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https://www.cnbc.com/2021/05/18/home-depot-hd-q1-2021-earnings.html
“Fiscal 2021 is off to a strong start as we continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects,” CEO Craig Menear said in a statement.
Why do you think that currently the UST has explicitly guaranteed $7T of MBS? I think the PSPA gives the gses up to a $200B backstop. The guarantee on MBS never was and never has been explicit. The market rightly recognizes that the government will come in and backstop the MBS market from collapse as they will the tbtf banks, but this guarantee is implicit. The Dodd Frank Act tries to through the living wills make future Government rescues unlikely through a good bank/bad bank scenario for the next inevitable financial crisis, but since most financial calamities start with entire financial industries engaging in rampant speculation and easy term borrower access, the entire industry goes down at once having crippling results for the economy and individuals.
I think your premise that there is a government guarantee in place with the PSPA and when the PSPA is gone there will be problems is misplaced because: (1) the gses have $50B in capital (2) everyone knows the government is not going to stand by and watch as the citizens suffer (3) they operated for 50 years with a $2B line of credit at UST which they NEVER used.
We heard that concern from Justice Elena Kagan as to the possible impacts of restrospective relief should they rule that restrospective relief is available to the Collins Plaintiffs, for example, does that mean that 17 million decisions made by the Social Security Administration could be challenged? David Thompson reassured Justice Kagan that the 3?yr Statute of Limitations, standing, and other Judicial limitations would prevent most of that, however, Thompson agreed with the general proposition that yes they should be challengeable.
A much easier and cleaner solution would be for the SCOTUS to decide that the nws is ultra vires (i.e., unlawful) and therefore void under the APA Claim. If they choose that route, they don't have to get into all of the Severability Analysis stuff, which is a little shady if you believe that the founding fathers only wanted the Legislative Branch to write, modify, and rewrite the laws and for the Judicial Branch to decide about their validity...
We'll see what happens!
Looks like Seila Law's request to have the CID denied by the court was ultimately unsuccessful, as the EnBanc Panel refused to accept their request to be heard on appeal by the full judge EnBanc Panel. How could a small boutique law firm in the 9th Circuit possibly afford to take in the CFPB with their almost limitless resources? THEY CAN'T THE ENTIRE CASE WAS BANKROLLED BY THE PACIFIC LEGAL FUND, A CALIFORNIA LIBERTARIAN BASED NON PROFIT.
A judge of the court sua sponte requested a vote on
whether to rehear this case en banc. A vote was taken, and
the matter failed to receive a majority of the votes of the non-
recused active judges in favor of en banc consideration. See
Fed. R. App. P. 35(f). Rehearing en banc is DENIED.
An opinion dissenting from the denial of rehearing en
banc prepared by Judge Bumatay is filed concurrently with
this order.
6 CFPB V. SEILA LAW
BUMATAY, Circuit Judge, joined by CALLAHAN,
IKUTA, and VANDYKE, Circuit Judges, dissenting from
the denial of rehearing en banc:
We all know the story of David and Goliath. Goliath, the
fearsome warrior who stood over nine feet tall, awaited a
challenger for forty days and forty nights. When no one
stepped forward, David—a young shepherd boy with no
experience at war—petitioned the king for the opportunity
to face Goliath. David stepped on the battlefield with just a
sling and a few stones from a nearby brook. Goliath was
indignant that such an unworthy opponent would stand
against him. But after a brief exchange of words, David
slung a single rock at Goliath, knocking him to the ground
and killing him. David, the underdog, had won a shocking
victory for his people.
This case is a little like the story of David and Goliath;
except here, the Ninth Circuit resurrects Goliath on the
battlefield so that he can defeat David. Seila Law, a law firm
operated by a solo practitioner, challenged the
constitutionality of the Consumer Financial Protection
Bureau, an independent agency created in the wake of the
2008 financial crisis. The CFPB had issued a civil
investigative demand on Seila Law, but the firm argued that
the CFPB was unconstitutionally structured since the
President could not remove its Director without cause. The
CFPB took Seila Law to district court, filing a petition to
enforce the civil investigative demand, which the court
granted. CFPB v. Seila Law, LLC, No. 17-cv-1081, 2017
WL 6536586, at *1 (C.D. Cal. Aug. 25, 2017). Seila Law
appealed to our court, and the CFPB prevailed again. CFPB
v. Seila Law LLC, 923 F.3d 680 (9th Cir. 2019).
But last year, the Supreme Court vindicated Seila Law
and held that the CFPB’s structure violated the Constitution.
CFPB V. SEILA LAW 7
Seila Law LLC v. CFPB, 140 S. Ct. 2183, 2192 (2020). The
Court did so because Congress improperly shielded the
CFPB Director from at-will removal by the President, which
rendered the agency “accountable to no one.” Id. at 2203.
Thus, like David, the one-man firm seemingly defeated the
giant CFPB.
But that is not the end of the story. Rather than dismiss
this action, the Court severed the CFPB Director’s tenure
protection and remanded the case to our court to determine
whether the action must be dismissed. Id. at 2211 (plurality
opinion). Shortly afterward, the CFPB’s then-Director,
Kathleen Kraninger, ratified both the civil investigative
demand and the petition to enforce the demand against Seila
Law. See CFPB v. Seila Law LLC, 984 F.3d 715, 717–18
(9th Cir. 2020) (Seila Law II).
On remand, a panel of our court resuscitated the giant,
holding that the CFPB’s post-severance ratification cured
any defect in the agency’s prior actions. Id. at 719. In so
ruling, the panel held that the CFPB’s constitutional defect
was confined “to the Director alone,” leaving “the legality of
the agency itself” undisturbed. Id. That meant that the
Director could retroactively ratify decisions made while the
agency was answerable to neither the President nor the
people, therefore permitting the investigation of Seila Law
to continue.
Our court’s decision to deny rehearing en banc
effectively means that Seila Law is entitled to no relief from
the harms inflicted by an unaccountable and unchecked
federal agency. Thus, while David slayed the giant, Goliath
still wins. But that is not the law. As the panel recognized,
Supreme Court precedent conditions effective ratification on
the principal having the power to do the act ratified at the
time of the act—not just at the time of ratification. Id. at 718.
8 CFPB V. SEILA LAW
And as the Court held, the Director’s insulation from
presidential control rendered the whole agency
unconstitutional. With no agency empowered to enforce the
laws at the time of the CPFB’s prior actions, no ratification
is permissible.
I therefore respectfully dissent from the denial of the
petition for rehearing en banc.
I.
A.
The Constitution vests the Executive power—“all of
it”—in the President. Seila Law, 140 S. Ct.
at 2191(emphasis added); U.S. Const. art. II, § 1, cl. 1. It is
the President alone who must “take Care that the Laws be
faithfully executed.” U.S. Const. art. II, § 3. Unlike the
bicameral Legislature with its intentional division of
authority, the Constitution purposefully consolidates the
Executive power in one person. That’s because the Founders
determined that the execution of the laws and protection of
the nation required the “[d]ecision, activity, secrecy, and
dspatch” that “characterise the proceedings of one man.”
