It’ll be interesting to see whether they recognize the relevant application to the conservatorship.
Also, I’ve been hearing a bit of noise about resistance to bypassing congress. It’s ludicrous to think that one can rationally object to an administrative solution when congress has shown themselves too dysfunctional over the past sixteen years(!) to end an unneeded conservatorship.
January will commence the tenth congress since the conservatorship. Why should it be any different than the previous nine? Bush, Obama and Biden all wanted to nationalize housing. Recall, it was Bush who told Hank Paulson to make sure the intended nationalization does not look like a nationalization! Trump will complete what he started at the end of 2020. It’s part of the mandate.
Agree. I don't understand why anyone would say anything about bypassing Congress. Congress has spoken clearly and unambiguously about about what it wants to do through HERA (admittedly a poor cut and paste job by Calabria). If it were me in charge of the FHFA (I would seek the nomination but have the same issue as John Paulson - on a much, much smaller scale) I would just cut a Final Notice on day 1 declaring HERA's 2.5% the new Capital Standard and any previously proposed standard cancelled. With the GSEs "reformed", the major court cases settled, and the capital rebuilt (about $200B if the JPs are converted) we should be good to go.
Also, I would like the folks now calling for the abolition of the FHFA (under DOGE) to sit down and shut up - at least until we get this done. The last thing we need at this point is being tackled on the 5 yard line by our own stockholders!
I like that idea. Massive, unnecessary capitalization requirements are making consumers pay far more than is necessary for a mortgage. Lower mortgage rates will kick off a massive economic expansion.
Interesting, it seems that legal language in past administrations have produced a policy fabric that requires unwoven. Alignment of relationships between FHFA and GSE (Fannie & Freddie ) and possible elimination of overlap. Thank you Rule of Law..!
Very good insights ROLG. I was surprised that Vivek and Elon referenced Collins Vs. Yellen of all cases in their article. Their take was that the decision authorized the president to fire ANYONE even though the case was specifically about the appointed Director of FHFA being fired "for cause" vs serving at the pleasure of the president. I don't know it gave authority to just fire everyone the president wants to fire in the executive branch, but I also don't see a constitutional reason that president would be prevented from firing people in the executive branch. In any case, it is pretty cool to see Collins mentioned if only to highlight that the next administration is thinking about FHFA and the conservatorships. That makes me believe it will be a real priority when even outsiders are referencing that case in an article (even if it is not in reference to the conservatorships themselves). I mean, why was 2021 Collins and some random 1992 case at the top of mind when they were writing the article and not the 2020 Seila Law LLC v. Consumer Financial Protection Bureau decision for the same purpose? I found that interesting in that it means that a larger circle of people in the next administration is discussing the GSEs.
Although I agree that it would presumably make it so action could be almost immediate by ending the current ERCF, I think the article also makes clear that they have no expectation that Washington bureaucrats will go down without a fight. I think such novel actions would likely be stayed by federal courts pending legal challenges and who knows how long those would take. It would probably be faster to have a newly appointed director to propose a new rule that is actually risk based. Honestly, the rule doesn't need to be nearly as complex as Calabria made it. Plus, FHFA has a good amount of rulemaking text and data from writing and promulgating prior rules from previous administrations and directors to knock out (via copy and paste mostly) a reasonable rule in a matter of weeks for public comment (really, it would be their ONLY job and a normal intelligent person with appropriate professional background could CTRL+C/CTRL+V/DELETE their way to write such a draft rule themselves in a week or two or they shouldn't be employed there). I see no reason why a 90- or 180-day comment period should be needed after that and would think a 60-day comment period would satisfy APA. If done efficiently, a new director could have a new rule promulgated by as soon as summer 2025 that would have been through the rulemaking process and be really difficult for an outsider to get a stay to prevent it from taking effect. I of course assume that the rule would end up showing that 2.5% exceeds the risk-based requirement since it would not have all the dumb buffers Calabria imposed on them and likely would actually use stress test results.
good thoughts Justin! the blob wont go down without a bloody fight, but even if the new FHFA Director gets DOGE/POTUS to pause ERCF, who has the standing or interest to challenge that action in court? I suppose Mark Calabria would have the interest, but I don't see how he would have the standing, or the money to pay the lawyers. the banks might, since pausing the ERCF would make GSEs more competitive versus the banks in housing finance, but I think the banks have bigger fish to fry and wont want to piss off the new Administration. it is an amusing scenario to contemplate
It is amusing for sure. Especially with SCOTUS 6-3 for conservatives. Honestly, I hope DOGE is functional and successfully reduces government in a way that works for everyone.
I read the op-ed piece. I think it is wishful thinking and DOGE is unlikely to bring the transformative change the authors (Musk / Ramaswamy) are seeking. Regarding the ERCF, I wish it could be undone with the stroke of a pen...but I'm doubtful it can happen and if they tried it would be challenged in court. The court challenges alone could eat up precious years of Trump's term and actually hinder the ending of conservatorship as FHFA and Treasury "wait and see" what happens in the courts.
Saw your comment. "the blob" doesn't seem to cut it. FHFA is more like an ever-growing Blobzilla. A Giant Gelatinous Behemoth that wants to grow the Ooze of Oblivion (rules and regulations) with their fellow citizens of Blobtopolis (gov't beurocracy).
