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We will be rockin and rollin with all of the anti-gse spinmasters. They will have all day to plant rumors, speculation and lies to bounce the twins prior to real news!
Hang on!
Go FnF!
Treasury Discussed Hiring Houlihan to Advise on Fannie-Freddie
By
Saleha Mohsin
,
Austin Weinstein
, and
Eliza Ronalds-Hannon
September 4, 2019, 10:50 AM EDT
Trump wants to free mortgage giants from U.S. control
Treasury poised to release its Fannie-Freddie plan Thursday
The Treasury Department has held talks with Houlihan Lokey Inc. about hiring the restructuring firm to advise it on Fannie Mae and Freddie Mac, the U.S. mortgage giants that have been under federal control since the 2008 financial crisis, said a person with knowledge of the negotiations.
Retaining the investment bank would be an important step in Treasury’s push to overhaul Fannie and Freddie. But Houlihan Lokey hasn’t been hired and there’s no indication that the Trump administration intends to free the companies from the government’s grip anytime soon. Many hurdles remain and the process is fraught with political and technical difficulties.
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A Treasury spokesman denied that the agency is holding current discussions with any advisory firm. Still, bringing on an outside expert could prove crucial as the administration enters a new phase on housing-finance policy.
On Thursday, Treasury is expected to released its long-anticipated plan -- requested by President Donald Trump -- for ending Fannie and Freddie’s conservatorships, said people familiar with the matter who asked not to be named because the report’s status hasn’t been publicly disclosed.
Shrinking Footprint
Whatever Treasury comes up with, including proposals for Fannie and Freddie to build up their capital cushions and reducing the companies’ footprints in the mortgage market, would still face a long implementation process. Houlihan Lokey, which is known for working on bankruptcies involving Lehman Brothers Holdings Inc. and Enron Corp., could advise on much of that work.
In an emailed statement, the Treasury spokesman said Wednesday that there is no merit to any report that Treasury is currently in talks to contract or hire any firm to serve as a financial adviser to the department on matters related to Fannie and Freddie.
Houlihan Lokey didn’t respond to a request for comment.
Figuring out a fix for Fannie and Freddie, the biggest outstanding issue from the 2008 meltdown, has long confounded politicians and policy makers. The companies were taken over as the housing market tanked, and bailed out with $191.5 billion in taxpayers funds. They have since become profitable again, paying more than $300 billion in dividends to the Treasury in recent years.
https://www.bloomberg.com/amp/news/articles/2019-09-04/treasury-discussed-hiring-houlihan-to-advise-on-fannie-freddie
$2.96! Vol. Picking Up.
Polar Express bullet train picking up speed!
Go FnF!
How about a dime Sparky?
Takes a while for a train to accelerate!
Go FnF!
I will not have to consider selling before $14.00 per share.
Go FnF!
HEARINGS
FULL COMMITTEE HEARING
Housing Finance Reform: Next Steps
DATE: Tuesday, September 10, 2019Add to my CalendarTIME: 10:00 AMLOCATION: Dirksen Senate Office Building 538
Check back for live video of this hearing.
TOPIC
THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS will meet in OPEN SESSION to conduct a hearing entitled “Housing Finance Reform: Next Steps” The witnesses will be: The Honorable Steven T. Mnuchin, Secretary of the Treasury, U.S. Department of the Treasury; The Honorable Benjamin S. Carson , M.D. Secretary, U.S. Department of Housing and Urban Development; and The Honorable Mark A. Calabria, Ph.D. Director, Federal Housing Agency.
All hearings are webcast live and will not be available until the hearing starts. Individuals with disabilities who require an auxiliary aid or service, including closed captioning service for webcast hearings, should contact the committee clerk at 202-224-7391 at least three business days in advance of the hearing date.
WITNESSES
The Honorable Steven T. Mnuchin
Secretary
U.S. Department of the Treasury
The Honorable Benjamin S. Carson, M.D.
Secretary
U.S. Department of Housing and Urban Development
The Honorable Mark A. Calabria Ph.D.
Director
Federal Housing Finance Agency
Well you know it is only a virtual neck on a forum. You get as many necks to (stick out) as you want. When you are finally correct nobody remembers all of your previous lopped off heads. Try it! It is fun! I hope he is right and the plan is released but if not any of us can speculate based on the few facts that we have. Nothing wrong with taking an educated guess. Watch this!
I think the plan will be revealed this afternoon.
Go FnF!
Oh I think we should do a football squares kind of pool to guess when and or who makes the announcement .
I can'tt buy a subscription. I spent everything on my fannie!
Go FnF!
10 Steps to Housing Finance Reform
By Mike Albanese on Sep 02, 2019
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Editor’s note: This feature originally appeared in a recent issue of MReport.
The government-sponsored enterprises (GSEs) have been in conservatorship for more than 10 years. During that time, three presidential administrations, four Federal Housing Finance Agency (FHFA) Directors, and seven different congresses have grappled with the seemingly herculean task of bringing Fannie Mae and Freddie Mac out of conservatorship and completing housing finance reform.
While the public debate has often envisioned and emphasized the need for legislative action, that avenue has been, and continues to be, an uphill battle in an unprecedented partisan political landscape. Still, stable growth in the housing market, strong employment, and the potential for rising interest rates point to the increasing need to establish a “new normal” for housing finance.