The Federalist No. 70, at 472 (Alexander Hamilton)
(J. Cooke ed., 1961). This unity of Executive power permits
the laws to be administered without the “habitual feebleness
and dilatoriness” that comes with a “diversity of views and
opinions.” Id. at 476.
Concentrating the Executive power in one person also
enhances accountability. Rather than permit the “diffusion
of accountability” that comes with the “diffusion of power,”
Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S.
477, 497 (2010), the Constitution entrusted the Executive
power to a “single object” to be held responsible by the
CFPB V. SEILA LAW 9
people, The Federalist No. 70, at 479. The Founders then
“made the President the most democratic and politically
accountable official in Government”—the only office, along
with the Vice President, elected by the entire Nation. Seila
Law, 140 S. Ct. at 2203. So the constitutional design of a
single-person Executive “ensure[s] both vigor and
accountability” to the people. Printz v. United States,
521 U.S. 898, 922 (1997).
At the time of the Founding, and even more so today, the
President needed assistance in carrying out these unique
responsibilities. The President may therefore “select those
who [are] to act for him under his direction in the execution
of the laws.” Myers v. United States, 47 S. Ct. 21, 25 (1926).
Legions of federal officials accordingly assist in the
discharge of Executive duties. But delegation of authority is
not abdication of accountability. In all matters of Executive
action, “[t]he buck stops with the President.” Free
Enterprise Fund, 561 U.S. at 493. Thus, while individual
executive officials may wield “significant authority,” such
authority always remains under “the ongoing supervision
and control of the elected President.” Seila Law, 140 S. Ct.
at 2203. The President’s control over executive officials
preserves a chain of accountability, with the President
serving as the check on those federal officials and the people
a check on the President. Id.; see Free Enterprise Fund,
561 U.S. at 498 (“[E]xecutive power without the Executive’s
oversight . . . subverts the President’s ability to ensure that
the laws are faithfully executed—as well as the public’s
ability to pass judgment on his efforts.”).
Necessarily concomitant with the President’s oversight
of the Executive branch is the power to remove federal
officers. Myers, 47 S. Ct. at 24 (holding that such power is
“vested in the President alone”). Although the President
10 CFPB V. SEILA LAW
possesses various means to influence his subordinates’
actions, see Free Enterprise Fund, 561 U.S. at 499–500
(discussing budget requests, “purely political factors,” and
other tools), the Constitution’s design for accountability “did
not rest . . . on . . . bureaucratic minutiae,” id. at 500. Rather,
it is the ultimate consequence of being fired from one’s perch
atop an agency that officers “must fear and . . . obey.” Seila
Law, 140 S. Ct. at 2197 (quoting Bowsher v. Synar, 478 U.S.
714, 726 (1986)). And one who is not bound to the
President’s will in this way “may not be entrusted with
executive powers.” Bowsher, 478 U.S. at 732.
B.
It was this “carefully calibrated” and historically
venerated design that Congress contravened in creating the
CFPB. Seila Law, 140 S. Ct. at 2203. As part of the Dodd-
Frank Act of 2010, Congress established the CFPB as an
independent agency to implement and enforce 19 consumer
protection statutes. Id. at 2193. True to that independence,
Congress conceived that the agency would be helmed by a
solo Director, serving for a five-year term, who would be
removable by the President only for “inefficiency, neglect of
duty, or malfeasance in office.” 12 U.S.C. § 5491(c)(1), (3).
This tenure protection meant the CFPB Director was
effectively unanswerable to the President. See, e.g., Seila
Law, 140 S. Ct. at 2204 (raising the concern that some
Presidents may have no “influence [over CFPB’s] activities”
and be “saddled with a holdover Director from a competing
political party who is dead set against [the President’s]
agenda” (emphasis omitted)).
The CFPB’s authority is also no little matter. Congress
granted the agency “vast rulemaking, enforcement, and
adjudicatory authority,” including the authority to conduct
investigations, issue subpoenas, carry out in-house
CFPB V. SEILA LAW 11
adjudications, and prosecute civil actions in federal court.
Id. at 2191; see 12 U.S.C. §§ 5562, 5564(a), (f). Remedies
at the CFPB’s disposal are similarly broad. They include
“any appropriate legal or equitable relief,” reformation of
contracts, and civil penalties up to one million dollars per
day. 12 U.S.C. § 5565(a)(1)–(2), (c). And the agency
exercises these powers free from Congress’s appropriations
decisions. The CFPB is statutorily entitled to a stream of
revenue directly from the Federal Reserve. Seila Law,
140 S. Ct. at 2194. The CFPB thus “acts as a mini
legislature, prosecutor, and court, responsible for creating
substantive rules for a wide swath of industries, prosecuting
violations, and levying knee-buckling penalties against
private citizens.” Id. at 2202 n.8.
From its inception, the CFPB wielded enormous power
but was led by a Director who was “neither elected by the
people nor meaningfully controlled . . . by someone who is.”
Id. at 2203. In no uncertain terms, the Supreme Court
described this arrangement as having “no basis in history and
no place in our constitutional structure.” Id. at 2201. The
CFPB Director’s “insulation from removal by an
accountable President” offended the separation of powers
and was thus “enough to render the agency’s structure
unconstitutional.” Id. at 2204.
Moreover, the President’s ability to oversee the CFPB
Director was so fundamental, and the defect so severe, that
if the removal protection were not severable, it may mean
that “the entire agency is unconstitutional and powerless to
act.” Id. at 2208 (plurality opinion). There would then be
“no agency left with statutory authority to maintain this suit
or otherwise enforce the demand.” Id. Thus, the severance
issue presented a binary choice: either (1) the Director’s
tenure protection could be removed and the CFBP “may
12 CFPB V. SEILA LAW
continue to exist and operate,” id. at 2207 (emphasis added),
or (2) there would be “no agency at all,” id. at 2210. But
because the Court determined “Congress would have
preferred a dependent CFPB to no agency at all,” id., the
Court severed the Director’s tenure protection. 1
C.
With these background principles in mind, I turn to the
CFPB’s ratification of its past actions against Seila Law.
After determining the CFPB’s structure was unconstitutional
and severing the offending tenure provision, the Supreme
Court remanded to this court to determine whether Acting
Director Mick Mulvaney had effectively ratified the
agency’s actions. 2 Before we decided that issue, however,
Director Kraninger (now removable by the President without
cause) again ratified the CFPB’s demand and petition. Seila
Law II, 984 F.3d at 718. Our court then held that Director
Kraninger’s actions validly ratified the CFPB’s pursuit of
Seila Law. Id. I disagree with this conclusion. 3
1
Three Justices joined this severance analysis, while four other
Justices joined its judgment. Two other Justices would have denied
severance and granted Seila Law relief then and there. Seila Law, 140 S.
Ct. at 2224 (Thomas, J., concurring in part and dissenting in part).
2
The Court declined to opine on the ratification debate, which
“turn[ed] on case-specific factual and legal questions not addressed
below and not briefed” before the Court. Seila Law, 140 S. Ct. at 2208
(plurality opinion). Instead, it left the issue for lower courts to consider
in the first instance. Id.
