Great insight on big banks and GSEs – NYT

This is a great insight on big banks and GSEs – from NYT

here is the full article (A Revolving Door-NYT)

And the highlights are,

1. the movement to take over the mortgage market has been propelled in part by a revolving door between Washington and Wall Street.
2. Michael D. Berman, David H. Stevens, Jim Parrott who advocate “big bank plan” are all revolving door persons and all come from Obama Admin – will Trump admin listens to their advise? I double it.
3. Fannie and Freddie so far have not been replaced by Wall Street behemoths, partly because local banks popular with many lawmakers are resistant. Moreover, some members of Congress are concerned that low-income borrowers would not be well served by private lenders.
4. “The M.B.A.’s position literally was: Get rid of Fannie and Freddie and create these new entities,” Mr. Berman said in a recent interview. “But there were extraordinary amounts of value in the enterprises to be reused in different ways in the new system.”
5. “The bank-centric model reduces distortion in the allocation of credit and preference for housing. However, this model benefits larger institutions that have better access to funding and the capacity to hold fully diversified portfolios of residential mortgate risk. This could lead to increased concentration in the banking sector and higher costs for borrowers served by smaller institutions.”
6. “This is a classic example of the revolving door at its worst,” he said. “These are large financial institutions that already have an edge when it comes to getting their voices heard on Capitol Hill and at their regulatory agencies. When you hear they are hiring the key policy makers to represent them, it raises serious questions that these decisions are being made not on the merits but on those personal connections.”
7. Mr. Painter said it was hard to know what was said at the meetings. But if Mr. Stevens, Mr. Berman and Mr. Parrott, “made statements at these meetings that were intended to influence government decisions in these two particular party matters involving Fannie and Freddie,” he said, “they violated the statute.”
8. those who favor recapitalizing the companies — a group that includes hedge funds and other speculators that stand to gain, as well as supporters of low-income housing — say that the past need not be prologue. They contend that the companies could be restructured in a way that would prohibit dubious activities, and that allowing Fannie and Freddie to rebuild capital would reduce taxpayer risk.
9. The banks are continuing their push for access to Fannie and Freddie’s assets and profits. But they are not putting all their eggs in the legislative basket. In recent months, they have urged Melvin L. Watt, director of the F.H.F.A., to put at least some of their recommendations in place administratively.