Wise Attempt to Stay Relevant and Retain A Seat At Table
Two of our fiercest opponents suddenly shifted gears and retreated to fallback positions. Former FHFA head Ed Demarco and MBA president David Stevens abandoned any hope of winding down Fannie and Freddie in their latest opinion pieces. This marks a radical shift on the side of our opponents. This shift should not be viewed lightly as they would never have surrendered so much ground if they were not convinced that defeat was certain. No one in their right mind would for that matter, the move was the equivalent of me acknowledging that the GSEs needed to be wound down, and their business turned over to the big banks, it was that radical. They know now that their dreams of a full wind-down is no longer a reality, so they are attempting to at least salvage part of their plot. I know many were quick to point out the fact that both of them still were pushing various aspects of their old plan, but that was to be expected.
I have confirmed that some of the leading voices on their side have acknowledged that a shift within the administration prompted their sudden reversal. Although both included similar bullet points, I must say that Demarco’s piece was far smoother and more effectively written than Stevens. I would guess that Demarco had help with his as it has the fingerprints of some of the more skilled conservative thinkers and writers.Stevens tried to go it alone working off just the bullet points.
Demarco acknowledged both the success and the importance of the shared risk initiatives that FHFA director Mel Watt has been enacting at breakneck speed.Demarco’s two-part plan consists of reformed GSEs coupled with the introduction of private capital into the secondary market through the CSP.Remember until now Demarco was strictly calling for wind down.
I would like to share portions of an article by Brian Honea entitled mae-and-freddie-mac-are-exceeding-credit-risk-transfer-goals that Andrew sent me today concerning the wild success of the shared risk. Demarco will be thrilled to see this I am sure. Much of what he calls for in his two part plan is well underway. “Credit risk transfer is now a regular part of the Enterprises’ business. The Enterprises are currently transferring a significant amount of the credit risk on almost 90 percent of the loans that account for the vast majority of their underlying credit risk,” FHFA said in the report. “These loans constitute about half of all Enterprise loan acquisitions.”
“In just three years, Fannie Mae and Freddie Mac have transferred significant credit risk on loans totaling more than $667 billion in unpaid principal balance (UPB), exceeding the goals set by their conservator, according to the FHFA’s Overview of Fannie Mae and Freddie Mac Credit Risk Transfer Transactions for August 2015 released Friday,”
Stevens Begins To See The Light
Some of my favorite Stevens quotes on Fannie and Freddie:
“Some might argue that this function could be replicated by other parties, private capital alone, or some new model.” This was Davids position until now.
“The role the GSEs play in supporting an affordable and sustainable housing finance system is absolutely critical to this nation.”
“Protecting the infrastructure of Fannie Mae and Freddie Mac should be a priority, because any transition to a new system will need to retain and redeploy key aspects of the GSE’s current systems and talented employees. Why reinvent the wheel and start from scratch when you already have so many of the necessary pieces in place?”
This is perhaps my favorite quote of all:
“The most important element here is to recognize that conservatorship is not a long-term solution, and in the current state may be the riskiest position of all. The GSEs do not have the capital to withstand the next housing downturn and the taxpayers do not want to be on the hook again if the companies falter. Setting a long-term pathway forward that offers structural reforms to the current companies and their operations, ends the conservatorship and opens the door for new entities to possibly compete with the legacy GSEs…”
Here we see a direct call for the reform/release of the GSEs, a complete abandonment of “wind down”. We also see Stevens plea for new entities to “possibly” compete with the GSEs.
David Stevens article was much harder to follow than Demarco’s as he clearly struggled to blend his new realizations with his prior misconceptions and ideas.He was far less tactful than Demarco as at times he still was trying to foolishly salvage his old plan by weaving in the misconception that Congress must act to resolve the conservatorships This is anything but true, and he knows it.
Those who have been following our struggle closely realize what a serious shift we witnessed.They also see that this was just one more dramatic event that seems to have been nonstop for the last several weeks.
https://davidhstevensblog.wordpress.com/2015/08/21/why-i-support-reforming-the-gses-not-eliminating-them/ http://www.wsj.com/articles/put-fannie-and-freddie-out-of-taxpayers-misery-1440112853#livefyre-comment (Another grossly misleading WSJ Headline)
The Real Wolves In Sheeps Clothing
I noticed some were referring to Demarco and Stevens as Wolves in sheep’s clothing, but this title is already claimed. Those like Jim Parrott and Mark Zandi have been the true wolves in sheep’s clothing. They were trusted by the President, and they betrayed him with their corrupt alliances and lies. Rather than share the truth with him they chose to parrot radical right wing lies and follow the playbook of FM watch. As I fought to get the truth through they fought equally as hard to keep their lies alive.They were not alone “left wing think tanks” the Urban Institute and CAP stand equally as guilty. I have been working on a post that will explain much of this in greater detail.
105 billion dollar return #Failed Model?
So now the beloved taxpayers have received a 105 billion dollar return on their 132 billion dollar investment. Soon they will have made a 100% return on their investment.The perversity of this bizarre arrangement is reaching epic levels.The thought that senior stakeholders deserve this kind of reward as the Jr. stakeholders are denied even a penny has no place in America. Even our fiercest critics are finding it impossible to suspend reality to the extent necessary to defend the outrageousness of this.
Fresh from Peter Chapman: (PDF link below)
“Attached to this e-mail message is a redacted version of Grant Thornton’s Response to Fairholme’s Motion (Docs. 165 and 206) to Remove the “Protected Information” Designation from Certain Unredacted Information in Documents Produced by Grant Thornton.
Grant Thornton discloses that it provides Treasury with annual valuations of Treasury’s Senior Preferred Stock in the GSEs and the Warrants for the GSEs common stock. Grant Thornton argues that its valuation process is proprietary and should not be publicly disclosed, and echoes the Government’s argument that releasing a small fraction of the 9,000 pages the accounting firm produced in discovery will present a misleading picture to the public.”
Critical Goals Accomplished
I apologize for the extra time between posts but we have accomplished all of our critical goals and are formulating the next steps. Also as the weather cools down a bit I am spending more time at the country club. I know readers were struggling to navigate the site with the 900 plus comments on a recent post. I will get new posts up before comments reach 500 in the future.
In light of the miraculous transformation by some of our most fierce critics I felt I should share a video: https://www.youtube.com/watch?v=IN05jVNBs64 Keep the Faith!