Wednesday, March 4, 2015

Tuesday, March 3, 2015

Treasury Official Says Administration is ‘Ready, Willing, and Able’ to Talk Housing Finance Reform

Treasury Official Says Administration is ‘Ready, Willing, and Able’ to Talk Housing Finance Reform



Stegman said the Administration would not end the conservatorship of the GSEs without a viable alternative that provides that elusive balance between eliminating taxpayer risk while still allowing credit access.
"I know that many of you want to know where we are on housing finance reform," Stegman said. "On this subject, let me be clear: the Administration stands by our belief that the only way to responsibly end the conservatorship of Fannie Mae and Freddie Mac is through legislation that puts in place a sustainable housing finance system that has private capital at risk ahead of taxpayers, while preserving access to mortgage credit during severe downturns."

My thoughts:
This will never happen. Private capital at risk ahead of government bailout while preserving access to mortgage credit during severe downturns. Never going to happen because the private model of PLS (private loan security) as run by the banks in 2008 still has not returned to the market and this is 2015 now. If the government does not want to backstop housing, then simply housing will take down the USA economically on next housing downturn. This is why FDR put Fannie in place decades ago. Private captal will leave at first hint of bad times and not return for a long, long time. 
Ask yourself, how did the savings and loans do on the downturn? They went away and a huge bailout followed. This time is different Fannie Mae and Freddie Mac took on all the PLS problems onto their shoulders and their own problems and carried our country through the problem all the long paying back the bailout with a huge profit to the TAXPAYER!
Which seems like a better deal? Huge S&L bailout that NO ONE paid back and a system that went away with nothing but Fannie to fill the void OR the Fannie model that supported both the TBTF Banks in 2008 and S&L problem when there was NO WHERE TO TURN?
Fannie and Freddie WORK! Why would you change that? Why would you do away with 30 year fixed mortgages for 5 year Arms? Politicians Are talking with both sides of their mouths!
Ask yourself was it the big banks or Fannie mae that saved American housing? It was not banks, and it was not the US Treasury. The taxpayer did not lose on its deal, they gained all their money back from the bailouts and Mortgages that would have never been refinanced or issued without fannie for last 7 years. Without Fannie the US mortgage market would be the walking DEAD!  

Monday, March 2, 2015

Treasury, FHFA Are Ignoring the Law in Their Handling of Fannie and Freddie Conservatorships

Treasury, FHFA Are Ignoring the Law in Their Handling of Fannie and Freddie Conservatorships


Legal Disputes
Some interpret HERA and comments at the time from Treasury Secretary Paulson to mean that HERA allows the government to take over the assets of Fannie Mae and Freddie Mac with all powers of the shareholders so long as the conservatorship remains in effect.
But, as noted, this ignores the fact that HERA requires FHFA, as conservator, to do whatever is needed to “conserve and preserve” the GSE's assets and the explicit and separate direction to the FHFA, as conservator, to take steps necessary to put the regulated entity in a “sound and solvent condition.” If that is not possible, then HERA requires the FHFA to place the GSEs into receivership. The law does not allow an endless conservatorship as a means to strip value, trample stakeholders' rights, and transform the GSEs into governmental housing agencies.
Some would argue that Treasury is acting within its authority given that it infused billions of dollars into the GSEs in order to keep them solvent. No one disputes that Treasury acted decisively and in the interests of shareholders and the public at large in preventing the collapse of Fannie and Freddie. However, Treasury's actions in the Third Amendment completely changed the relationship between Treasury and the GSEs from one in which Treasury provided statutory assistance that the GSEs would repay, which would be consistent with FDIC precedents, to one in which Treasury seizes all current and future net worth. 
This latter approach is confiscatory and has no relationship to repayment of the assistance provided and completely disregards all past precedents from FDIC open bank assistance and conservatorships. While Treasury is entitled to be, and has been, repaid for the assistance provided, nothing in HERA or its antecedents supports the Third Amendment. Treasury has no authority to use Fannie and Freddie as a never-ending revenue stream.