Politics

Fannie Mae: Fact Checking Michael Stegman

Fannie Mae: FactChecking Michael Stegman by Investors Unite

Politico is reporting on remarks made by U.S. Treasury official Michael Stegman at a Goldman Sachs housing finance reform conference earlier today.

Stegman, a housing policy counselor, reportedly said that “recapitalization of Fannie Mae and Freddie Mac and draws against the existing Treasury backstop due to future losses would come at taxpayer expense.” He also said that “simply returning these entities to the way they were before is not practical nor is it a realistic consideration.”  Stegman also delivered his now-familiar refrain that it was up to Congress to decide what to do with the companies, and that the government was “looking for new ways” for private investors to play a larger role in housing finance.

We’re encouraged that Mr. Stegman is finally being forced to address critical issues related to the undercapitalization of Fannie Mae and Freddie Mac, and how the government’s illegal Third Amendment Sweep is actually exacerbating this problem by taking all of Fannie and Freddie’s profits.  But as it has been in the past, his analysis is wrong, and in conflict with HERA, which is the statute that actually governs the conservatorship.

Let’s review:

  1. Recapitalization and Future Draws: Fannie Mae and Freddie Mac have paid back and then some the taxpayer loans they received in the wake of the 2008 financial crisis. To date, Fannie and Freddie have sent $228.2 billion to the Treasury – that is $40.5 billion more than what they took in draws from Treasury.  By not allowing them to rebuild capital, and by illegally diverting 100% of their profits to the Treasury each quarter, the government is violating HERA, and IS actually putting the taxpayers at risk from future draws.  .
  2. Returning to the Way Things Were: This is a straw man argument, because nobody is advocating a return to how things were. Fannie and Freddie needed to be reformed, and they have been.  Any future reconstitution of these entities would incorporate needed reforms, including adequate capital levels.
  3. Congress: Stegman has repeatedly claimed that it is the responsibility of Congress to decide what to do with the companies. This is inaccurate.  Under the Housing Economic Reform Act of 2008, Congress named the Federal Housing Finance Agency as the conservator over Fannie and Freddie.  As the conservator, FHFA has certain responsibilities, one of which being the responsibility to return the companies to a solid economic position that helps ensure their long-term viability. Under this law, FHFA has the ability to let the GSEs begin rebuilding capital and also to end the conservatorship.  We refer our readers to this paper from Michael Krimminger and Mark Calabria, who were instrumental in the drafting of HERA.
  4. Private Capital: Re: Stegman’s comments today that the government was looking for new ways for private investors to play a larger role in housing finance…Why should private investors be interested in this, when they have been burned by the government’s illegal Third Amendment Sweep? Mr. Stegman, capital follows the rule of law, and the government broke the law when it decided in 2012 to take all of Fannie and Freddie’s profits going forward.

Policymakers are debating what to do about Fannie and Freddie, but we have a GSE Reform law called HERA.  Right now, HERA is being violated by the Treasury, and it was violated by Director Watt’s predecessor Ed DeMarco, who famously admitted to this at a Washington policy conference last year . It’s not too late to reverse course.  FHFA can begin rebuilding capital at Fannie and Freddie now, and has the statutory authority to do so under HERA.  This would be a good first step.

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Fannie Mae: Fact Checking Michael Stegman

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  • David D

    All the corruption by elected official will
    NOT matter if we lose America, will it?

    I’m now convinced Obama is not for America, aren’t you? We are on the Brink of Losing a Peaceful America.

    And again if Iran wants to be treated like a normal country, let it behave like one. Iran trains and arms terrorists in Hamas and Hezbollah. Khamenei’s idea of moderation is to channel Pol Pot. In a recent post, he says he doesn’t mean Israel should be annihilated by a bomb but simply abolished as a country inhabited by people there before 1948. Oh, and yes, give weapons to Palestinians on the West Bank. Presumably not to be
    policemen, but to simply eradicate Jews who don’t want to leave.

    None of the Sunni powers in the region see American outreach to Tehran as good news, particularly since Obama has given Iran a free hand in Syria and Iraq over the last three years. Obama has allowed Iranian troops to dig on the border of Israel and the border of Jordan. King Abdullah of Saudi Arabia urged the U.S. to destroy Iran’s program and thereby “cut off the head of the snake in the Middle East.”