The Trump administration has tapped regulators to take a fresh look at the options available to get momentum moving in the right direction. Published in March, the White House’s Memorandum on Federal Housing Finance Reform directs the Treasury Department, in consultation with other key housing regulators, including the FHFA, the Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB), to develop a blueprint for reform.
The memo not only outlines broader national housing policy priorities but shines a light on the influential role that regulators can play in driving significant components of housing finance reform in the absence of congressional consensus. The 10 requirements regulators have been tasked with represent a toolbox of policy authority that, when drawn upon, can accomplish significant progress, leaving a final few select measures up to Congress.
As FHFA Director Mark Calabria said before the Mortgage Bankers Association Secondary Market Conference in May, “The perspective in the past that we must wait on Congress is not one I share. There are a number of things I can’t do, where we need congressional authority, but there are a number of things I can do.” Treasury Secretary Steven Mnuchin expressed a similar sentiment in a CNBC interview in February, saying the administration preferred bipartisan legislative action, but “if that doesn’t work, we have administrative tools that we can [use to] make moves in housing.”
As President Trump’s memo makes clear, there are at least 10 ways regulators can lay the groundwork for reform.
The memo mandates the regulatory proposal for housing finance reform end conservatorship, facilitate competition in mortgage lending, establish regulations of the GSEs going forward, and ensure the government is compensated for support of the secondary housing finance market. The memo sets forth the following objectives to advance these priorities:
Preserve the 30-year Fixed-Rate Mortgage
Unsurprisingly, maintaining access to the 30-year fixed-rate mortgage—the hallmark of the U.S. housing market and the impetus for chartering the GSEs in the first place—tops the list. Regulators are tasked with preserving this product and other affordable mortgage options that “best serve the financial needs” of qualified homebuyers.
At times during the decade-long debate on housing finance reform, certain industry stakeholders have disagreed on the need for the government to guarantee the availability of the 30-year mortgage and asserted that private lenders and others who securitize mortgagebacked securities (MBS) could sustain access to this product on their own while also offering competitive interest rates.
Calabria has argued against the necessity of the 30-year mortgage in the past, but recently has expressed a more open position, saying during his nomination hearing before the Senate Banking Committee, “It is indeed possible for us to have a well-capitalized, strong system that preserves the 30-year mortgage.”
With Calabria, the Trump administration, and most of the mortgage industry aligned on this objective, the release of the GSEs and/or the design of a new guarantee structure is more than likely to incorporate requirements to sustain securitization of the 30-year mortgage by continuing to match mortgage lenders with investors that can manage the long-term interest rate risks associated with a 30-year product.
Maintain Equal Access for Lenders
Today the GSEs play a central role in providing liquidity that is accessible to lenders of all sizes, charters, and geographic locations. In 2017 and 2018, Fannie Mae and Freddie Mac originations represented just under 50% of total volume, according to the Urban Institute. Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) originations account for about a quarter of total volume, and portfolio originations make up another 30%. Prior to conservatorship, private-label securities (PLS) accounted for roughly one-third, to as much as half, of all originations.
Restoring a healthier and more competitive mix of securitizations, one not entirely dependent on GSE and government-backed securitization, would contribute to a more functional mortgage market that meets the needs of all lenders. Before the Mortgage Bankers Association, Calabria said, “I’m a big believer in competition.”
Among the specific components required to maintain access for smaller lenders is the preservation of the TBA market model and the cash window for loan sales. In releasing Fannie Mae and Freddie Mac, the ability for smaller lenders to continue to deliver into the TBA market, bypassing the volume requirements for “specified pool” markets, should remain unchanged. Maintaining the GSEs respective cash windows for the outright purchase of single loans is extremely important for the stability of small and even mid-sized lenders. When delivering loans through an aggregator are added to allowing direct investor delivery
without incurring the pricing and product impairments, the cash window creates securitization access in an environment that minimizes market risk for smaller market participants.
Establish New Capital Standards
Calabria has been vocal about the importance of setting and achieving appropriate levels of capital and liquidity, saying in May, “It was insufficient capital that triggered the conservatorship, and it’s going to be sufficient capital that triggers an exit.”
FHFA is in the process of once again reviewing the GSEs’ current capitalization, but Calabria has said that “step one” will be to end the current net worth sweep of Fannie Mae and Freddie Mac’s earnings.
This measure alone, however, is not expected to build capital fast enough to align with the administration’s timeline. FHFA is considering other options, including raising capital through initial public offerings (IPOs) and hopes to begin implementing new capital building measures by January 2020.
Although no specific levels have been established, a suitable capital requirement threshold has been the source of industry, regulatory, and congressional debate for years. “With a leverage ratio of nearly one thousand to one, the GSEs’ balance sheet capital cushion is razor-thin relative to their huge amount of assets,” Calabria said at the Secondary Market Conference. “As a regulator, my primary concern is that the GSEs maintain capital levels commensurate with their risk profiles,” he added and suggested Fannie Mae and Freddie Mac should be subject to the same capital requirements as large financial institutions.
Congress has occasionally weighed in on the issue. Senators Mark Warner (D-Virginia) and Bob Corker (R-Tennessee) proposed the Housing Finance Reform and Taxpayer Protection Act, one of the first major bipartisan legislative proposals for housing finance reform, envisioned a 10% capital requirement. The Urban Institute estimates that a level of 4-5% would have adequately sustained the GSEs through incurred losses from the financial crisis.
