2015: Year of the Jeb…no, the other Jeb

Jeb Bush recently announced he is considering a run at the presidency in 2016, so we will surely see and learn a lot more of this Jeb in 2015.

However, this post is about the other JebJeb Hensarling. Mr. Hensarling is a Republican from Texas in his 12th year in Congress who is starting his third year as Chairman of the House Financial Services Committee.

It is often said that you can know someone best by the friends they keep.

Last year, Mr. Hensarling was the top recipient of commercial bank political contributions among all members of the House and Senate. Commercial banks contributed $327,302 to Mr. Hensarling in 2014.

And if being numero uno in bank contributions is not impressive enough, the Congressman received an even more impressive sum from the insurance industry at $350,764. Rounding out Mr. Henssalring’s top industry contributors is the securities and investments industry at $314,604, the real estate industry at $204,200 and another $193,650 from finance/credit companies.

The House committee that Mr. Hensarling chairs oversees the banking, financial services, insurance, securities and housing industries.

MetLife, JP Morgan Chase and Goldman Sachs are Jeb’s top three contributors.

http://www.opensecrets.org/influence/

Those friends are impressive A-list friends! Besides giving money to the Congressman, what else do these friends do together?

House Finance Chair Hensarling Goes on Ski Vacation with Wall Street 

http://www.propublica.org/article/house-finance-chair-goes-on-ski-vacation-with-wall-street

“In January (2013), Rep. Jeb Hensarling, R-Texas, ascended to the powerful chairmanship of the House Financial Services Committee. Six weeks later, campaign finance filings and interviews show, Hensarling was joined by representatives of the banking industry for a ski vacation fundraiser at a posh Park City, Utah, resort.”

I identified more of Mr. Hensarling’s friends, in an earlier post on this blog, where I reprinted an article by the Dallas News – Relationship with Wyly brothers helped launch Jeb Hensarling; could it now hinder him?

You can read about the Congressman’s former job at a hedge fund company here:

http://www.dallasnews.com/news/washington/20100812-Relationship-with-Wyly-brothers-helped-launch-7438.ece

In addition to Jeb Hensarling befriending wealthy and influencial friends, he has also garnered tremendous political power himself. In fact, when Eric Cantor stepped down as Majority Leader this past summer, Mr. Hensarling was on the top of a very short list to assume that role. However, upon consultation with his friends, he stated, “…this is not the right office at the right time for me.”

Chairman Hensarling and friends have some unfinished work to do on the House Financial Services Committee.

“I serve as the Chairman of the House Financial Services Committee. In my role as chairman…I was the only member of Congress to have introduced comprehensive reform legislation for Fannie Mae and Freddie Mac during the credit crisis, lauded in the media as ‘a concrete plan for fixing Fannie and Freddie.’ That is why, under my leadership, the Financial Services Committee passed the Protecting American Taxpayers and Homeowners Act, also known as the PATH Act, which would:

  • end the largest bailout in history – the nearly $200 billion taxpayer-funded bailout of Fannie Mae and Freddie Mac – and phase out the troubled Government-Sponsored Enterprises within five years;
  • increase competition by ending the federal government’s domination of the housing finance market that has left taxpayers liable for $5.1 trillion in mortgage guarantees; and
  • free America’s housing markets from the control of Washington elites, giving consumers more choices in determining which mortgage product best suits their needs.”

http://hensarling.house.gov/issues/financial-services

So, Mr. Hensarling desires to ‘phase out Fannie and Freddie’ because they represent ‘the federal government’s domination of the housing finance market.’

If the rest of the civilized world knows that Fannie Mae and Freddie Mac are private companies, surely an ex-hedge fund manager and current Chairman of the House Financial Services Committee knows that Fan and Fred are not part of the ‘federal government.’

Further, Chairman Hensarling states his goal is to ‘free America from the control of the Washington elites’ while at the same time being the reigning king of Big Bank political contributions.

Are there any other examples of Washington doublespeak?

Chairman Hensarling Statement on Mel Watt’s Confirmation  Washington, Dec 10, 2013

“I congratulate my colleague Mel Watt on his confirmation… My soon-to- be former colleague has big shoes to fill in replacing Acting Director DeMarco and I hope and challenge him to carry on Mr. DeMarco’s policies. I want to praise Ed DeMarco for the commendable job he has done as FHFA’s acting director. Mr. DeMarco put the interest of hardworking taxpayers first, standing strong against intense political pressure in Washington to do the opposite.”

Really!?!  OK…

In addition to the outpouring of love for Mr. DeMarco, the Chairman goes on in his statement to assess that, “…the financial crisis…was caused in large part by federal policies that incented, mandated, and browbeat financial institutions to loan money to people to buy homes they ultimately could not afford.”

The Chairman boasts, “…That is why earlier this year our committee passed the Protecting American Taxpayers and Homeowners Act (PATH Act). The PATH Act creates a housing finance system that’s designed… for hardworking taxpayers so they never again have to bail out corrupt financial government enterprises like Fannie Mae and Freddie Mac. With the reforms in the PATH Act, Americans will finally have a housing finance system that is worthy of them.”

The Chairman of the House Financial Services Committee referred to Fan and Fred as “corrupt financial government enterprises.” Is the Chairman completely ignorant on the structure of Fannie Mae and Freddie Mac. This statement is bizarre coming from a member of Congress let alone from the Chairman of the House Finance Committee.

http://financialservices.house.gov/news/documentsingle.aspx?DocumentID=364017

In regards to Fannie and Freddie, has the Chairman made any other conflicting, bizarre statements?

In November 2013, Chairman Hensarling said, “Fannie and Freddie have not ‘repaid’ taxpayers one thin dime. Reports to the contrary are pure Washington spin. Legally, they can’t pay back taxpayers because their nearly $200 billion bailout was a draw from the Treasury, not a loan. But the truth is Fannie and Freddie cost the taxpayers a whole lot more than the amount of their bailout.