3
As a threshold matter, I have concerns about whether the CFPB
has Article III standing to bring this action. As we held in CFPB v.
Gordon, a party must be “part of the Executive Branch” to be exempt
from the traditional standing requirement of an individualized injury.
CFPB V. SEILA LAW 13
To begin, ratification does not seem to be a proper
remedy for separation-of-powers violations such as we face
here. The Court has made clear that parties injured by
actions of a constitutionally deficient executive official are
“entitled to relief.” Lucia v. SEC, 138 S. Ct. 2044, 2055
(2018). Indeed, when a party raises a constitutional
challenge as a defense to a federal enforcement action, “no
theory . . . would permit [a court] to declare the [agency’s]
structure unconstitutional without providing relief to the
[injured party.]” Fed. Election Comm’n v. NRA Pol. Victory
Fund, 6 F.3d 821, 828 (D.C. Cir. 1993). In the criminal
context, for example, the Court usually regards structural
violations as “so intrinsically harmful as to require automatic
reversal” of the defective decision. Neder v. United States,
527 U.S. 1, 7 (1999). Since ratification purports to cure
defects in an agency’s prior actions, the result is that a party
injured by a separation-of-powers violation is left with no
relief at all. But the Court has told us to provide remedies
that “create incentives to raise” separation-of-powers
challenges. See Lucia, 138 S. Ct. at 2055 n.5 (simplified)
(ordering a new hearing before a properly appointed SEC
administrative law judge, even though the SEC had ratified
the appointment of the then-unconstitutionally serving ALJ
who had ruled against Lucia). Ratification then seems
inconsistent with the Court’s teachings.
Even if ratification could cure structural constitutional
errors, the CFPB’s ratification here was ineffective because
819 F.3d 1179, 1189 (9th Cir. 2016). Seila Law raises the concern that
the CFPB was not duly constituted as “part of the Executive Branch” for
Article III standing purposes. Nevertheless, since no party raised or
briefed this issue, I do not discuss it here. On en banc review, we should
have directed the parties to address this court’s jurisdiction to hear this
case.
14 CFPB V. SEILA LAW
it lacked Executive authority at the time it initiated its actions
against Seila Law. The ratification inquiry is “governed by
principles of agency law.” Fed. Election Comm’n v. NRA
Pol. Victory Fund, 513 U.S. 88, 98 (1994) (discussing
Restatement (Second) of Agency § 90 (1958)); see Seila
Law II, 984 F.3d at 718; Gordon, 819 F.3d at 1191. And
under those common law principles, it is essential that the
party ratifying should be able “to do the act ratified at the
time the act was done” as well as “at the time the ratification
was made.” NRA Political Victory Fund, 513 U.S. at 98
(emphasis omitted).
This is so because ratification “affects the relations
between the principal, agent, and third persons” and thus
“the same limitations apply to the ratification of acts” that
apply to the acts themselves. Restatement (Second) of
Agency § 84 cmt. a (1958). Since “[t]o ratify is to give
validity to the act of another, [it] implies that the person or
body ratifying has at the time power to do the act ratified,”
Norton v. Shelby Cnty., 118 U.S. 425, 451 (1886), and “a
ratification can have no greater effect than a previous
authority,” Dist. Twp. of Doon v. Cummins, 142 U.S. 366,
376 (1892).
We applied these principles in Gordon. In that case, the
CFPB brought an action against Gordon during Richard
Cordray’s tenure as Director after an unconstitutional recess
appointment. Gordon, 819 F.3d at 1186. Later, however,
Cordray was properly nominated and confirmed, and he
ratified his earlier action against Gordon. Id. at 1185–86.
Gordon argued that, even after Senate confirmation, Director
Cordray could not have ratified his own prior acts as a recess
appointee because he lacked the power to do those acts at
that time.
CFPB V. SEILA LAW 15
Applying the Second Restatement, we held that “if the
principal (here, CFPB) had authority to bring the action in
question, then the subsequent . . . ratification of the decision
to bring the case against Gordon is sufficient.” Id. at 1191
(citing Restatement (Second) of Agency § 84(1)). Thus, we
construed the “principal” to be the CFPB as an agency,
which could possess the power to act on behalf of the
Executive branch separately from any individual Director. 4
Next, because we understood that “the CFPB had the
authority to bring the action at the time Gordon was
charged,” we ruled that a properly appointed Director was
empowered to ratify the action after the fact. Id. at 1192. In
the end, we held that Director Cordray—acting as the
CFPB’s agent after being properly nominated and
confirmed—could ratify his own prior acts as a recess
appointee. Id.
But based on the Court’s intervening decision in Seila
Law, that ratification inquiry must now come out differently.
Contrary to our assumption in Gordon, the CFPB was not a
“principal” empowered to act on behalf of the Executive
branch at the time of its actions against Seila Law. Until the
Supreme Court severed the Director’s tenure protection, the
CFPB was operating beyond the control of the President.
When an agency has “slip[ped] from the Executive’s control,
and thus from that of the people,” Free Enterprise Fund,
561 U.S. at 499, the chain of accountability breaks. And
when that happens, the chain of delegated power also breaks.
4
Judge Ikuta forcefully argued that this analytical move was
incorrect because only individual officials—and not abstract agencies—
can possess Executive power. See Gordon, 819 F.3d at 1200 (Ikuta, J.,
dissenting). Whether the Gordon majority or Judge Ikuta is correct on
this point is beyond the scope of this dissent. Under either view,
ratification was improper here.
16 CFPB V. SEILA LAW
See Bowsher, 478 U.S. at 732 (holding that officers not
controlled by the President are not “entrusted with executive
powers”). That is because the Executive power is not
Congress’s to dispense to such individuals and agencies as it
pleases; it is vested solely in the President, who may be
assisted by those he controls—including through the
“powerful tool” of removal. Free Enterprise Fund, 561 U.S.
at 510 (simplified).
Indeed, the Court’s determination that severance was
necessary confirms that the CFPB lacked Executive
authority pre-severance. The Court was explicit that, if it
failed to sever the Director’s tenure protection, there would
be “no agency . . . with statutory authority to maintain this
suit.” Seila Law, 140 S. Ct. at 2208 (plurality opinion). And
contrary to the panel’s belief that the constitutional violation
did not affect “the legality of the agency itself,” Seila Law II,
984 F.3d at 719, the Supreme Court held that the Director’s
separation-of-powers violation was “enough to render the
agency’s structure unconstitutional.” Seila Law, 140 S. Ct.
at 2204 (majority opinion). Given this defect, there would
be “no agency at all” in the absence of severance, and the
Court severed because it believed Congress would have
preferred a “dependent CFPB” to “no CFPB.” Id. at 2210
(plurality opinion). Thus, so long as the CFPB was not
accountable to the President and, through him, to the people,
the agency did not “ha[ve] the authority to bring the action”
on behalf of the Executive branch. Gordon, 819 F.3d at
1192. In other words, the agency was not a “principal” under
agency law and could not have ratified Executive-branch
actions after the fact. 5 By holding the ratification to be
5
A “principal” is “[s]omeone who authorizes another to act on his
or her behalf as an agent.” Black’s Law Dictionary (11th ed. 2019).