    A proposed 10-year ban on Iran’s nuclear work won’t cut off the head. It is too short a time for a transition to a civilized state – and do we really want a nuclear-capable Iran, ever? Not in 10, 20, 100 years. We should abandon the daydream that embracing and enriching Iran will turn it into Switzerland. To date, the efforts to sooth the rogue
    regime are emboldening it. Iran is thinking like an old-fashioned superpower,
    yet instead of forcing them to get rid of the Iranian nuclear threat, we’re not
    even verifying or inspecting it.

    The risks of letting Iran get to the one-year threshold of being a nuclear power are too great, given how much religion and ideology dominate their thinking. Ray Takeyh of the Council on Foreign Relations describes a 10-year timeframe as a “catastrophic mistake”.

    Anyway, let’s not get hung up on 10, 11, 12 – Obama talks of “double digits” at one moment and “10” the next. But do we ever want a nuclear-capable Iran in a country as anti-American as the pronouncements of the Iranian leaders suggest they are? As David Brooks of The New York Times put it, “If the Iranian leaders believe what they say, then
    United States policy should be exactly the opposite of the one now being
    pursued. Instead of embracing and enriching Iran, sanctions should be toughened
    to further isolate and weaken it. Instead of accepting a nuclear capacity,
    eliminating that capacity should be restored as the centerpiece of American
    policy.” Iran has taken full control of Syria. Revolutionary Guard commanders
    have taken charge of the front from the Golan Heights all the way down to Daraa
    in the south. More than 10,000 Shite volunteers have been flown to Syria to
    repel the Sunnis. This process of Iran-ization is unfolding just 10 kilometers
    from Israel’s border. Washington, which seems to want a nuclear agreement at
    nearly any price, has turned a blind eye and is exploiting America’s lack of
    familiarity with the region. In effect, it has lent its support in transferring
    control over Damascus to the Iranians. That puts Israel in much greater danger
    of another broad Iranian front and will present a new regional reality in the
    form of Iranian power. It is astounding that a country, Iran, that engages in
    global terrorism that floods the Middle East with blood and surrounds Israel
    with terror on three fronts, Lebanon, Gaza and the Golan, be given a tool to
    threaten the region and to have the capacity to launch an existential threat to
    Israel. America’s key allies across the Middle East are as upset as Israel over
    the administration’s pursuit of a nuclear bargain with Iran, for they see an
    America that is about to abandon its long-standing friends to win the favor of
    their common foe, which is on a rampage across the region. No wonder in a Fox
    News poll 84 percent of Americans think allowing Iran to get nuclear weapons in
    10 years is a bad idea.

    This is a life and death issue for Israel. With just one bomb Iran can do to the
    Jews in 12 minutes what Adolf Hitler did in 12 years. Jews learned from the
    Holocaust to take fanatics at their word. Nobel prize laureate Elie Wiesel’s
    invitation is compelling, “Will you join me in hearing the case for keeping
    weapons from those who preach death to Israel and America.”

    The great Greek leader and historian Pericles once warned: “What I fear more than the strategies of our enemies is our own mistakes.” With memories of another rabid leader many years ago whose name was Hitler, it is natural that Israel would consider a nuclear armed Iran as an existential threat. This is a nation, perhaps the only nation, that has
    been constantly threatened with extinction. Israel is not the enemy. Iran is, especially if it is a nuclear-armed Iran. We should not abandon an ally in the hopes of appeasing an enemy.

    *****I encourage every American to call their state representative, major and governor
    including every office in Washington D.C. and demand America is to never allow Iran
    to have nuclear power of any kind. If Iran stalls to allow full inspections for
    even a day, then cut the head off of the snake once and for all, if you want
    peace in the middle east and America. An American Vet.

  • David D

    Corruption won’t matter if you have no America, will it?

    I’m now convinced Obama is not for America, aren’t you? We are on the Brink of Losing a Peaceful America.

    And again if Iran wants to be treated like a normal country, let it behave like one. Iran trains and arms terrorists in Hamas and Hezbollah. Khamenei’s idea of moderation is to channel Pol Pot. In a recent post, he says he doesn’t mean Israel should be annihilated by a bomb but simply abolished as a country inhabited by people there before 1948. Oh, and yes, give weapons to Palestinians on the West Bank. Presumably not to be
    policemen, but to simply eradicate Jews who don’t want to leave.

    None of the Sunni powers in the region see American outreach to Tehran as good news, particularly since Obama has given Iran a free hand in Syria and Iraq over the last three years. Obama has allowed Iranian troops to dig on the border of Israel and the border of Jordan. King Abdullah of Saudi Arabia urged the U.S. to destroy Iran’s program and thereby “cut off the head of the snake in the Middle East.”