Regulators need to agree on the appropriate capital level in order to finalize a risk-based capital rulemaking. This critical step “needs to be finished before there’s an exit,” Calabria told Politico earlier this year.
Charter New Guarantors
Several proposals for housing finance reform, including Senate Banking Committee Chairman Mike Crapo’s (R-Idaho) outline and the Mortgage Bankers Association’s white paper, have suggested privatizing the GSEs and allowing new additional private guarantors to compete with them.
The inclusion of this priority in the White House’s memo reflects a shared interest in pursuing an expansion of the number of mortgage guarantors. Legislation would be required to provide FHFA with the authority to issue charters to new guarantors. A new chartering authority would allow FHFA to move away from Fannie Mae and Freddie Mac’s current duopoly. Calabria said, “When it comes to housing, competition would make the system more stable. If there were 10 GSEs instead of two, it’s unlikely any of them would be ‘too big to fail.’”
Curtail the GSE Footprint
Right-sizing Fannie Mae and Freddie Mac’s collective footprint in the housing market has been one of FHFA’s primary objectives since conservatorship. This is also one of the only lingering reforms not addressed by the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank) mandate to end “too big to fail.” Reigning in the GSEs’ market share is contingent on the successful execution of some of the other objectives laid out by the White House, including reevaluating multifamily market participation, the Qualified Mortgage (QM) patch, and affordable housing.
There are several avenues that FHFA could pursue to reduce the GSEs’ current origination volume directly. Eliminating or reducing participation with certain products, including larger loan sizes, investor or second homes, and cash-out refinances, is a commonly discussed option to cut down market share tactically. Some of these products arguably do not serve the GSEs original mandate and make up nearly one-third of their total volume (cash-out refinances accounting for 20% and second homes accounting for 10%).
FHFA also can reduce GSE loan limits to curb the concentration of larger balance mortgages, but this step would likely require amendments to the Housing and Economic Recovery Act (HERA). Raising g-fees or tightening credit underwriting requirements is another viable alternative for motivating new competition from PLS securitizers and curtailing GSE volume.
Choose the Appropriate Size of Retained Portfolios
The retained portfolios of Fannie Mae and Freddie Mac have been gradually reduced under the direction of FHFA since conservatorship. The senior preferred stock purchase agreements (PSPAs) between Treasury and the GSEs established a schedule for 15% annual reductions in retained portfolios. The PSPAs also instituted a $250 billion cap that became effective this year. Both Fannie Mae and Freddie Mac are working on executing FHFA’s approved retained portfolio plans to maintain the cap, even under adverse conditions. Through these actions, FHFA has reduced the volume of mortgage purchases for investment while maintaining securitization volume.
Under conservatorship, FHFA has specifically focused on the reduction of riskier retained mortgage portfolios, which were down to $484 billion by the end of 2017, compared to $1.6 trillion in 2008. FHFA will continue to maintain restrictions on the GSEs’ retained mortgage and investment portfolios and propose reasonable standards for the GSEs post-conservatorship as part of the regulatory framework for housing finance reform.
Define the Role of GSEs in Multifamily
In addition to a substantial market share in single-family mortgage originations, the GSEs have grown their footprint in multifamily mortgage lending since the financial crisis. Multifamily mortgage originations have increased as a whole, from around $150 billion in 2007 to a projected $324 billion in 2019, according to Freddie Mac. Before the financial crisis, the GSEs only accounted for about a quarter of multifamily mortgage originations. However, they now represent nearly half of the market’s volume.
Lawmakers, including Sen. Crapo, have been eager to revisit the scope of the GSEs’ involvement in this area as well. Crapo’s outline proposes selling Fannie Mae and Freddie Mac’s multifamily businesses to be operated as independent guarantors. The multifamily industry has pushed back against a dramatic wind down in the GSEs’ role in the market, arguing they play an essential role in supporting the unique needs of rising apartment lending.
FHFA’s 2018 Scorecard Progress Report, released in April, outlines a $35 billion cap to be placed on the volume of new multifamily business that each GSE can take on. Importantly, FHFA has chosen to exclude affordable and underserved market segments from the cap requirements.
Evaluate the QM Patch
The original GSE patch for QM requirements will end in January 2021 or when Fannie Mae and Freddie Mac come out of conservatorship—whichever comes first. The CFPB is working in consultation with other regulators to determine whether to allow the patch to expire, temporarily extend its provisions, or revisit the Ability-to-Repay/QM rulemaking altogether. How the CFPB decides to proceed with the patch, which extends safe harbor protections for GSE loans even though they do not meet the regulatory QM requirements, will likely align with the path of housing finance reform.
The CFPB’s Spring 2019 Rulemaking Agenda explains that the GSE patch is currently under review. “After further policy analysis,” the CFPB said it will “determine whether rulemaking or follow up activity is appropriate.” Bob Broeksmit, President and CEO of the Mortgage Bankers Association, told American Banker, “Not doing something to extend the patch would be highly disruptive.”
The GSE patch, however, has been linked to the growth of the GSEs’ footprint, in conflict with other objectives from the White House memo. The CFPB recently conducted an assessment of the Ability-to-Repay/QM rule saying, the “continued prominence” of originations covered by the GSE patch “is contrary to the Bureau’s expectations at the time of the rulemaking.” The CFPB continued, “The scope of GSE-eligible loans is broad and grew broader for a period of time after the rule became effective as the GSEs loosened the credit eligibility.” Investors have also gravitated to GSE loans with QM protections in lieu of non-QM originations. As a result, the CFPB said, the PLS market “remains quite small,” which “limits the funding available” for non-QM loans.