Since the CFPB lacked the authority to “act” as a principal on behalf of
CFPB V. SEILA LAW 17
effective, we allowed the CFPB to retroactively curtail Seila
Law’s rights, even though it lacked the power to do so at the
time.
Consider the converse: if, as the panel maintained, the
pre-severance CFPB did possess lawful authority to act
against Seila Law, the Court’s decision to sever the
Director’s removal protection would be inexplicable and
irrelevant. If “the legality of the agency” were untouched by
the Director’s defect, Seila Law II, 984 F.3d at 719, Seila
Law would have suffered no constitutional injury and would
have been entitled to no relief. That cannot be the case. As
the Court stated, “violat[ing] the separation of powers . . .
inflicts a here-and-now injury on affected third parties that
can be remedied by a court.” Seila Law, 140 S. Ct. at 2196
(simplified). Thus, the Court recognized that the
unconstitutional structure of the CFPB injured Seila Law.
But our court today pronounces that this harm is no big deal
and allows the CFPB to continue its pursuit of Seila Law—
effectively rendering the firm’s “here-and-now injury”
without remedy.
II.
Under our constitutional structure, an agency untethered
from the President’s control may not wield his power. Such
unchecked power would be unaccountable to the people and
subvert the constitutional design. Before severance, the
CFPB Director was free from Presidential oversight—and
thus free of Executive authority. The doctrine of ratification
does not permit the CFPB to retroactively gift itself power
that it lacked. The panel’s decision to condone this power
the Executive branch, it could not bestow that authorization on others,
including its Director.
18 CFPB V. SEILA LAW
grab was erroneous. Just as bad, our failure to correct this
decision en banc declares Goliath the victor and makes
hollow the promise of judicial relief for separation-of-
powers violations. I respectfully dissent.
"Congress enacted the APA to make judicial review widely available to anyone who is aggrieved within the meaning of a relevant statute. And shareholders are aggrieved by the Net Worth Sweep." David Thompson 12/09/20
Follow up on Seila Law, did the 9th Circuit Appeals Court, sitting with a 3 judge panel (1 who came in from Ohio) rule that the CFPB did in fact ratify the Civil Investigative Demand? Yes they did, here's the link to their 10 page decision
https://www.google.com/url?sa=t&source=web&rct=j&url=https://cdn.ca9.uscourts.gov/datastore/opinions/2020/12/29/17-56324.pdf&ved=2ahUKEwjRurGn8dHwAhXGMlkFHSebD68QFjACegQIDRAC&usg=AOvVaw0cLKQNun0aSEdw7iDeMflC
Guess who appealed that decision to the Full EnBanc Panel of Judges on the 9th Circuit?
Interestingly they didn't decide whether or not the Acting Director had ratified it, leaving that issue unsettled.
"Director Kraninger’s ratification remedied any
constitutional injury that Seila Law may have suffered due
to the manner in which the CFPB was originally structured."
We know what MC thinks about the nws don't we? I wonder if he has had one of his lawyers draft a statement about this already in the event their is a similar ruling in Collins?
From Seila Law: "Accordingly, there is a live controversy over the question of severability. And that controversy is essential to our
ability to provide petitioner the relief it seeks: If the re-
moval restriction is not severable, then we must grant the
relief requested, promptly rejecting the demand outright.
If, on the other hand, the removal restriction is severable,
we must instead remand for the Government to press its
ratification arguments in further proceedings. Unlike the
lingering ratification issue, severability presents a pure
question of law that has been fully briefed and argued by
the parties."
https://www.law360.com/articles/1374334/seila-law-says-full-9th-circ-should-reject-cfpb-ratification
I can't access this above recent news story.
https://www.housingwire.com/articles/ninth-circuit-court-upholds-cfpb-investigation-on-seila-law/
https://www.cnbc.com/video/2021/05/17/material-costs-driving-up-home-prices-causing-delays.html
https://www.housingwire.com/articles/mortgage-forbearance-numbers-officially-half-of-2020s-peak/
https://home.treasury.gov/news/press-releases/jy0178
"Deputy Secretary Adeyemo understands that communities that have been hardest hit by this pandemic often face barriers to access loans, rental assistance, and tax credits, and expressed Treasury’s commitment to seeking input from a diverse set of stakeholders to adequately ensure inclusivity. The Deputy Secretary also sought input and ideas from the Members as Treasury works to pursue its racial equity priorities, and looked forward to working together on an ongoing basis."
Wow! So, but for, the CRT PROGRAM THE GSES WOULD HAVE $14.95 ADDITIONAL CAPITAL ON THEIR BOOKS, NO WONDER MC IS LOOKING INTO THIS AND THE FINANCIAL INDUSTRY IS SO FOR IT!
Getting closer, here's the latest from the CZAR of the gses: 5/17/2021
FHFA Publishes Report on the Performance of Fannie Mae's and Freddie Mac's Single-Family Credit Risk Transfers
?Washington, D.C. – The Federal Housing Finance Agency (FHFA) today published a report on the performance of Fannie Mae's and Freddie Mac's (the Enterprises') single-family credit risk transfers (CRT). The report focuses on securities issuance and insurance/reinsurance credit risk sharing vehicles, which account for about 90 percent of all CRT issuance to date.
In 2019, FHFA called for a comprehensive review of the Enterprises' CRT programs for the first time since their inception in 2013. As an initial step toward that objective, this report estimates the historic and projected net costs of the Enterprises' CRTs, discusses the performance of CRT vehicles during the COVID-19 pandemic, and identifies areas for research and analysis to clarify CRT-related costs and benefits and assess potential risks to the Enterprises, their missions, or the housing finance markets.
“Given the size and complexity of the CRT market, this report is an important step to fulfill FHFA's statutory duties as a prudential regulator. The report is especially timely as it incorporates initial lessons from the COVID-19 stress and raises issues related to potential changes in the design of CRT structures while the Enterprises continue building capital. The findings of this report, and the research that it calls for, will inform FHFA's and the Enterprises' decisions about how best to utilize CRT in the future," said Director Mark Calabria.
Key findings from the report include:
Risk in Force: Between July 2013 and February 2021, about $126 billion of risk in force (RIF), or the Enterprises' maximum credit risk coverage, had been placed through securities issuance and insurance/reinsurance CRTs. As of February 2021, $72 billion combined RIF at issuance remained in force on a reference pool of $1.7 trillion in unpaid principal balance (UPB).
The Enterprises' net cost – defined as CRT benefits (investor write downs and counterparty reimbursements) minus CRT costs (interest and premiums):
Through February 2021: $15.0 billion (the Enterprises received approximately $0.05 billion via investor write downs and counterparty reimbursements and paid approximately $15.0 billion in interest and premiums).
Projected Lifetime (i.e., the sum of $15.0 billion in net cost through February 2021 and projected net cost over the remaining lifetime of active CRTs):
Baseline Scenario: $32.6 billion under a baseline scenario.
