

Maloni, 6-30-2019