It’ll be interesting to see whether they recognize the relevant application to the conservatorship.
Also, I’ve been hearing a bit of noise about resistance to bypassing congress. It’s ludicrous to think that one can rationally object to an administrative solution when congress has shown themselves too dysfunctional over the past sixteen years(!) to end an unneeded conservatorship.
January will commence the tenth congress since the conservatorship. Why should it be any different than the previous nine? Bush, Obama and Biden all wanted to nationalize housing. Recall, it was Bush who told Hank Paulson to make sure the intended nationalization does not look like a nationalization! Trump will complete what he started at the end of 2020. It’s part of the mandate.
Agree. I don't understand why anyone would say anything about bypassing Congress. Congress has spoken clearly and unambiguously about about what it wants to do through HERA (admittedly a poor cut and paste job by Calabria). If it were me in charge of the FHFA (I would seek the nomination but have the same issue as John Paulson - on a much, much smaller scale) I would just cut a Final Notice on day 1 declaring HERA's 2.5% the new Capital Standard and any previously proposed standard cancelled. With the GSEs "reformed", the major court cases settled, and the capital rebuilt (about $200B if the JPs are converted) we should be good to go.
Also, I would like the folks now calling for the abolition of the FHFA (under DOGE) to sit down and shut up - at least until we get this done. The last thing we need at this point is being tackled on the 5 yard line by our own stockholders!
I like that idea. Massive, unnecessary capitalization requirements are making consumers pay far more than is necessary for a mortgage. Lower mortgage rates will kick off a massive economic expansion.
Interesting, it seems that legal language in past administrations have produced a policy fabric that requires unwoven. Alignment of relationships between FHFA and GSE (Fannie & Freddie ) and possible elimination of overlap. Thank you Rule of Law..!
Very good insights ROLG. I was surprised that Vivek and Elon referenced Collins Vs. Yellen of all cases in their article. Their take was that the decision authorized the president to fire ANYONE even though the case was specifically about the appointed Director of FHFA being fired "for cause" vs serving at the pleasure of the president. I don't know it gave authority to just fire everyone the president wants to fire in the executive branch, but I also don't see a constitutional reason that president would be prevented from firing people in the executive branch. In any case, it is pretty cool to see Collins mentioned if only to highlight that the next administration is thinking about FHFA and the conservatorships. That makes me believe it will be a real priority when even outsiders are referencing that case in an article (even if it is not in reference to the conservatorships themselves). I mean, why was 2021 Collins and some random 1992 case at the top of mind when they were writing the article and not the 2020 Seila Law LLC v. Consumer Financial Protection Bureau decision for the same purpose? I found that interesting in that it means that a larger circle of people in the next administration is discussing the GSEs.
Although I agree that it would presumably make it so action could be almost immediate by ending the current ERCF, I think the article also makes clear that they have no expectation that Washington bureaucrats will go down without a fight. I think such novel actions would likely be stayed by federal courts pending legal challenges and who knows how long those would take. It would probably be faster to have a newly appointed director to propose a new rule that is actually risk based. Honestly, the rule doesn't need to be nearly as complex as Calabria made it. Plus, FHFA has a good amount of rulemaking text and data from writing and promulgating prior rules from previous administrations and directors to knock out (via copy and paste mostly) a reasonable rule in a matter of weeks for public comment (really, it would be their ONLY job and a normal intelligent person with appropriate professional background could CTRL+C/CTRL+V/DELETE their way to write such a draft rule themselves in a week or two or they shouldn't be employed there). I see no reason why a 90- or 180-day comment period should be needed after that and would think a 60-day comment period would satisfy APA. If done efficiently, a new director could have a new rule promulgated by as soon as summer 2025 that would have been through the rulemaking process and be really difficult for an outsider to get a stay to prevent it from taking effect. I of course assume that the rule would end up showing that 2.5% exceeds the risk-based requirement since it would not have all the dumb buffers Calabria imposed on them and likely would actually use stress test results.
Cheers,
Justin
good thoughts Justin! the blob wont go down without a bloody fight, but even if the new FHFA Director gets DOGE/POTUS to pause ERCF, who has the standing or interest to challenge that action in court? I suppose Mark Calabria would have the interest, but I don't see how he would have the standing, or the money to pay the lawyers. the banks might, since pausing the ERCF would make GSEs more competitive versus the banks in housing finance, but I think the banks have bigger fish to fry and wont want to piss off the new Administration. it is an amusing scenario to contemplate
It is amusing for sure. Especially with SCOTUS 6-3 for conservatives. Honestly, I hope DOGE is functional and successfully reduces government in a way that works for everyone.
I read the op-ed piece. I think it is wishful thinking and DOGE is unlikely to bring the transformative change the authors (Musk / Ramaswamy) are seeking. Regarding the ERCF, I wish it could be undone with the stroke of a pen...but I'm doubtful it can happen and if they tried it would be challenged in court. The court challenges alone could eat up precious years of Trump's term and actually hinder the ending of conservatorship as FHFA and Treasury "wait and see" what happens in the courts.
see my comment to Justin just above
Saw your comment. "the blob" doesn't seem to cut it. FHFA is more like an ever-growing Blobzilla. A Giant Gelatinous Behemoth that wants to grow the Ooze of Oblivion (rules and regulations) with their fellow citizens of Blobtopolis (gov't beurocracy).