Today was a huge day as far as developments. I hope to post a little analysis on the government response, I am writing these two simultaneously, but that may have to wait until tomorrow. You have to read between the lines to decipher Julian Castros comments today at his confirmation hearing. He had no easy task as his comments had to serve a few different purposes. First and foremost he had to keep the refrain that was also used by Mary Miller in her speech, that is that it is critical for the country to reform housing finance through legislation. This steady drumbeat is for the benefit of Judge Sweeney. They hope to pressure her into siding with the government or gravely imperil our country economically. That somehow if the government loses in the Fairholme lawsuit or the Perry injunction the country will plunge into an abyss of bankruptcies. Don’t expect Judge Sweeney to fall for this.
The other much more important aspect of Julian Castro testimony was that the coup is alive and well. Note he did not endorse the Johnson/Crapo bill. He continued what is becoming a steady refrain from the administration, that the conservatorship is greatly impeding Fannie and Freddie from achieving their goals. The change in discourse is subtle, but you can see where this is heading. The conservatorship is exacerbating the weakening in the housing recovery(Home lending has slumped to a 17 year low) He chose his words carefully and contrary to several media reports he did not call for ending Fannie and Freddie. He very carefully stated “I share your goals of ensuring that we have a housing finance system that both protects the taxpayers in a stronger way than we have had in place, but also balances access to credit for folks of modest means who are credit worthy,” and “I absolutely believe that there are better alternatives than what we have in place with this duopoly and with this conservatorship”. “We can achieve this balance to stay within historic mission of FHA,” of providing affordable financing, he said, “but at the same time we have to have policies in place to make sure that what happened a few years ago doesn’t happen again.” words echo those from the democrats who voted no on the Johnso/Crapo bill. To achieve these goals, there is simply only one alternative, reform and release Fannie and Freddie. Julian Castro is about to assume a key roll in the democrats coup to ultimately reform and release Fannie and Freddie from conservatorship. This is a complicated issue for the democrats, right now their primary goal is to keep the profits diverting to the treasury while at the same time gearing up for their ultimate goal. Castro Has aspirations far beyond being head of the FHA, what a better stepping stone than successfully overseeing the reform and release of Fannie and Freddie and the multi billion dollar windfall the tax payers will gain.All while keeping the democrats housing initiatives alive and well. Keep the Faith!