At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
Republican Senator Bob Corker from Tennessee, as you probably know, has waged something of a crusade against Fannie Mae and Freddie Mac. He’s publicly advocated eliminating them in Congress, he’s critized hedge funds that invested in them and he even told investors to short them on national television. Yet privately, he’s invested millions of his own money in the same hedge funds and, as reported last week by Infowars.com, it seems he took short positions on the GSEs even as he’s attempted to legislate against them.
If true, all Americans should be extremely troubled by this news. Read more below from Investors Unite.
In the fall of 2015, Sen. Bob Corker, R-TN, shocked a lot of people when he urged investors to short Fannie Mae and Freddie Mac stock during an interview on CNBC. Corker’s motivations for this audacious pronouncement are again inviting scrutiny with a piece published on Infowars this week that probes his own investments in hedge funds that held shares in the government sponsored enterprises (GSE).
Corker, then chairman of the Senate Banking Committee and the leading proponent of shutting down the GSEs, quickly tried to defuse his comments, characterizing them as a little off-the-cuff glibness. Nonetheless, Investors Unite noted that, at the very least, they prompted questions about whether Corker or his associates had any stake in his legislation to replace Fannie and Freddie with a mortgage finance model based more on private capital – and therefore more dominated by large banks.
Apparently, these are still good questions. Corker, who is now Chairman of the Senate Foreign Relations Committee, continues to harbor a desire to end Fannie and Freddie’s dominant role in the mortgage finance industry. At the end of March, he and other senators wrote Federal Housing Finance Agency Director Mel Watt to make sure the GSEs’ net worth would continue to be turned over the Treasury, consistent with the Net Worth Sweep. In addition, Corker is reportedly gearing up to reintroduce his ironically named Jump Start GSE Reform bill. Are Kim Jong-eun and Bashar al Assad making the world so tranquil that the Foreign Relations chairman needs something to do?
This week Jerome Corsi at Infowars continued his deep dive into the anatomy of the fiasco the conservatorship of Fannie and Freddie has become. The investigation found that Corker’s financial disclosure statements reveal that since his 2006 Senate run, Corker made millions of dollars in profits from hedge fund investments handled through Pointer Management, LLC, based in Chattanooga. Corker served as mayor of the city before running for the Senate. A copy of a letter authored by Pointer Management, dated September 30, 2008, which Infowars.com obtained and published, suggests Pointer was taking a short position on Fannie and Freddie. Under the complicated transaction involving credit default swaps, if share prices in Fannie and Freddie declined then Pointer could see a robust profit.
The story also questions the timing and content of communications between Corker and James Lockhart, then the director of the Office of Federal Housing Enterprise Oversight (OFHEO), the regulatory agency that became FHFA, in April 2008 and again in July 2008, prior to the Pointer purchase of credit default swaps involving Fannie and Freddie.
Corker has derided hedge funds for wanting to make a profit on stock holdings in Fannie and Freddie but Infowars’ finding suggest Corker might have also stood to gain from shorting the GSEs’ stock. Investors Unite has not conducted an independent forensic probe based on this story to prove Corker’s legislative activity was intended for any personal gain but we do know this much: Taxpayers, potential borrowers and GSE shareholders have a lot to lose if Corker succeeds in dismantling Fannie and Freddie and handing over their function to Too Big to Fail Banks.
Prolonging the conservatorship and sweeping up the GSEs’ profits all but guarantees that taxpayers will again have to foot the bill for keeping the enterprises afloat. In addition, so far no one has been able to demonstrate that a home loan marketplace dominated by large banks will be able to keep rates low and capital available for affordable homeownership the way Fannie and Freddie have for decades. Last but not least, shareholders would be denied economic justice. So why is Corker so persistent in an effort to weaken them?
Ray Dalio At Robin Hood 2021: The Market Is Not In A Bubble