    A proposed 10-year ban on Iran’s nuclear work won’t cut off the head. It is too short a time for a transition to a civilized state – and do we really want a nuclear-capable Iran, ever? Not in 10, 20, 100 years. We should abandon the daydream that embracing and enriching Iran will turn it into Switzerland. To date, the efforts to sooth the rogue
    regime are emboldening it. Iran is thinking like an old-fashioned superpower, yet instead of forcing them to get rid of the Iranian nuclear threat, we’re not even verifying or inspecting it.

    The risks of letting Iran get to the one-year threshold of being a nuclear power are too great, given how much religion and ideology dominate their thinking. Ray Takeyh of the Council on Foreign Relations describes a 10-year timeframe as a “catastrophic mistake”.

    Anyway, let’s not get hung up on 10, 11, 12 – Obama talks of “double digits” at one moment and “10” the next. But do we ever want a nuclear-capable Iran in a country as anti-American as the pronouncements of the Iranian leaders suggest they are? As David Brooks of The New York Times put it, “If the Iranian leaders believe what they say, then
    United States policy should be exactly the opposite of the one now being
    pursued. Instead of embracing and enriching Iran, sanctions should be toughened
    to further isolate and weaken it. Instead of accepting a nuclear capacity,
    eliminating that capacity should be restored as the centerpiece of American
    policy.” Iran has taken full control of Syria. Revolutionary Guard commanders
    have taken charge of the front from the Golan Heights all the way down to Daraa
    in the south. More than 10,000 Shite volunteers have been flown to Syria to
    repel the Sunnis. This process of Iran-ization is unfolding just 10 kilometers
    from Israel’s border. Washington, which seems to want a nuclear agreement at
    nearly any price, has turned a blind eye and is exploiting America’s lack of
    familiarity with the region. In effect, it has lent its support in transferring
    control over Damascus to the Iranians. That puts Israel in much greater danger
    of another broad Iranian front and will present a new regional reality in the
    form of Iranian power. It is astounding that a country, Iran, that engages in
    global terrorism that floods the Middle East with blood and surrounds Israel
    with terror on three fronts, Lebanon, Gaza and the Golan, be given a tool to
    threaten the region and to have the capacity to launch an existential threat to
    Israel. America’s key allies across the Middle East are as upset as Israel over
    the administration’s pursuit of a nuclear bargain with Iran, for they see an
    America that is about to abandon its long-standing friends to win the favor of
    their common foe, which is on a rampage across the region. No wonder in a Fox
    News poll 84 percent of Americans think allowing Iran to get nuclear weapons in
    10 years is a bad idea.

    This is a life and death issue for Israel. With just one bomb Iran can do to the
    Jews in 12 minutes what Adolf Hitler did in 12 years. Jews learned from the
    Holocaust to take fanatics at their word. Nobel prize laureate Elie Wiesel’s
    invitation is compelling, “Will you join me in hearing the case for keeping
    weapons from those who preach death to Israel and America.”

    The great Greek leader and historian Pericles once warned: “What I fear more than the strategies of our enemies is our own mistakes.” With memories of another rabid leader many years ago whose name was Hitler, it is natural that Israel would consider a nuclear armed Iran as an existential threat. This is a nation, perhaps the only nation, that has
    been constantly threatened with extinction. Israel is not the enemy. Iran is,
    especially if it is a nuclear-armed Iran. We should not abandon an ally in the
    hopes of appeasing an enemy.

    *****I encourage every American to call their state representative, major and governor
    including every office in Washington D.C. and demand America is to never allow Iran
    to have nuclear power of any kind. If Iran stalls to allow full inspections for
    even a day, then cut the head off of the snake once and for all, if you want
    peace in the middle east and America. An American Vet.

  • PaulApp

    Breaking the law is what the U.S. government continued to do best!

  • disqus_mVafl1wK0N

    What a waste of a day…at this time the government has allowed the American People to keep their ear to the ground waiting for good news… this did not happen
    Todays meeting with Goldman Sachs was a public display that the American Government is allowing the Banks to buy into the CSP the GSE have been working on with the GSE resources.
    Imagine having the GSE resources and infrastructure and letting the Banks profit from it.
    Similar to Ford spending on Research and Development and letting Chrysler go into Production of this latest model…The American people have just been taken again