Be Mine: Happy Valentine’s Day!

February 14…

Besides being my birthday (please, no gifts — donate to your favorite anti-corrupt government advocacy group instead), it’s a day best known for Valentine’s Day. We share our love, friendship and general kindness to others in our lives.

Indeed a special day. But for those of us who have followed the Fanniegate saga over all of these years, Valentine’s Day holds a special place in our hearts.

On February 15, 2014 (ok, technically the day after V-day, but stay with me…) Gretchen Morgenson, then with the New York Times, broke the long-held silence from the main stream media regarding the details of the government takeover of Fannie and Freddie. Gretchen wrote, The Untouchable Profits of Fannie Mae and Freddie Mac, stating:

“Siphoning off the entities’ profits is the opposite of conserving their assets and property, the plaintiffs contend.

Do the Treasury’s actions amount to a backdoor nationalization of the companies? A full-fledged takeover would have required Treasury to put all the companies’ obligations — $4.9 trillion at the time — on the government’s balance sheet. A nonstarter.

Furthermore, nationalization would have required the government to provide compensation to shareholders for what it took. Now the government gets the benefits of the companies’ profits while avoiding any compensation payments.”

The MSM generally remained silent for the next year, when Gretchen followed up exactly one year later with another Valentine’s piece.

On February 14, 2015 Gretchen wrote, After the Housing Crisis, a Cash Flood and Silence stating:

“Whatever the case, it is disturbing that the government goes to such lengths to shroud the details of the profit-sweep decision. It reminds me of a comment made by Ferdinand Pecora, the hard-driving prosecutor who investigated Wall Street’s role in the crash of 1929. In his memoir, “Wall Street Under Oath,” he wrote: “Had there been full disclosure of what was being done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism.”

I highlighted this Valentine’s Day coincidence in a February 2015 blog post, Fantastic February for Fans of Fannie and Freddie.

So, this year Valentine’s Day is just two days away and we have another great day ahead!

The first events will be simultaneous releases of 4th Quarter, 2018 earnings for both Fannie and Freddie. I believe this will be the first time during conservatorship that both companies are releasing earnings on the same day. Is this just another Valentine’s Day coincidence or is new information contained in the financial statements that require them to be released on the same day?  We’ll find out… As Forrest Gump says, “Life is like a box of chocolate…you never know what you’re gonna get!”

One would assume that if the earnings reports have a material change to retained earnings and/or the net worth sweep, an official announcement from FHFA, Treasury or the White House would precede Fan/Freds’ releases. Therefore, an Admin announcement would likely come out tomorrow or early Thursday.

I try to stay away from predicting events in the Fanniegate saga while reminding myself of another Gumpism, “Stupid is as stupid does…”

Also on Valentine’s Day, Mark Calabria will visit the Senate Committee on Banking, Housing and Urban Affairs for his confirmation hearing which can be viewed live on their website starting at 10:00 AM. Mark is listed last on the witness list, but it’s unknown at this point when Mark’s session will take place.

It will be interesting to learn how much Mark shares about his visions for FHFA. Remember, that agency is designed to be independent from other administrative agencies, to include the US Treasury and even the White House.

However, recall that Joe Otting, acting FHFA Director and Treasury employee, recently advised FHFA staff that the Administration has a plan to deal with the never-ending conservatorships, which according to Joe is due out any day now… Will Mark reveal details of this plan? Will he endorse the greater Administration plan? Or will he do what a lot of officials do during their confirmation hearing — bob, weave, duck and answer in vague, abstract terms?

Equally interesting will be the Senators’ views on the 10+ year conservatorships. At this point it seems obvious Congress needs to rely on the Administration’s leadership to resolve the stalemate. Does anyone expect the Rs and Ds in the R-led Senate to all agree on a Senate plan? AND THEN have the Rs and Ds all agree on a plan from the D-led House… AND THEN reconcile the two plans into one? After waiting for more than 10 years?

There have been calls over the past several years for the Administration to take the lead on resolving the conservatorship impasse. Highlighted in a January 2015 Hill article, “Why the Obama administration should revive Fannie and Freddie on its own:”

“Senator Tim Johnson (D.-S.D.), urged Mel Watt the head of the Federal Housing Finance Agency, which oversees Fannie and Freddie, to work with Treasury to end conservatorship without Congress.   Watt, however, has long said it’s up to his former colleagues in the Senate to resolve the issue. After Johnson’s comments, Treasury let it be known that fixing Fannie and Freddie was a job for our elected representatives. So it’s back to gridlock.”

2019 seems to be the year to finally end the Fan/Fred gridlock!!

Sure, I’ll celebrate Valentine’s Day in the traditional sense with my wife… flowers, chocolate, dinner (no it won’t be at Bubba Gumps!)… I hope everyone else enjoys the special day, too!

But before that celebration, I’ll be tuned into Fanniegate to watch the latest developments unfold. I’m sure most of you will be, as well!

 

I was looking for a sweet Valentine’s song to play here, but I came across this one instead, “Be Mine” by Ofenbach. Eerie similarities to our Fan/Fred situation. Two individuals held captive. The captor uses the two, gets want she wants and then they are finally freed. (warning R rated!) Cool song…

 

 

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