Further extending the GSE patch would allow Fannie Mae and Freddie Mac to continue these trends and risks further disincentivizing PLS growth in non-QM originations. Eliminating the GSE
patch—assuming the Fannie Mae and Freddie Mac would slow or halt their purchase of non-QM loans without safe harbor protections—would have a significant impact on GSE origination volume. Redwood Trust estimates that between 25-30% of mortgages purchased by the GSEs would be considered non-QM in the absence of the patch.
This reduction would certainly contribute to curtailing the GSE footprint. According to Redwood Trust’s analysis, the private market could absorb as much as 70% of the GSEs current non-QM volume. This transition would also help the mortgage market achieve a healthier blend of non-QM and legitimate QM products, fulfilling the original intention of the CFPB’s rule.
Direct the GSEs; Role in Affordable Housing
FHFA, in coordination with other regulators, including HUD and Treasury, will need to define what measures, if any, will be used to quantify the GSEs’ role in promoting affordable housing. The White House has asked regulators to define the role for the GSEs “without duplicating support provided by the FHA and other federal programs.” To this end, it is important that HUD is involved in mapping out the placement of multiple federal programs, in addition to the GSEs’ post-conservatorship space in affordable housing.
Crapo’s outline envisions replacing the current affordable housing goals and duty-to-serve requirements with a Market Access Fund. This fund would extend grants, loans, and rental assistance to advance affordable options for low-income households and communities.
The affordable housing mission, mandated by Congress in 1992, was one approach to engaging the GSEs in the extension of affordable mortgage credit. Reinvigorating competition and longer-term predictability to the mortgage market may also help achieve a better balance of credit availability. As discussed with other objectives, limiting certain products, such as larger balance loans and investor and second homes may narrow the GSEs’ focus on more low- and moderate-income households.
Set Conditions for Ending Conservatorship
While FHFA has arguably been working on setting the conditions to end conservatorship for 10 years, finally actualizing the release of Fannie Mae and Freddie Mac will require agreement on the appropriate measures of success. Calabria said that achieving “an excess of capital” will be the ultimate threshold for release. “The path out of conservatorship that we will establish for Fannie and Freddie is not going to be calendar dependent. It will be driven, first and foremost, by their ability to raise capital,” he said. If one GSE becomes ready for privatization before another, FHFA will consider releasing them out of conservatorship at different times.
Regardless of the timing, the White House has stipulated that upon the termination of conservatorship, Treasury and FHFA need to develop a mechanism that ensures the federal government is compensated for any explicit and implicit guarantee provided to the GSEs or their successors, specifically “in the form of an ongoing payment” to the U.S. The White House has also called on regulators to ensure that, incorporating many of the priorities listed above, the GSEs’ post-conservatorship missions and portfolios are appropriate. Regulators must additionally outline a vision for heightened prudential and safety and soundness requirements for the next generation GSEs, “designed to prevent future taxpayer bailout and minimize risks to financial stability.”
Great Expectations
As a host of new housing leaders, including Calabria, Mnuchin, Kathy Kraninger, Director, CFPB, Ben Carson, Secretary, HUD, and Brian Montgomery, FHA Commissioner, coalesce around the tools at their disposable, the mortgage industry should finally expect to see gradual steps taken towards housing finance reform. Calabria has tellingly promised, “If there’s one thing I know for sure it’s that Fannie and Freddie will look much different at the end of my five-year term than they do today.”
More than ten years after the financial crisis, the mortgage industry certainly understands Calabria’s sentiment, “The status quo is no longer an option.” After executing the objectives set forth by the Trump administration, regulators have assured that Congress will be provided ample time to consider the housing finance reform framework and take any remaining necessary legislative steps to conclude their efforts. Between now and Congress’ eventual action, regulators have a long runway to get housing finance reform off the ground—once and for all
https://themreport.com/daily-dose/09-02-2019/10-steps-to-housing-finance-reform/
Stock Analyst Opinions:FNMA
FANNIE MAE
2.82? 0.05 (1.81 %)AS OF 3:59:59PM ET 08/30/2019
FNMA Equity Summary Score:
Very Bullish (9.1) Provided by StarMine from Refinitiv ? AS OF 09/01/2019
The Equity Summary Score is an accuracy-weighted sentiment derived from the ratings of independent research providers on Fidelity.com. It uses the past relative accuracy of the providers in determining the emphasis placed on any individual opinion. Learn More....
FNMA Equity Summary Score Firms ?
(i) Independent Firm
FirmRefinitiv
StarMine
Relative
Accuracy ?Standardized
Opinion ?McLean Capital Management (i)70?NeutralZacks Investment Research, Inc (i)47?OutperformTrading Central (i)27?BuyColumbine Capital Services Inc. (i)22?OutperformValuEngine (i)9?Neutral
Opinion used in Equity Summary Score
FNMA Equity Summary Score
5 Firms†| Methodology?
I hope this plan is not so vague that we will continue to wait for some slip of the tongue details to spill from Mnooch, Trump, Candelabra etc.
The stock will spike and then after the public walk back from said individual the stock drops back down.
