FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[Guest cherzeca]

Well....why cant Calabria/Otting stop the sweep and let this reform nonsense die out alongside the recap of capital? As long ago as they were I think this is what Otting maybe have been hinting to in his comments and letter to Maxine Waters.

 

What a pathetic last gasp this is, a show from all of these experts.

 

I couldn't watch, but prof. levitan addressed this committee in 2011. about explicit guarantee. did they drag him back to make same point 8 years hence?

 

Dont recall much about explicit guarantee. . He talked mostly about the single guarantor model. If anything all of this chatter by otting seemed to have put congresses' butt in gear.  If sweep is held on 3/31 if anything it would create more urgency and Otting could frame it a step getting FnF out of conservatorship with reform via Congress.

 

right.  in 2011 noone was talking about multiple guarantors. levitan argued for a paid for fed guaranty back in 2011, and I thought he would likewise now.  he's a respected finance law prof and that he pissed on multiple guarantors this time around is good to hear

[Guest cherzeca]

admin flipping finger at congress.  this is good:  https://www.politico.com/story/2019/03/26/fannie-mae-freddie-mac-1296067

[Midas79]

admin flipping finger at congress.  this is good:  https://www.politico.com/story/2019/03/26/fannie-mae-freddie-mac-1296067

 

That's not the administration skirting around the letter of the law, it was Watt.

 

I don't think this is a good thing if it catches the attention of Congress and turns into a media narrative. Some there already think that FnF are too powerful, and this only reinforces that view.

[rros]

admin flipping finger at congress.  this is good:  https://www.politico.com/story/2019/03/26/fannie-mae-freddie-mac-1296067

 

That's not the administration skirting around the letter of the law, it was Watt.

 

I don't think this is a good thing if it catches the attention of Congress and turns into a media narrative. Some there already think that FnF are too powerful, and this only reinforces that view.

Or the view that FHFA is the one that is too powerful. Or unrestrained.

[Guest cherzeca]

I still like it.  subtle message is that congress will get steamrolled.  how in hell does congress get off saying ceos of fnf cant make normal salary?  punch a bully in the nose and watch him retreat

[rros]

The White House is expected to release a presidential memo instructing the Treasury Department and the Department of Housing and Urban Development to draft reports on reforming Fannie Mae (OTCQB:FNMA +0.4%) and Freddie Mac (OTCQB:FMCC), Politico reports. There won't be much substance in the memo. That should come in the summer OMB government report plan.

[hardincap]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

[Midas79]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

 

The same thing that happened with Jumpstart, most likely.

 

I wonder how far back this really sets the administration? If Katy O'Donnell is correct then it might not take long at all to write this report. Treasury and FHFA could also continue to work together in the meantime.

 

Our housing pro, Katy O’Donnell, reports that there won’t be much meat to it — expect a longer version of the section on GSEs in the summer 2018 OMB government reform plan

[allnatural]

According to the report this is not a starting point, but as reported, ""The move would be the culmination of months of meetings among administration officials on what to do about Fannie and Freddie." This contradicts Howards point of starting from scratch to vet out reform.

[orthopa]

The White House is expected to release a presidential memo instructing the Treasury Department and the Department of Housing and Urban Development to draft reports on reforming Fannie Mae (OTCQB:FNMA +0.4%) and Freddie Mac (OTCQB:FMCC), Politico reports. There won't be much substance in the memo. That should come in the summer OMB government report plan.

 

My first question would be does more capital go along with reforming goals of he WH? I would say so. We will know with sweep this weekend.

 

"Everyone " seems to be against recap and release but ok with recap and reform.

[orthopa]

The White House is expected to release a presidential memo instructing the Treasury Department and the Department of Housing and Urban Development to draft reports on reforming Fannie Mae (OTCQB:FNMA +0.4%) and Freddie Mac (OTCQB:FMCC), Politico reports. There won't be much substance in the memo. That should come in the summer OMB government report plan.

 

any link to article or just a headline?

[Guest cherzeca]

I usually agree with Tim howard on everything but here I just think this is a sensible approach and not necessarily a stall tactic; I would think the admin plan referred to by Otting would (certainly should) be detailed and expansive.  if it isn't yet, then it should be further developed.  if it has to cover various alternatives (such as multiple guarantors) and explain why that approach is or is not being incorporated, so much the better

[investorG]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

 

the likely timeline: 

 

otting's comments leak.  congress tells wh privately they will go fast.  wh says publicly they want to work with congress.  crapo outline released.  mnuchin writes brief support statement.  2 days of productive Senate hearings.   

 

today's hearing went better imo.  Calhoun was strong.  lots of utility talk, less Demarco agenda.  barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes.  that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point.

 

so things changed vs january.  mnuchin is likely giving congress 1 last shot.  crapo likely knows time is of the essence, and things will likely move quickly.  this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome.

 

[allnatural]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

 

the likely timeline: 

 

otting's comments leak.  congress tells wh privately they will go fast.  wh says publicly they want to work with congress.  crapo outline released.  mnuchin writes brief support statement.  2 days of productive Senate hearings.   