Severely Stressed Scenario: $20.6 billion under severely stressed housing market conditions similar to those of the 2008 financial crisis.
Fast prepayments accelerate the reduction of credit risk protection: The amount of credit risk protection that CRTs provide the Enterprises decreases as the principal balances of the reference pool mortgages are paid down. As a result of fast prepayments starting in mid-2019, by September 2020, soon after COVID-related delinquencies began to increase, almost all of the most senior investor tranches in securities issuance CRTs issued before 2020 had been fully paid off.
CRTs remain untested by a serious loss event: With the prospect of potential future losses at the onset of COVID-19, some investors suggested that their willingness to continue to invest in CRTs was contingent on the Enterprises' amending or suspending certain contractual provisions of early fixed-severity securities issuances. The Enterprises affirmed that COVID-related forbearance mortgages would be treated as specified in the contracts and disclosures.
The report identifies several areas beyond its scope that are in need of research and analysis to inform the future direction of the CRT programs: (1) more accurate measurement of the amount of credit risk transferred via CRTs over time, as well as CRT-related costs and benefits; (2) the Enterprises' exposure to counterparty risk through insurance/reinsurance CRTs and the costs, benefits, and potential risks of the Enterprises' approaches to mitigate counterparty risk; (3) the efficacy of, and potential costs and benefits of innovations to, certain features of CRT structures; and (4) the value of the information about credit risk that has been and can be derived from CRT pricing.
"As Amy noted, the court would likely announce on Friday any opinion days for next week. Until we get deeper in to June, it is probably just going to be Mondays (and the Tuesday after Memorial Day)."
Mark Walsh
SCOTUS Blog
They just decided over 10% of their remaining cases for the October 2020 term, I am pretty sure there were 32 before 10am to decide and now there is 28 left before the Justices begin their Summer Vacations.
But guess whose having another conference on Thursday?
https://www.cnbc.com/2021/05/17/homebuilder-confidence-remains-high-despite-rising-costs.html
https://www.cnbc.com/2021/05/17/64percent-of-millennials-have-regrets-about-buying-their-current-home.html
https://www.scotusblog.com/case-files/terms/ot2020/
That was Justice Kagan and a unanimous decision limiting the IRS's power and on Tax Day, nonetheless, you go girl!
"Americans," Kagan writes on Tax Day, "have never had much enthusiasm for paying taxes."
I think what David M. is saying here is that the SCOTUS is not the court that actually issues the remedy BUT the case will be remanded back to the 5th Circuit for a remedy consistent with the SCOTUS decision. So, if the SCOTUS declares the NWS as an ultra vires act of a federal agency director and in violation of the Administrative Procedures Act, the case will be remanded to the 5th Circuit who will issue the remedy consistent with the SCOTUS decision in Collins. This is simply because the SCOTUS is an appellate court and not the trial level court. Thus their ruling steers the lower courts on the answer to the question presented to the SCOTUS.
But for the "evil hedge fund guys" who COULD BANKROLL $100 MILLION PLUS IN LEGAL FEES TO STOP THE FEDERAL GOVERNMENT FROM NATIONALIZING 2 FORTUNE 50 CORPORATIONS! I don't blame Charlie G. for not understanding all the Constitutional and legal issues, but it is sad that some of the best 1st Amendment defenders (i.e., the free press) can't see that a "temporary conservatorship" is NOT SUPPOSE TO LAST MORE THAN 18 MONTHS! That's a red flag Charlie G., but it appears that the WSJ, FOX BIZ, W.POST, NYT, ET. AL. can't research this and they consistently go back to the enriching the "evil hedge fund guys" narrative!
I'm pretty sure hedge funds own less than 20% of the outstanding common and preferred shares, the rest is held by pension funds, small to mid size Community Banks, and a host of other hard working Americans and American retirees. I don't think we know for sure BECAUSE THE FHFA AS CONSERVATOR WON'T LET THE VICTIMIZED SHAREHOLDERS SEE THE ACTUAL CORPORATE BOOKS MUCH LESS WHO THE OTHER SHAREHOLDERS ARE!
"In addition to the collection of assessments, HERA authorizes
FHFA to invest the idle portions of the assessments through
Treasury. Annually, FHFA determines the total expected
costs associated with regulating the Enterprises and the
FHLBanks. The expected costs are shared proportionally
among the Enterprises and the FHLBanks in accordance
with FHFA’s assessment regulation, Code of Federal
Regulations 1206.6. FHFA issues assessment notices to
the regulated entities semi-annually, with the collections
occurring October 1 and April 1. In FY 2020, FHFA
assessed the entities a total of $311.4 million, including
$49.9 million to support the OIG.
Under HERA, FHFA is authorized to retain a working
capital fund for unforeseen or emergent requirements, which
can be funded through a special assessment to the entities
or through retention of unobligated balances at the end of
the fiscal year. At the end of FY 2020, the FHFA working
capital fund had a balance of $34.3 million."
https://www.fhfa.gov/AboutUs/Reports/Pages/Performance-and-Accountability-Report-2020.aspx
Had the federal government paid the annual operating budget of FHFA instead of the gses, the jps holders could have received a 2020 dividend of approximately 1%. Nice to know that MC increased the head count at FHFA by 18% Year over Year for 2021.
From the ACCOUNTABLE TO NO ONE IN GOVERNMENT, CZAR OF THE GSES:. 5/14/2021
FHFA Director Mark Calabria's Statement at The Brookings Institution on May 11, 2021
Public Remarks as Prepared for Delivery
Dr. Mark A. Calabria
Director, Federal Housing Finance Agency
The Brookings Institution
Living wills for housing government-sponsored enterprises: Implementation and impact
Tuesday, May 11, 2021
Thank you, Aaron, for that introduction and for inviting me to speak today.
Thank you to the Brookings Institution for hosting this important discussion. It is an honor to speak before these distinguished panelists.
When President Lyndon Johnson addressed this institution on its 50th Anniversary, he said that, “in field after field, reports and studies that emerged from Brookings [brought] about substantial changes in law and in practice.”
And he highlighted as especially important “the power to evaluate […] the power to say, about public policies or private choices, ‘This works. But this does not.’”
All this is as true today as it was 1966. Brookings continues to inform our most consequential policy debates. And careful evaluation and analysis continue to be critical for effective policymaking.
Careful analysis is especially important when the government makes preparations for a crisis. During the 2008 crisis, American families were hit hardest by the effects of market uncertainty around how the largest financial institutions could fail.
Advance planning allows government institutions to act predictably and transparently. This helps the public and markets make their own informed preparations.
That it is why FHFA just finalized a resolution planning rule for Fannie Mae and Freddie Mac. The rule is built on the foundation of resolution planning established by the 2010 Dodd-Frank Act.
Under Dodd-Frank, America’s biggest banks are required to create resolution plans, or living wills, in the event a bank experiences severe financial stress. Each bank’s plan clarifies how it could be placed into a receivership overseen by the FDIC or into bankruptcy and resolved without disrupting markets or relying on extraordinary government support.
When President Obama signed Dodd-Frank, he said “because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes. There will be no more tax-funded bailouts – period. If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy.”