Rinse and repeat!
Sound familiar?
Happy Labor Day!
Oh, some daily affirmations until the big news.
The plan is real!
The plan is sound!
The plan is detailed!
Go FnF!
Federal National Mortgage Association Fannie Mae (FNMA) Institutional Investors Quarterly Sentiment
Posted by Ruth Wright on August 30, 2019 at 3:40 pm
Sentiment for Federal National Mortgage Association Fannie Mae (FNMA)
Federal National Mortgage Association Fannie Mae (FNMA) institutional sentiment increased to 2.5 in 2019 Q1. Its up 2.10, from 0.4 in 2018Q4. The ratio is more positive, as 5 investment professionals started new or increased equity positions, while 2 sold and reduced stock positions in Federal National Mortgage Association Fannie Mae. The investment professionals in our partner’s database now hold: 161,673 shares, down from 165,067 shares in 2018Q4. Also, the number of investment professionals holding Federal National Mortgage Association Fannie Mae in their top 10 equity positions was flat from 0 to 0 for the same number . Sold All: 1 Reduced: 1 Increased: 2 New Position: 3.
Federal National Mortgage Association provides liquidity and stability support services for the mortgage market in the United States. The company has market cap of $3.24 billion. It securitizes mortgage loans originated by lenders into Fannie Mae mortgage-backed securities . It has a 123.48 P/E ratio. The firm operates through two divisions, Single-Family and Multifamily.
The stock increased 2.53% or $0.07 during the last trading session, reaching $2.84. About 1.49 million shares traded. Federal National Mortgage Association (FNMA) has 0.00% since August 30, 2018 and is . It has by 0.00% the S&P500.
Edge Wealth Management Llc holds 0.03% of its portfolio in Federal National Mortgage Association for 42,500 shares. Capwealth Advisors Llc owns 11,950 shares or 0.01% of their US portfolio. Moreover, Interocean Capital Llc has 0.01% invested in the company for 52,000 shares. The North Carolina-based Captrust Financial Advisors has invested 0% in the stock. Glenmede Trust Co Na, a Pennsylvania-based fund reported 350 shares.
https://investtribune.com/federal-national-mortgage-association-fannie-mae-fnma-institutional-investors-quarterly-sentiment/
Hello Arnold!
Go FnF!
Wrong! I definitely know nothin!
Go FnF!
The Big Short's Michael Burry Sees Another Contrarian Opportunity Emerging
https://www.bloomberg.com/news/videos/2019-08-30/the-big-short-s-michael-burry-sees-another-contrarian-opportunity-emerging-video
Everyone can ride the Polar Express but Clark, Skeptic and Jog have to sit with Z-Ride.
Go FnF!
No administration (president) would tarnish their legacy by taking FnF debt on to the govt. books by allowing receivership.
Go FnF!
Buyouts, not bailouts: public banks as a solution to the next crisis. (Have fun with this)
When the next crisis hits we must reject corporate bailouts and demand a permanent public takeover of failing banks.
Thomas Hanna
28 August 2019
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Image: Michael Fleshman, CC BY-SA 2.0
This article is part of ourEconomy's 'Preparing for the next crisis' series.
In July, a series of earthquakes hit the US state of California. After a relatively quiet few years, they were a jolting reminder that parts of the region are prone to seismic activity and overdue for the “big one.” So too has the recent announcement of a yield curve inversion (and other poor economic news from around the world) reminded us that we are now overdue for another financial crisis – which have, in the neoliberal era, typically happened on average every ten years.
It has been a little more than ten years since the US financial system imploded in 2008, ushering in the worst economic crisis in 80 years. Globalization, and the interconnectedness of many economies, ensured that the crisis spread rapidly, engulfing much of the world. We often forget now how existential the threat really was. There was genuine fear amongst the world’s political and financial elite that capitalism as they knew it was over. In the end, however, they managed to save the existing system through a series of massive government economic interventions. Specifically, rescuing major financial institutions and pumping trillions of dollars into capital markets. For a great number of people, though, the threat was very real. Millions lost their jobs, their homes, their savings, and their retirement funds. Tens of thousands lost their lives.
Despite the severity of the crisis, very little was subsequently changed in the structure of the American financial system. Already weak regulatory reforms have been systematically picked apart by financial industry lobbyists. Too-big-to-fail banks are now even bigger. Fraud and scandals continue to plague the industry. The shadow banking sector has grown in size and complexity. And the US financial system (and broader economy) is still tightly interwoven with the rest of the world. When the next financial crisis comes – and it will come because, like earthquakes, only the when and how severe is ultimately up for debate – it seems all but inevitable that once again the public will be called upon to step in and bailout the big financial institutions.
There is, however, another option. Instead of panic-driven handouts to corporations and temporary quasi-nationalizations, a plan should be in place for cleanly and transparently taking failing financial corporations into genuine public ownership. Ultimately repurposing them, and shifting their activities away from financialization, speculation, and extraction and towards supporting healthy, prosperous, and equitable local economies as well as a sustainable planet.