 

today's hearing went better imo.  Calhoun was strong.  lots of utility talk, less Demarco agenda.  barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes.  that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point.

 

so things changed vs january.  mnuchin is likely giving congress 1 last shot.  crapo likely knows time is of the essence, and things will likely move quickly.  this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome.

 

+ Begin retaining capital in the interim once Calabria is in his seat which shouldn't disrupt any reform efforts.

[investorG]

if crapo wants to stall admin action, he might keep in the multiple guarantors in his bill because that would likely lead to a party line vote  and some potential dead ends in the full senate and house.

 

alternatively, if he wants Sherrod brown on board, he will likely transition away from big bank centric ideas (apart from the govt mbs guarantee) and this increases the odds of a bill passing this congress.

[investorG]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

 

the likely timeline: 

 

otting's comments leak.  congress tells wh privately they will go fast.  wh says publicly they want to work with congress.  crapo outline released.  mnuchin writes brief support statement.  2 days of productive Senate hearings.   

 

today's hearing went better imo.  Calhoun was strong.  lots of utility talk, less Demarco agenda.  barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes.  that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point.

 

so things changed vs january.  mnuchin is likely giving congress 1 last shot.  crapo likely knows time is of the essence, and things will likely move quickly.  this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome.

 

+ Begin retaining capital in the interim once Calabria is in his seat which shouldn't disrupt any reform efforts.

 

while possible, there's a better chance they leave the sweep intact until they lose a court ruling or congress fails imo.

 

[orthopa]

tim howard:

my suspicion is that the bank lobby has succeeded in convincing someone senior within the administration (not at Treasury) to request a study of Fannie and Freddie reform with the intent of putting at least a temporary roadblock in the way of any recap and release initiative Treasury and FHFA may have been working on

 

this has been my concern since otting's 2-4 wk timeline failed to materialize.

 

the likely timeline: 

 

otting's comments leak.  congress tells wh privately they will go fast.  wh says publicly they want to work with congress.  crapo outline released.  mnuchin writes brief support statement.  2 days of productive Senate hearings.   

 

today's hearing went better imo.  Calhoun was strong.  lots of utility talk, less Demarco agenda.  barring something crazy, the committee will likely pass a bill, perhaps with more cushion than standard 13-12 party line votes.  that raises the odds of it passing the Senate this summer, and then they could see where waters stands at that point.

 

so things changed vs january.  mnuchin is likely giving congress 1 last shot.  crapo likely knows time is of the essence, and things will likely move quickly.  this timing also allows for the FHFA to hopefully finalize capital ratio targets and perhaps the 5th circuit outcome.

 

+ Begin retaining capital in the interim once Calabria is in his seat which shouldn't disrupt any reform efforts.

 

while possible, there's a better chance they leave the sweep intact until they lose a court ruling or congress fails imo.

 

That certainly would be the path of least resistance but goes against Ottings comments regarding capital. In the end only makes the capital raise more difficult and lets congress stall longer.

[orthopa]

Its amazing to me after 10 years it all comes down to a brief Crapo outline on a couple of sheets of paper and a combined 4 hour hearing with 10 experts. You would think something that needed to be reformed so bad would take more effort. Unless of course you were pressed to act in the last minute.

 

I dont see what downside there is to Treasury to stopping the sweep. The Senate banking committee is well aware of the ability of FHFA to go it alone and no doubt Ottings comments. That being said what can they do? Block Calabria's nomination. The committee talks as though he is already the director.

[Guest cherzeca]

statement released today by SBC minority leader brown:  https://www.banking.senate.gov/newsroom/minority/brown-opening-statement-at-hearing-on-the-chairmans-housing-reform-outline-part-two

 

if crapo proceeds with his two pager, there will not be bi-partisan support

[Guest cherzeca]

Its amazing to me after 10 years it all comes down to a brief Crapo outline on a couple of sheets of paper and a combined 4 hour hearing with 10 experts. You would think something that needed to be reformed so bad would take more effort. Unless of course you were pressed to act in the last minute.

 

I dont see what downside there is to Treasury to stopping the sweep. The Senate banking committee is well aware of the ability of FHFA to go it alone and no doubt Ottings comments. That being said what can they do? Block Calabria's nomination. The committee talks as though he is already the director.

 

if the SBC sought therapy, it would be diagnosed as passive-aggressive.  I dont see a bill getting reported out of committee with any bi-partisan support, and even if passed by senate without bi-partisan support (which I highly doubt), it will go nowhere in house.  so this is just more waiting for Godot. question is whether the potus directive reported this morning will result in a meaningful analysis that can be turned into an actual administrative reform plan, or will this just be more sound and fury signifying nothing. 