Years later, looking back on Dodd-Frank’s implementation, then-Brookings Distinguished Fellow Janet Yellen said about living wills, “enhancements in resolvability protect financial stability and help ensure that the shareholders and creditors of failing firms bear losses. These steps promote market discipline, as creditors […] demand prudent risk-taking, thereby limiting the too-big-to-fail problem.”
I could not agree more. And FHFA’s new resolution planning rule accomplishes the same thing for our nation’s biggest housing finance institutions.
The rule also implements FHFA’s statutory receivership requirements to prioritize protecting housing markets and the Enterprises’ missions ahead of their creditors.
Fannie Mae and Freddie Mac own or guarantee more than $6 trillion in single-family and multifamily mortgages – half the market. Taken together, these Enterprises are roughly equal in size to the top three largest banks in America combined. And they are bigger than the 4th through 15th biggest banks combined.
Yet while banks must operate with leverage around 10 to 1, the Enterprises have only recently reduced their leverage to 140 to 1. That is not enough capital for them to survive a housing downturn.
We recognize the Enterprises are not banks. But an orderly system for settling claims is just as critical to any financial institution as appropriate capital standards. And as we learned in 2008, inconsistencies in financial regulation across institutions can mask risk and fuel financial instability.
Ensuring the Enterprises have credible living wills comparable to the other largest financial institutions enhances the integrity of the entire post-Dodd-Frank orderly resolution system.
It also brings important clarity to housing finance about how FHFA’s receivership powers would work in a time of significant financial stress, as remote as such times can seem when home prices are rising.
And today’s housing market is booming. The pandemic drove a surge in demand into already tight housing supply. The supply of available homes for sale dropped 40 percent year-over-year, to almost half pre-pandemic levels. Mortgage rates fell to the lowest levels on record.
As a result, in 2020, house prices jumped more than 10 percent in every Census region, according to FHFA’s House Price Index. That is the biggest year-over-year increase in the history of our index.
All this added onto what was already the national housing market’s longest period of rising home prices without a downturn.
Fannie and Freddie supported this market in 2020, ensuring mortgage credit stayed available despite the pandemic’s disruptions. They acquired more than 60 percent of the single-family mortgages originated last year.
But the cyclical history of the housing market teaches that strong house price growth is not a guarantee of future stability.
In fact, FHFA’s data shows that high prices gave Enterprise borrowers a slightly greater share of home equity in December 2005, on the cusp of the last crash, than they had as of December 2020.
We know that just as prices go up, they also go down. It is prudent to prepare for the downturns during the boom times. That is what FHFA’s resolution planning rule helps accomplish.
Several commenters on the rule suggested that planning for a safe and orderly resolution process is a bad idea because an Enterprise going into receivership is an undesirable policy outcome.
FHFA is committed to doing everything in our legal power to avoid an unnecessary receivership. That is why FHFA has been working to strengthen the Enterprises’ financial conditions and build their capital. The surest path to avoiding Enterprise receiverships runs through a capital raise securing enough equity to keep Fannie and Freddie solvent through a downturn.
But we also recognize that we have to be ready. The job of a prudential regulator is to hope for the best but prepare for the worst.
The Safety and Soundness Act sets out 12 conditions that can initiate an Enterprise receivership. The Act sets two conditions that trigger mandatory receivership.
FHFA’s rule implements the receivership authorities Congress gave the Agency in 2008 in order to make clear how they would work. This enables an orderly resolution process that protects Fannie and Freddie’s mission.
FHFA’s new rule requires each Enterprise to develop plans to facilitate their rapid and orderly resolution without disrupting housing finance markets.
Resolution does not mean dissolution. By law, Fannie or Freddie wouldn’t be going away.
FHFA must set up a new company that succeeds to the congressional charter to be Fannie Mae or Freddie Mac. The new, clean Fannie or Freddie would continue operating and fulfilling its mission.
These plans will be designed to protect the mission of the Enterprise throughout the restructuring process of any receivership.
Therefore FHFA’s resolution rule requires the Enterprises to develop their plans under the assumption of stressed economic conditions and without the expectation of extraordinary government support. These are customary assumptions in the resolution planning process established under Dodd-Frank.
The planning process starts with each Enterprise identifying its core business lines. These are operations critical to the stability of housing finance markets or fulfilling the Enterprise’s statutory mission.
The Enterprise must describe how these core business lines can be transferred and operated without interruption. The Enterprise must also identify potential obstacles to rapid and orderly resolution and steps to overcome those obstacles.
These plans will be essential to helping FHFA make key decisions in the event an Enterprise is placed in receivership. Those decisions involve transferring the core business lines into the new operating entity in a manner that creates franchise value and positive net worth, making it more likely to attract private capital and liquidity.
Once the new entity builds enough capital, it will exit to permanent, independent status. The charters do not change. The new company will continue to be responsible for all its same duties and mission obligations.
The assets remaining in the failed company would be used to pay creditors. FHFA will minimize losses to the extent possible and pay creditors according to the prioritization set out by the Safety and Soundness Act. The law is very clear that creditors should expect to bear losses. The government’s priority is protecting the housing market as a whole and the missions of the Enterprises.
As important as these plans are, they must be backed up by the capability to execute an orderly resolution process.
Last year, FHFA hired Jason Cave from the FDIC to run our Division of Resolutions. We also just hired FDIC veteran Marc Steckel as Associate Director for the Office of Receivership Management, Governance, and Operations.
Jason and Marc were both key figures in FDIC’s implementation of Dodd-Frank’s Orderly Liquidation Authority. And they helped oversee the creation of credible living wills for America’s largest banks.
We are continuing to strengthen and grow FHFA as a world-class regulator.
We also continue to strengthen the Enterprises. In fact, today I think we see the strongest board and management teams in the history of these companies.
At FHFA’s direction, those teams are working on risk management and other supervisory concerns to ensure their business is conducted responsibly. And they are currently building capital by retaining their earnings.
Capital is essential for the Enterprises to fulfill their missions to promote mortgage credit access nationwide, expand affordable housing in underserved communities, and backstop the housing market in a crisis when other credit disappears.
When house prices are stable or rising, more capital at the Enterprises means more resources to support affordable housing and provide relief to families in need.
For example, when COVID hit, the Enterprises used their recently authorized retained earnings to help millions stay safe in their homes. And most recently, FHFA announced a new refinancing option that will help low-income families save thousands of dollars on their mortgage.
Capital becomes even more important in a downturn. When house prices decline, capital absorbs Enterprise losses and allows them to continue fulfilling their missions, providing stability and liquidity to the housing market when they are needed most.
In a crisis, capital at the Enterprises offers borrowers protection from foreclosure, destroyed credit, and displacement. This is especially important for lower-income and minority families who are often first to lose their jobs and savings.
That is why FHFA is making sure that Enterprise risk is matched to their capital. And it is why I have spent the last two years making every effort to build capital at Fannie Mae and Freddie Mac.