The response last time
Back in 2007 and 2008, very few people saw the financial crisis coming. Even fewer had any idea what to do once its true severity was revealed. The US government’s immediate response was to pull out all the stops to save the failing banks. This included providing more than 700 banks with capital injections through the Capital Purchase Program (CPP), part of the Troubled Asset Relief Program (TARP). In return, the government (through the Treasury Department) received preferred securities with limited (or non-existent) voting rights as well as warrants to buy company stock equal to a fraction of the overall government investment. This approach has confounded many experts. At the time, Bo Lundgren, the former Swedish Minister of Fiscal and Financial Affairs who had engineered his own government’s response to the 1990s financial crisis in that country, stated “for me, that is a problem. If you go in with capital, you should have full voting rights.” The government also took a more active role with several companies, essentially nationalizing Freddie Mac, Fannie Mae, AIG, and GMAC (and taking a 36 percent ownership stake in Citigroup).
The US government went out of its way to emphasize the time-limited nature of its interventions into the financial sector. “The government was more interested in exiting these investments promptly than in earning a return,” Steven Davidoff Solomon writes. Ultimately, what the banking industry learned was that there was nothing to fear from the government and everything to gain. All the banks had to do was wait out the initial public outcry, allow the government to retreat from the sector, and get back to business as usual.
Failed reform
As the immediate threat from the financial crisis began to subside, attention in the United States turned to reform, the centerpiece of which was the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank was, ultimately, a weak piece of legislation. It made very few structural changes to the financial sector (an amendment to break up the biggest banks was voted down, for instance) and many experts have deemed it insufficient and unlikely to prevent another crisis. In 2012, for instance, Richard Kovacevich, the former CEO of Wells Fargo, commented that “there’s nothing in Dodd-Frank that would have prevented the last financial crisis, nor will it prevent the next crisis.” More recently, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, has statedthat “the biggest banks are still [too-big-to-fail] and continue to pose a significant, ongoing risk to our economy.”
Moreover, since its passage even those reforms that made it into the final legislation have been systematically stalled, blocked, and dismantled. The political influence wielded in Washington by the finance sector is legendary, and Dodd-Frank has been firmly in their cross-hairs for most of the last ten years. In 2014, for instance, Congress repealed the regulation requiring banks to trade certain risky derivatives contracts in separate affiliates with higher capital requirements and no government protection (the so-called “pushout” rule). The repeal was included in a spending bill required to keep the government operating (causing outrage among Congressional Democrats) and was written almost entirely by Citigroup, the bank that received one of the largest shares of government bailout funds during the crisis.
Former IMF chief economist Simon Johnson has recently commented that the reforms enacted after the financial crisis “were serious; but they did not go far enough, and they can be rolled back without much difficulty. The Trump administration is poised to do exactly that. The big banks will get bigger. Capital levels will fall. And reasonable risk-management practices will again become unfashionable. Powerful people do well from booms and busts. The rest of us can expect deeper inequality and more crisis-induced poverty.”
And the big banks have, indeed, increased in size since the financial crisis. “Of the 15 banks that received the most bailout money, 11 are now bigger than they were before the recession, even after adjusting for inflation…” Philip Bump reported in the Washington Post in early 2016. “The recession was a blip on a steep upward climb.” Moreover, repeated scandals and investigations during the past decade suggest that the financial sector has not yet adequately tackled the internal dynamics and incentives that led to the excessive risk taking, speculation, and fraud that was at the heart of the financial crisis. “The last decade has seen a steady stream of financial scandals and crises: mortgage frauds, insider trading, the illegal fixing of global interest rates, money laundering, and the rigging of the Treasury bond market. This is a partial list,” author and former hedge fund analyst Sheelah Kolhatkar wrote in 2016.
Lastly, the shadow banking sector – essentially opaque and un- or under-regulated financial institutions that offer a variety of often risky financial services and instruments – has grown, now accountingfor at least $13.8 trillion in assets in 2015, or around 75 percent of the country’s total GDP. The shadow banking sector is intricately entwined with the regulated banking system, raising the prospect of substantial contagion and damage to the rest of the economy when another crisis occurs. “A collapse in the shadow banking sector cannot be contained to the shadow banking sector,” former Comptroller of the Currency Eugene Ludwig warns.
The public ownership alternative
When the next big financial crisis occurs, one or more of the large financial institutions will likely once again become reliant on public support for their survival. In such a moment these companies can be de-privatized rather than simply bailed out. During the 2008 financial crisis, various commentators and experts actually came out in favor of short-term nationalizations (forms of which were implemented in several cases), but were generally emphatic in their rejection of long-term public ownership. For instance, economist Adam Posen stated in 2009 that “nobody in their right mind wants the government to be in the banking business any longer than it needs to be.”
Such offhand judgments, however, deliberately ignore the extensive, and often highly successful, experience with public banking both in the United States and around the world. Recently, Thomas Marois has estimated that there are nearly 700 public banks operating globally with some $37.7 trillion in assets. In Germany, for instance, there are close to 400 publicly owned municipal savings banks (Sparkassen) with more than €1.2 trillion in assets and approximately 210,000 employees. Unlike some of the larger banks, the Sparkassen, according to The Economist, “[came] through the crisis with barely a scratch.” In North Dakota, the publicly owned Bank of North Dakota (BND) just celebrated its 100 year anniversary. The bank, which has $7 billion in assets and a loan portfolio of $4.5 billion, has been widely credited with helping the state weather the last financial crisis by backstopping local banks with liquidity (thereby ensuring that the state had the lowest foreclosure rate and lowest credit card default rate in the country, as well as no bank failures for more than a decade), and making loans to consumers while private banks were freezing credit, all while continuing to contribute its revenues to the state’s budget.
