Fifth Circuit to Mark Calabria: Take that!
(Blog below was written before Friday night's BOFFO 5th Circuit decision came out! More on that in my next blog.)
We all should have seen
this coming--although I sensed it--when newly minted FHFA Director Mark
Calabria arrogantly began talking like a big bank attorney laying out a writ
against the GSEs.
His large piece of the
Treasury report ( although all of it is his) shows him not to be thoughtful government executive responsible
for fostering the GSEs return to financial health as privately owned,
appropriately capitalized financial institutions, able to carry out their
national mortgage liquidity role, but as an angry avenger seeking instead to turn them into perpetual wards of
the federal government under his fat FHFA thumb.
Yes, the Treasury Report says they want to re-privatize the GSEs but the Devil is in the details and I don’t find their details attractive. It's a potpourri of hobble Fannie and Freddie--and help the big bank-- memes dressed up as thoughtful proposals.
Yes, the Treasury Report says they want to re-privatize the GSEs but the Devil is in the details and I don’t find their details attractive. It's a potpourri of hobble Fannie and Freddie--and help the big bank-- memes dressed up as thoughtful proposals.
IMO, it should have been
a tip-off after his Senate approval when he told the press that ending
Conservatorship might take his entire five-year term.
Forget what he
told/promised the Senate Banking Committee during his nomination hearing. (Please
God, let them believe everything I say and not question me too closely. Of
course, my Republican allies won't but those damn Democrats might force out my real opinions!)
It also appears as if
Steve Mnuchin meekly has ceded GSE authority to Calabria--traditionally
Treasury's turf--a GSE critic, far less interested in how an unencumbered
Fannie and Freddie can help more American families to get their share of the
American Dream but instead how he can tilt the mortgage market in favor of his
longtime allies the nation's TBTF banks.
The Treasury report is a
piece of crap filled with hostile ideological GSE flotsam and jetsam labeled as
needs and recommendations.
Its sloppiness proclaims
it was written disjointedly by a committee, HUD, NEC, Treasury, FHFA, filled
with more caveats and ineffective directions to other government elements
seeking help to damage or derail the GSEs.
How many trees had to
give up their lives for most of this ineffective report to see the light of
day?
Put Ginnie Mae--an on-budget
federal agency--into the business of securitizing bank originated conventional
mortgage-backed securities, with its meager staff which never has worked on
anything but FHA/VA/Ag Department government-backed loans????? (There’s the bone to Michael Bright)
How does that create
more private capital and avoid possible Uncle Sam losses? (Stuff like that make
the report take on the elements of a garbage bin, hardly thoughtful
recommendations.)
Give the nation’s
behemoth banks a new federal loss guarantee for their private mortgage-backed
securities. (What have the big banks done to deserve any additional federal largess?)
Where in the plan is the
answer to Steve Mnuchin two-year-old promise to quickly free Fannie and
Freddie, as well make good on what DJT says is important?
Specifically where in
the plan’s vagaries are what Treasury and FHFA will do to facilitate
that grand Conservatorship objective?? Where is the step by step
discussion of the needed choreography each agency will perform to
free Fannie and Freddie which the Admin claims are its priority??
Everyone, including the
Admin's wool heads know Congress isn't going to work across party or chamber
lines to facilitate what Calabria
dictates, especially Calabria, himself, a child of the Senate Banking
Committee staff, who counts on SBC Chairman Crapo and VP Pence as his political
Godfathers.
Yet throughout this
report is loaded with useless demands/dictates that, "Congress should do
X, Y, and Z!!"
Where is Calabria's honesty about higher across the board mortgage costs if he gets to stick the GSEs with bank-like capital requirements or capital levels which their recent low credit losses and stress test results indicate are needed?
Naturally, leavened in
with his GSE animus/arrogance is the bureau-piggy suggestion that FHFA and Calabria need
more authority to make their desired massive
market changes which Congress never in the past thought necessary for a
second-tier regulatory agency which now seems to have Fed-like aspirational delusions.
But hey, channeling his
best Jim Lockhart/Ed DeMarco grander powers (which means more staff and
less money going to the Treasury) and ignoring GOP small government hypocrisy,
Calabria wants Congress to expand his turf and let him work his will.
I hope observers saw the
initial rejections of the Treasury reports by House Banking Committee Chairman
Maxine Waters (D-Cal.) and the Snare Banking Committee's ranking Democrat
Sherrod Brown (D-Ohio) and early indication of what most Democrats think.
A rumor still circulates
that former Treasury executive, Craig
Phillips working for Steve Mnuchin, crafted a solid end of Conservatorship
plan, but got muscled out of his job by Calabria and his allies, paving the way
for Calabria to make multiple changes to Phillips work--as Secretary Mnuchin was looking elsewhere busy on more important
Trump Admin priorities.
It certainly would be
revealing if the Hill would demand a copy of Phillips original work and what
alterations the FHFA and its new Director made to it.
I guess a real test of
Calabria's brooding about sufficient GSE capital will be tested at this months
end when he has a chance to allow the GSEs to retain their earnings, or, once
again force them to ship that cash to Treasury with the @ $300 Billion already shipped
over since 2012 to pay off the original $190 Billion debt. (Please note the
"2012 in perpetuity profit sweep" still is being argued in
federal courts.)
I wanted to get this off
my chest so before the counter ass-kissing comes from the happy with the Treasury
report trade associations and other interest groups start their chirping, although most of the news going forward will be about the Fifth Circuit's pro-GSE decision yesterday.
Besides the predictable partisan happy talk, let’s see if any of
these matters come up next Tuesday when the Senate Banking Committee hosts Secretary
Mnuchin, HUD Secretary Ben Carson, and FHFA’s Calabria or as someone tabbed them, "Hear no evil, see no evil, and GSE Evil."