When I came into office, the Enterprises were allowed to hold only $6 billion in loss-absorbing capital to back their $6 trillion balance sheets. In September 2019, Treasury and FHFA raised their combined capital caps to $45 billion.
That change saved Fannie and Freddie from failing last year when the COVID shock hit. But it does not mean they are safe. In their current condition, Fannie and Freddie will fail in a downturn in house prices.
The PSPA amendments that FHFA and Treasury announced earlier this year were aimed at preventing that from happening. And they make some important progress toward that goal.
They effectively end the net worth sweep. This allows Fannie and Freddie to build capital to meet the requirements set out in the capital rule that FHFA finalized last fall.
But most of the work to put Fannie and Freddie in a safe and sound condition remains ahead. Allowing the Enterprises to retain capital is not the same as the Enterprises having capital. And building capital is not the only necessary step.
To responsibly exit their conservatorships, Fannie and Freddie must be both well-capitalized and well-regulated.
The resolution planning rule is the next critical component of FHFA’s commitment to protecting the mission of the Enterprises and the millions of families who depend on a stable mortgage market. Credible living wills provide the clear rules of the road needed in times of stress when large financial institutions can fail.
As President Johnson closed his Brookings 50th Anniversary remarks, he said, “When governments are faced with great public dilemmas, they must shape their programs with the greatest wisdom that they possess, but governments must act.”
Credible living wills at Fannie and Freddie will ensure that, in a great public dilemma involving housing finance, FHFA will be able to act quickly without exposing the financial system or taxpayers to additional risk.
They will help FHFA act to protect the Enterprises’ mission even in the worst conditions. They build on the foundation laid by Dodd-Frank to end Too Big to Fail and protect taxpayers from Wall Street’s losses.
With this living wills rule, FHFA is preparing an important tool for a world-class financial regulator to hold in case of a crisis. But the surest path to avoiding Enterprise receiverships runs through raising enough capital to keep Fannie and Freddie strong through a downturn.
And FHFA will continue preparing the Enterprises to fulfill their mission throughout the cycle.
Contacts:
?Raffi Williams Raffi.Williams@FHFA.gov / Adam Russell Adam.Russell@FHFA.gov
I think both parties are equal opportunity haters of the gses! It's sort of humorous (and ironic?), that FDR created Fannie Mae as a Government enterprise, LBJ privatized them in 1968, and OBama tried to destroy them on August 17, 2012! But their business model is just as repugnant to Libertarians and most R's! Sorry but the gses work simply because the "free market" will result in a race to the bottom in both loan pricing and quality, just as the Private Label MBS market brought the world economy to its knees in the 2004-9.
I hear you! But for the $100m+ in legal fees paid so far by the "evil hedge fund guys", do you really think that the government would somehow give up its biggest theft of private shareholders property in US history? That Senators Warren and Brown and a parade of others are so hostile to Capitalism could be troubling for free enterprise and the new and innovative ways it provides all Americans access to the goods and services that benefit them and increases their standards of living.
"And that’s why I’ve called on Congress to wind down the government-backed companies known as Fannie Mae and Freddie Mac."
That's a direct quote from OBama, post the nws, which in case you do not understand was designed solely to eliminate the private shareholders interests in the company and keep them 100% NATIONALIZED.
As I recall it was to a group of Realtors and the hall was pretty silent after he proclaimed he was doing away with the gses!
"And that’s why I’ve called on Congress to wind down the government-backed companies known as Fannie Mae and Freddie Mac."
https://obamawhitehouse.archives.gov/the-press-office/2015/01/08/remarks-president-housing-phoenix-az
What is absolutely amazing to me and shows the importance of the gses, is the fact that so many powerful people and institutions have tried to drive a stake through the twins hearts and they are still alive and actually helped during the latest crisis!
"and everything to do with their capital levels", MC is a nonstop record since day one that they need more capital, that doesn't mean the day after the SCOTUS rules they are going to try to raise equity capital. We don't even know what the FA's suggest and way too many other factors. Still too early to speculate on timing and everything else.
The SPSPA'S can be changed with the stroke of pen, still kinda early to figure out how all this ends up exactly.
Look I know you and the other jps and probably tons of common shareholders are ready to be done with this "nightmare" investment after over 12.5+ years of the governments shenanigans and constantly shifting political winds, but the fact remains that the gses are profitable and if well run and managed could end up being a good long term play. Hang in there and we should ALL end up seeing some good returns.
Excellent, thank you!
Do you remember the speech OBama gave in Arizona about how the gses wouldn't be around and he did that finger waging with a frown on his face? The crowd did NOT erupt in cheers because they knew getting rid of the gses would be bad news...
I'll bet they are super fun to hang out with!....
Thanks for the link GAK, I hadn't seen that before! TH has been a really great advocate of letting the world know EXACTLY HOW THE GFC OF 08/09 was created! No other former Executive from either of the gses has helped educate the public as much as Tim and I thought his Amicus Brief was extremely informative! Trials are about getting to the truth of the issues presented to the court and after 6 years of Discovery, the Government will not be able to continue fooling the public about the gses!
MC letting the JB Administration know that there's no reason to fire me, we are working hard on improving America's Secondary Mortgage Market! MC should have changed this part, "And as 2008 demonstrated, when the GSEs fail, America’s housing problems get even worse.", to "And as 2008 demonstrated when the UST strong arms 2 Fortune 50 private corporate board of directors into Nationalization of their businesses, America's housing problems get even worse."
I think they left the NYSE because the share price was below a minimum level for a certain time period...
Then maybe also when they implemented the nws the "conservator" petitioned to have it removed to the pink sheets so, "the shareholders will never see value from their shares again".
Treasury Distributes $742 million to States and Territories through Homeowner Assistance Fund
May 13, 2021
WASHINGTON – Today, the U.S. Department of the Treasury announced that it has distributed $742 million to 42 states and 3 territories through the Homeowner Assistance Fund (HAF). A part of the Biden-Harris Administration’s American Rescue Plan, HAF was designed to prevent mortgage delinquencies and defaults, foreclosures, loss of utilities or home energy services, and displacement of homeowners experiencing financial hardship due to the COVID-19 public health crisis.
“Today there are over 3 million homeowners behind on mortgage payments, and the pandemic has exacerbated the country’s already severe housing affordability crisis,” said Deputy Secretary of the Treasury Wally Adeyemo. “Treasury is focused on ensuring the American economy recovers from the devastation of the COVID-19 crisis, including providing relief for our country’s most vulnerable homeowners facing the loss of basic housing security through no fault of their own.”
The Homeowner Assistance Fund provides:
A minimum of $50 million for each state, the District of Columbia and Puerto Rico
$498 million for Tribes or Tribally designated housing entities and the Department of Hawaiian Home Lands
$30 million for the territories of Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands
The HAF infusion comes on the heels of last week’s announcement that the Department of the Treasury, in coordination with the Department of Housing and Urban Development, and the White House American Rescue Plan Implementation Team allocated $21.6 billion for Emergency Rental Assistance (ERA), which will help prevent evictions and ensure basic housing security for millions of Americans. These programs represent the Administration’s all-of-government approach that leverages authorities and agencies across the entire Administration to help people remain stably housed during the pandemic, an important step towards building stronger and more equitable communities.