One of the few prominent finance experts who engaged seriously with the question of long-term public ownership during the financial crisis was former Goldman Sachs advisor (now chief economist at Citigroup) Willem Buiter, who wrote in September 2008:
"Is the reality…that large private firms make enormous private profits when the going is good and get bailed out and taken into temporary public ownership when the going gets bad, with the tax payer taking the risk and the losses? If so, then why not keep these activities in permanent public ownership? There is a long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer."
Beyond this, there are several reasons why long-term public ownership in the financial sector can be beneficial. According to Marois, these can include economic and regional development (and specifically, financing public policy priorities such as renewable energy and climate change mitigation), providing financial services to sectors and individuals that are ignored or underserved by the private sector, stabilizing the economy during times of crisis, taking the lead on setting social and environmental standards, generating public revenue to cross-subsidize public services and projects, and operating without the need for profit-maximization (therefore reducing costs for users and helping to “minimize the effect of hyper-competitive global financial imperatives on society”). Public banks could also be restricted from engaging in many of the types of speculative activity that have been driving increased financialization, systemic risk, and economic instability in recent decades.
If and when a public takeover actually occurs, one option is for the new publicly-owned entity to be kept largely intact and tasked to specific large-scale public policy needs and goals, such as investing in badly needed infrastructure improvements or financing the transition to renewable energy (and a just transition for workers and communities affected by the move away from fossil fuels). Another would be to break up the entity into a network of regional and local public banks that could focus on taking deposits from public entities (such as local governments), backstopping small community banks, providing banking services to low-income populations, extending low-interest loans to students, small businesses, and those recovering from disasters, and/or financing the conversion of businesses to worker ownership. Profits would flow to state and local governments, providing a valuable source of revenue to pay for social services, infrastructure, retirement obligations, and other important areas of need.
In either scenario, the internal governance and oversight of the new, publicly owned entities could (and should) be reformed and democratized. This may include using deliberative and participatory processes to set the overall long-term structure and mission of the bank(s); establishing appropriate metrics of success and efficiency for each public bank beyond pure financial measures (such as social and ecological benefit); enabling robust stakeholder participation (in the form of multi-stakeholder boards, worker assemblies, empowered trade unions, and the like); increasing transparency and accountability requirements; and enshrining equity in internal governance procedures (such as limiting executive pay, increasing racial and gender diversity, and gender pay equality).
Planning for next time
Bailing out Wall Street and the big financial corporations was unpopular ten years ago, and has only become more unpalatable since. One poll in 2012 foundthat 84 percent of Americans opposed any future bank bailouts (an extraordinary number given that these days you would be hard pressed to find any issue that nearly 90 percent of all Americans can agree on). In fact, there are indications that Americans actually prefer public ownership to bailouts. A 2009 Newsweekpoll, for instance, found that 56 percent of Americans thought it better to have “nationalization, where the government takes temporary control” versus 29 percent who thought “government financial aid without any government control of the bank” was better. Similar sentiment also exists in the UK. In 2017, the Legatum Institute, a right-wing think tank, was surprised to find that 50 percent of Britons favoured nationalizing the banks (amidst strong appetite for public ownership more broadly).
Moreover, since the financial crisis ten years ago, interest in public banking has taken off like wildfire across the United States and around the world as activists, community groups, and politicians have begun to recognize the importance and potential of asserting public control over finance. It is likely that during the next crisis, there will be similar (if not greater) public support for public ownership rather than no-strings-attached corporate bailouts. Such sentiments can naturally be deepened into widespread support for longer-term public ownership in the sector if a developed, viable, and vetted plan is available. It is imperative that the hard work of developing such a plan starts now. We simply cannot know how much time we have until the next big crisis hits.
https://www.opendemocracy.net/en/oureconomy/buyouts-not-bailouts-public-banks-solution-next-crisis/
What time was this published today? Seems positive yet share price dropped.
Go FnF!
Did I miss a Calabria statement today?
Link?
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Hell man, I have been watching this too long. Nobody predicts FnF accurately. That is simply because FnF are news driven and nobody can predict the news accurately. I just buy more on big drops until the big news in some form is released. Lots of good news coming. When? Who knows!
Go FnF!
If it continues to fall to $2.25 I shall be forced to pick up another 2000 shares or sò. I surely do not need them but I simply can not stop myself. I like cheap Fannie too much!
Go FnF!
Hey we held our gains on a really weird market twittered down day. I will take it, happily.
Go FnF!
It is a $20 hammer with a $1980 tether.
Well... it is a special anti gravity internationally usable space hammer!
Go FnF!
He said as the stock approached $3.00
Go FnF!
Fannie and Freddie intermission
The ISS has been described as the most expensive single item ever constructed.[46] In 2010 the cost was expected to be $150 billion. This includes NASA's budget of $58.7 billion (inflation-unadjusted) for the station from 1985 to 2015 ($72.4 billion in 2010 dollars), Russia's $12 billion, Europe's $5 billion, Japan's $5 billion, Canada's $2 billion, and the cost of 36 shuttle flights to build the station; estimated at $1.4 billion each, or $50.4 billion in total. Assuming 20,000 person-days of use from 2000 to 2015 by two- to six-person crews, each person-day would cost $7.5 million, less than half the inflation-adjusted $19.6 million ($5.5 million before inflation) per person-day of Skylab.[47]
It just does not take a bunch of research.
https://en.m.wikipedia.org/wiki/International_Space_Station_program
Sanders dark chocolate sea salt caramels please. I am running dangerously low.