Their failed business model was at the epicenter of the financial crisis – a crisis that threw millions of Americans out of work and ruined people’s lives. Fannie and Freddie can never make amends for the catastrophic damage their failed business model caused our economy – a failed model that is still alive today and must be terminated. Any positive cash flow Fannie and Freddie are experiencing is due to the government-sanctioned monopoly they retain over the market.”

http://www.housingwire.com/articles/27862-hensarling-gses-have-not-repaid-taxpayers-one-thin-dime

At least the Chairman knows about one thing… Washington spin!!

It is either extremely frightening that Mr. Hensarling would mischaracterize how preferred stocks work…or even more concerning if he is actually unfamiliar with how companies can redeem and pay off preferred stock.

The Chairman either needs to stop making reckless statements…stop thinking and talking about Fan and Fred — OR he needs to receive more education on the subject.

One would hope that a former hedge fund manager and current Chairman of the House Financial Services Committee would not need such advice.  Perhaps if Mr. Hensarling is truly confused on the matter he should read the Preferred Stock Purchase Agreements between FHFA and Treasury regarding FNMA and FMCC.

“Under the PSPAs, Treasury’s financial support is in the form of an equity investment in the Enterprises. Preferred stock is an equity interest (that)…gives the preferred shareholder the right to receive compensation for its preferred stock…(By) express consent from Treasury and FHFA, an Enterprise (can) redeem the senior preferred stock (upon) the termination of Treasury’s funding commitment.

Treasury’s announcement of the 2012 Amendments said that the changes would ‘make sure that every dollar of earnings’ the Enterprises generate would be ‘used to benefit taxpayers…’ The change in the dividend structure also will affect quarterly payments to Treasury, potentially resulting in the Enterprises returning more money to federal taxpayers sooner.”

http://www.fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf

So when the esteemed Chairman states, “…Legally, they can’t pay back taxpayers because their nearly $200 billion bailout was a draw from the Treasury, not a loan,” he is completely wrong on two fronts. Fan and Fred can legally pay back the Treasury AND the transaction was not a nebulous ‘draw’ but clearly funding from a preferred stock issuance. The only reason Fan and Fred “can’t pay back taxpayers” is because the US Government (FHFA and Treasury…which the House Finance Committee is charged with overseeing) has confiscated all of their profits!

At the same time Mr. Hensarling is making outlandish statements like Fan and Fred “…have not repaid taxpayers one thin dime” the FHFA Office of Inspector General states “…the Enterprises are returning more money to federal taxpayers sooner.”

Mr. Hensarling’s Committee, which is responsible for reviewing actions of FHFA and the US Treasury, evidently supports that the profits of the privately-owned Fannie and Freddie are siphoned off and funneled to the US Treasury.

How does the High Chairman view Fannie and Freddie funding the HUD-administered Housing Trust Fund and the Treasury-administered Capital Magnet Fund? It’s logical that if Chairman Jeb supports Treasury taking 100% of Fan and Fred’s profits, he would be indifferent to a small portion of those same profits going to HUD and Treasury programs designated to help fight homelessness.

In December, the Chairman said, “Diverting assets to housing trust funds instead of repaying taxpayers or stabilizing Fannie and Freddie’s finances only makes matters worse. That will not happen because the Financial Services Committee will call director Watt to testify as soon as the next session of Congress begins in early January.”

http://www.nationalmortgagenews.com/news/secondary/fhfas-affordable-housing-decision-sparks-strong-reactions-1043339-1.html

From the one side of the Chairman’s mouth he states that taxpayers can never be repaid…then from the other side of his lips he says that indeed taxpayers should be repaid (despite the fact that Fan and Fred have already repaid more than they received from Treasury).

Mr. Hensarling supports the 100% confiscation of private company profits when it serves his purpose. However, in suspicious opposition to the HUD and Treasury housing funds, he states that Fan and Fred’s assets should be used to stabilize the two private companies!  He wants to simultaneously stabilize and eliminate…

Jeb Hensarling also said FHFA Director Watt “is making a grave mistake that harms hardworking taxpayers and violates both the letter and spirit of the law” and he would summons Mr. Watt to testify at the Finance Committee “as soon as the next Congress begins in January.”

http://thehill.com/policy/finance/226809-republicans-blast-fhfa-plan

http://finance.yahoo.com/news/regulator-tells-fannie-freddie-fill-144803066.html

Lastly, how does Jeb Hensarling view Director Watt’s move to increase home affordability by implementing the 3% down payment program…?

Jeb states it is “an invitation by government for industry to return to slipshod and dangerous practices that caused the mortgage meltdown in the first place and wrecked our economy…”

http://washpost.bloomberg.com/Story?docId=1376-NEY0216K50YE01-5BPPS4N4THPFENCRD6QF4SF8N9

I look forward to Director Watt’s appearance at the committee hearing.  Here is a preview of what to expect:

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3 thoughts on “2015: Year of the Jeb…no, the other Jeb

  1. Well damnation, fire and brimstone. Thanks Fred for an excellent review. Corrupt Washington politics. So he’s collecting a million dollars from the very groups he’s charged with overseeing? Is this a conflict of interest? Perhaps Congressional ethics needs to take a close look. What say you Mrs. Warren?

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    • Thanks. Agreed, seems like a violation of ethics. Personally I don’t care if “that’s how it works in Washington” and “everyone does it.” Is it right to accept money from the companies he’s charged with monitoring and regulating? I am with you…Godspeed to Mrs. Warren on her crusade!

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  2. Pingback: “Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Authority” | thetruthaboutfannieandfreddie

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