[investorG]

statement released today by SBC minority leader brown:  https://www.banking.senate.gov/newsroom/minority/brown-opening-statement-at-hearing-on-the-chairmans-housing-reform-outline-part-two

 

if crapo proceeds with his two pager, there will not be bi-partisan support

 

I recommend watching today's hearing.  it was likely an eye opener for crapo.  he and the bank lobbyists know they need to change his outline to get Sherrod's vote.  so the question is will they.  if not, dead end.  if they do, the odds of this passing congress materially increase.  why might waters go along?  because if calabria is confirmed, he will likely start off nice but if waters torpedos a bill that he and mnuchin and sherrod like which codifies a lot of consumer and small biz protections then he might turn to his libertarian roots over time. 

 

[investorG]

Its amazing to me after 10 years it all comes down to a brief Crapo outline on a couple of sheets of paper and a combined 4 hour hearing with 10 experts. You would think something that needed to be reformed so bad would take more effort. Unless of course you were pressed to act in the last minute.

 

I dont see what downside there is to Treasury to stopping the sweep. The Senate banking committee is well aware of the ability of FHFA to go it alone and no doubt Ottings comments. That being said what can they do? Block Calabria's nomination. The committee talks as though he is already the director.

 

if the SBC sought therapy, it would be diagnosed as passive-aggressive.  I dont see a bill getting reported out of committee with any bi-partisan support, and even if passed by senate without bi-partisan support (which I highly doubt), it will go nowhere in house.  so this is just more waiting for Godot. question is whether the potus directive reported this morning will result in a meaningful analysis that can be turned into an actual administrative reform plan, or will this just be more sound and fury signifying nothing.

 

today's directive could be a friendly reminder to crapo to stay on the horse because there's another potential game in town.  there's a good chance the timing isn't random, maybe they didn't like yesterday's tone at the hearing.

[orthopa]

Its amazing to me after 10 years it all comes down to a brief Crapo outline on a couple of sheets of paper and a combined 4 hour hearing with 10 experts. You would think something that needed to be reformed so bad would take more effort. Unless of course you were pressed to act in the last minute.

 

I dont see what downside there is to Treasury to stopping the sweep. The Senate banking committee is well aware of the ability of FHFA to go it alone and no doubt Ottings comments. That being said what can they do? Block Calabria's nomination. The committee talks as though he is already the director.

 

if the SBC sought therapy, it would be diagnosed as passive-aggressive.  I dont see a bill getting reported out of committee with any bi-partisan support, and even if passed by senate without bi-partisan support (which I highly doubt), it will go nowhere in house.  so this is just more waiting for Godot. question is whether the potus directive reported this morning will result in a meaningful analysis that can be turned into an actual administrative reform plan, or will this just be more sound and fury signifying nothing.

 

Agree. Chris what do you see as the upside/downside to stopping the sweep in regard to this attempt at reform from the SBC and the memorandum today from the WH?

[Guest cherzeca]

statement released today by SBC minority leader brown:  https://www.banking.senate.gov/newsroom/minority/brown-opening-statement-at-hearing-on-the-chairmans-housing-reform-outline-part-two

 

if crapo proceeds with his two pager, there will not be bi-partisan support

 

I recommend watching today's hearing.  it was likely an eye opener for crapo.  he and the bank lobbyists know they need to change his outline to get Sherrod's vote.  so the question is will they.  if not, dead end.  if they do, the odds of this passing congress materially increase.  why might waters go along?  because if calabria is confirmed, he will likely start off nice but if waters torpedos a bill that he and mnuchin and sherrod like which codifies a lot of consumer and small biz protections then he might turn to his libertarian roots over time.

 

these SBC hearings and crapo's 2 pager are all a charade. question is whether the potus directive will be a waste of time charade or not.  I am hopeful the treasury report is well done and helpful; what HUD reports back on I am not sure we care as it has jurisdiction over other housing programs.  at end of day, if treasury/HUD rec something that makes sense and crapo throws up his hands and tells his bank buddies, I did my best but I give up, and some legislation eventually passes, then fine...but that will be 2020.

[Guest cherzeca]

Its amazing to me after 10 years it all comes down to a brief Crapo outline on a couple of sheets of paper and a combined 4 hour hearing with 10 experts. You would think something that needed to be reformed so bad would take more effort. Unless of course you were pressed to act in the last minute.

 

I dont see what downside there is to Treasury to stopping the sweep. The Senate banking committee is well aware of the ability of FHFA to go it alone and no doubt Ottings comments. That being said what can they do? Block Calabria's nomination. The committee talks as though he is already the director.

 

if the SBC sought therapy, it would be diagnosed as passive-aggressive.  I dont see a bill getting reported out of committee with any bi-partisan support, and even if passed by senate without bi-partisan support (which I highly doubt), it will go nowhere in house.  so this is just more waiting for Godot. question is whether the potus directive reported this morning will result in a meaningful analysis that can be turned into an actual administrative reform plan, or will this just be more sound and fury signifying nothing.

 

Agree. Chris what do you see as the upside/downside to stopping the sweep in regard to this attempt at reform from the SBC and the memorandum today from the WH?

 

if as I believe that rebuilt GSE capital will be insisted upon by treasury, then it makes no sense to continue to sweep capital.  but there may be political optics at work behind scenes that auger for a delay of termination of sweep.