Treasury will continue to distribute HAF funds in the coming months. For more information, visit https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/homeowner-assistance-fund.
Latest from Senator Sherrod Brown, Chair of the Senate Banking Committee (I don't think he's a big fan of the"evil hedge fund guys" or the "evil banksters"!):
"BROWN, COLLEAGUES INTRODUCE TAX REFORM LEGISLATION TO CLOSE CARRIED INTEREST TAX LOOPHOLE
Carried Interest Fairness Act Will Eliminate Private Equity Tax Break and Make Wealthy Fund Managers Pay Ordinary Income Rates Like Workers Do
WASHINGTON, D.C. – U.S. Senators Sherrod Brown (D-OH), Tammy Baldwin (D-WI), and Joe Manchin (D-WV), introduced tax reform legislation to close the carried interest tax loophole that benefits wealthy money managers on Wall Street. Currently, the carried interest loophole allows investment managers to pay the lower 20 percent long-term capital gains tax rate on income received as compensation, rather than the ordinary income tax rates of up to 37 percent that they would pay for the same amount of wage income. The Carried Interest Fairness Act will require carried interest income to be taxed at ordinary rates. According to the Joint Committee on Taxation, closing this loophole will raise $15 billion in revenue over 10 years.
“The carried interest loophole is yet another example of Wall Street executives exploiting our tax code to pad their pockets rather than invest in workers and Main Street,” said Brown. “Corporate greed is fundamental to the Wall Street business model — and workers aren't going to get their fair share until we change it. It's past time for Congress to put workers first.”
For years, President Trump promised to close the carried interest tax loophole but failed to do so. In 2017, Senate Republicans rejected an amendment to their tax bill, introduced by Senator Baldwin and supported by every Democratic Senator, to close the loophole. Trump then signed the 2017 tax bill and failed to keep his promise to eliminate the tax break for wealthy hedge fund managers.
President Biden’s American Families Plan calls on Congress “to close the carried interest loophole so that hedge fund partners will pay ordinary income rates on their income just like every other worker.” The White House said in a fact sheet on the plan, “Permanently eliminating carried interest is an important structural change that is necessary to ensure that we have a tax code that treats all workers fairly.”
The Carried Interest Fairness Act is cosponsored by Senators Cory Booker (D-NJ), Dianne Feinstein (D-CA), Mazie Hirono (D-HI), Tim Kaine (D-VA), Amy Klobuchar (D-MN), Ed Markey (D-MA), Jack Reed (D-RI), Bernie Sanders (I-VT), Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI).
The legislation is supported by AFL-CIO, The Agenda Project, American Family Voices, American Federation of Government Employees, American Federation of State County and Municipal Employees, American Federation of Teachers, American Postal Workers Union, Americans for Financial Reform, Catholics in Alliance for the Common Good, Center for Popular Democracy Action, Communications Workers of America, Consumer Action, Courage Campaign, Credo, Democracy for America, Economic Policy Institute, Franciscan Action Network, Friends of the Earth, Hedge Clippers, International Federation of Professional & Technical Engineers, Institute for Policy Studies, Media Voices for Children, MoveOn.org, National Education Association, NETWORK, The Other 98%, Patriotic Millionaires, People's Action Institute, Presente.org, Public Citizen, Service Employees International Union, Strong Economy for All Coalition, The Rootstrikers at Demand Progress, UNITE-HERE, U.S. Public Interest Research Group, United Auto Workers, Working America, and the Working Families Party.
More information about the legislation is available here. An online version of this release is available here."
Is Monday the new Thursday? https://www.supremecourt.gov/
Companies earning $10B to $20B a year in Net Income don't end up in receivership and the Liquidation Preference was artificially contrived by the government to keep the gses in Conservatorship and as a means of Nationalizing the gses.
As far as your persistent "immediacy to raise capital" position, having a "conservator" siphon off 2 companies profits to the tune of $308B (more if you count the dollar for dollar increase in the LP) for the last decade and then ONLY after the SCOTUS has ruled that it's wrong and stops them, to believe that the market will be ready, willing, and able to hand over Billions of Dollars in the largest capital raise in world history, to put their own money in a 1st Loss Capital Position seems a little far fetched to me. I think a 3 to 5 year path of retained earnings retention may be a more feasible route.
Let's see what happens.
Believe me I hear you! That's why building capital now is so important. The builders will build more as home prices rise and we are finally starting to kick Covid-19 down the road, and people will start supplying the market with more home listings. For the last 10 years straight, we have built less housing per year than demand and obsolescence dictated.
The gses book of biz is the strongest I have seen it since I was employed there in 1988. The current mark to market LTV is in the mid to low 70's, FICO scores are very strong, and there is some credit risk transfer in place.
The current runup in prices is primarily a result of extremely tight supply (2 months v 6 months), 50 year low Mortgage Rates, and the millennial generation (70m+) coming into home buying age, unlike the 08/09 that was built on rampant buyer speculation and the "if you have a pulse, you have a mortgage!" lender mentality (where do you think all that Private Label MBS came from!).
Never seen homes sell so quickly though...
Conservatorships are suppose to be temporary. MC to his credit in his interview yesterday said, "Conservatorships by their very nature are suppose to be temporary, the longest bank conservatorship lasted only 18 months!". If you were ever entrusted to be a conservator of an invalid or say someone with Alzheimer's and you took the profits from their assets and put them in your personal bank account, guess where you would end up if caught? The SCOTUS gets that, let's see if they can craft a decision that helps put an end to the 12.5+ year Conservatorship even though the Collins Plaintiffs is only asking for invalidating the nws. How would they do it? Just brainstorming here, but perhaps they could rule that HERA is Unconstitutional and we don't know exactly how the US Congress would have preferred us to rewrite HERA (e.g., multi member board to make it difficult for the POTUS to totally control FHFA versus a single Director removable at will) and they rule that HERA in its entirety is void and the parties are to be put back to where they were pre HERA. But most commentators believe that this is unlikely (as do I).
What else could they do with a ruling? Maybe transfer the Conservatorship to the courts to supervise after invalidating the nws, but that seems unlikely as well. They do have a lot of power, likely recognize (as all of us do) that the Executive branch doesn't want to let go of their golden goose and they may end up crafting a ruling that helps truly expedite the government into exiting the Conservatorships. Maybe allowing the shareholders to sue would help as well. Good times, Good times...
"The median credit score for newly originated mortgages increased to 788 while the score for new auto loans rose to 720. Just 15% of the newly originated auto loans were to subprime borrowers with scores lower than 620.
Delinquency rates also continued to drop, edging lower to 3.1% of all debt, a 1.5 percentage point decline from the same period in 2020."
https://www.cnbc.com/amp/2021/05/12/household-debt-climbs-to-14point64-trillion.html
Dow tumbles 680 points in worst decline since January as hot inflation reading spooks investors
Will the gses become the anti bubble trade?
"Nationwide, the median existing-home sales price rose 16.2% in the first quarter to $319,200, a record high in data going back to 1989, NAR said."