Go FnF!
Looks like some left over enthusiasm from folks late to the party!
Go FnF!
You are correct. I would hate to be duped into selling at $150.00 per share.
Go FnF!
I hope the sarcasm is clear enough!
Do you think that Trump would allow an appeal? He wants to campaign on fixing housing. He wants this finished. Or, maybe he at least wants the plan finished.
Go FnF!
Unfortunately you and many of us are products of our environment. We all have very good reasons to be skeptical. We are jaded from so many false starts. Never the less, here we are. We are scarred and flinching but still hanging on. The ones that prosper are the ones willing to do the hard things. Stay out of your comfort zone if you want to be successful. Take the risks or be mediocre.
Go FnF!
That is all for this morning's pep talk
Remember the warning about games being played after Jackson Hole!
Go FnF!
Gasbag will keep playing this up. His ego needs to! Another (SCOOP) COMING SOON!
Go FnF!
Nice close!
Go FnF!
Don't get caught chasing the stock. You can not catch a rocket!
Go FnF!
Bringing Fannie and Freddie out of Conservatorship
By Seth Welborn on Aug 22, 2019
?A plan to return Fannie Mae and Freddie Mac to private-shareholder ownership could be released as early as next month, The Wall Street Journal reports. The plan is expected to ensure the firms have adequate capital to absorb loan losses in a future housing slump, putting the GSEs on a sound footing before returning to private hands.
According to WSJ, the plan was originally expected earlier this summer, but was delayed in part due to revisions from the Department of Housing and Urban Development and the Treasury. Sources state that privatizing Fannie and Freddie would likely take several years and would involve allowing the firms to retain earnings and raise tens of billions of dollars from investors. Reuters reported earlier this year that the U.S. Treasury is dealing with several other issues, putting the plan for the GSEs on hold for now.
According to Federal Housing Finance Administration (FHFA) Director Mark Calabria, he hopes Fannie and Freddie will have exited, or will be ready to exit, conservatorship before his term ends in 2024. Calabria told Reuters that he is not operating toward a hard deadline.
“That’s my time horizon,” he said. “I’m under no expectation to try to get all this done. ... So if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.”
Calabria stated that Treasury Secretary Steven Mnuchin is currently “juggling a number of balls,” while Craig Phillips, Mnuchin’s adviser who had been closely involved in the reform plan, also left in June.
Additionally, Calabria stated that the Treasury will back some form of government guarantee for Fannie and Freddie in the report, and notes that the government does not have forever to overhaul them and needs to progress while the housing market remains stable.
“The market looks pretty strong now, so that to me is the time when we want to make real repairs,” he said.
https://themreport.com/daily-dose/08-22-2019/bringing-fannie-and-freddie-out-of-conservatorship/amp
Treasury plan for Fannie Mae, Freddie Mac reportedly near completion
Fox Business VideosAugust 22, 2019, 5:40 PM UTC
FBN's Charlie Gasparino on the Treasury Department's potential plans for Fannie Mae and Freddie Mac and Patrick Byrne resigning as CEO of Overstock.
https://finance.yahoo.com/amphtml/video/treasury-plan-fannie-mae-freddie-174019329.html
Politics
Fannie-Freddie Revamp Risks Destabilizing Economy, Democrat Says
https://www.bloomberg.com/amp/news/articles/2019-08-22/fannie-freddie-revamp-risks-destabilizing-economy-democrat-says
Here's Why Fannie Mae and Freddie Mac Stocks Are Rising Today
After years of waiting, shareholders could finally get some sense of where these companies are heading.
Matthew Frankel, CFP
(TMFMathGuy)
Aug 22, 2019 at 11:29AM
What happened
On Wednesday afternoon, it was reported that the U.S. Treasury Department is getting close to releasing its plan to reform Fannie Mae (OTC:FNMA)and Freddie Mac (OTC:FMCC). The finalized plan is expected to be announced as early as September.
Investors appear to be pleased with the news. By 10:45 a.m. EDT on Thursday, shares of Fannie and Freddie had risen by more than 9% and 7%, respectively.
?
IMAGE SOURCE: GETTY IMAGES.
So what
To say that Fannie and Freddie's investors have been waiting a long time for some clarity on the future would be a major understatement. Since being rescued by the government in the wake of the financial crisis, all profits of the two agencies have been swept away by the Treasury.
Fannie and Freddie received a combined $191 billion as part of the financial crisis bailout and have since repaid the entire amount plus $105 billion. So it's not a surprise that many people (government officials and private investors alike) feel that it's time to release the agencies from government control.
Now what
It's important to mention that the details of the Treasury's plan remain quite unclear at this point. We don't know anything about a proposed timetable or how future profits would be allocated, or how the recapitalization of the companies would take place.
What we do know is that the Trump administration is strongly in favor of returning both companies to private shareholders and to make sure both are adequately capitalized before it happens. The details of the finalized plan could move the stocks dramatically in one way or the other, but for now this is a welcome development for patient shareholders.
https://www.fool.com/investing/2019/08/22/heres-why-fannie-mae-and-freddie-mac-stocks-are-ri.aspx?source=iedfolrf0000001