Speaker 1: Hello, and welcome to the Votes and Verdicts podcast, hosted
Speaker 1: by the litigation and policy team at Bloomberg Intelligence, the
Speaker 1: investment research platform of Bloomberg LP. Bloomberg Intelligence has five
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Speaker 1: This podcast series examines the intersection of business policy and law.
Speaker 1: I'm Elliott Stein and analysts with Bloomberg Intelligence covering financials litigation,
Speaker 1: and I'm.
Speaker 2: Ben Elliott I'm an analyst with Bloomberg Intelligence covering consumer finance.
Speaker 1: So our guest today is Mark Calabria, Senior Advisor to
Speaker 1: the Cato Institute, where he provides strategic input and direction
Speaker 1: on the federal economic policy making process. Mark previously served
Speaker 1: as Director of Financial Regulation at the Cato Institute, where
Speaker 1: he co founded cato's Center for Monetary and Financial Alternatives.
Speaker 1: Mark is also the former director of the Federal Housing
Speaker 1: Finance Agency, better known as the FAHFA, which regulates and
Speaker 1: supervises Fannie May, Freddie Mack and the Federal Home Loan Banks,
Speaker 1: and prior to heading the FAHFA, Mark served as chief
Speaker 1: economist to Vice President Mike Pence, and before that, Mark
Speaker 1: served as a senior aide to the US Senate Committee
Speaker 1: on Banking, Housing, and Urban Affairs under chairs Richard Shelby
Speaker 1: and Phil Graham. During his Senate service, Mark acted as
Speaker 1: the primary drafter of the Housing and Economic Recovery Act
Speaker 1: of two thousand and eight, better known as HARA, which
Speaker 1: established a regululatory framework for the government sponsored housing enterprises.
Speaker 1: Mark recently released a book called Shelter from the Storm
Speaker 1: How COVID Mortgage Meltdown Was Averted, which covers how the
Speaker 1: government responded to the COVID nineteen crisis without bailing out
Speaker 1: Wall Street. It's a very informative read and I highly
Speaker 1: recommend it to our listeners. And I also enjoyed that
Speaker 1: the book title is sort of homage to Bob Dylan.
Speaker 1: So with all that, Mark, Welcome to the Votes on
Speaker 1: Verdicts podcast.
Speaker 3: Elliott Bennet, It's such a pleasure.
Speaker 1: To be here, So Mark, the first question we always
Speaker 1: ask our guests is to sort of walk us through
Speaker 1: their career history. Their career path. You know, I just
Speaker 1: mentioned the highlights of your official bio. It's obviously very impressive,
Speaker 1: but you know, we'd love to know how you got
Speaker 1: to where you are, what took you into government service
Speaker 1: and in particular housing and financial regulation.
Speaker 3: Well, you know, the out of the in some way,
Speaker 3: because in respect it all seems to have made sense,
Speaker 3: but it certainly certainly didn't feel like a clear path
Speaker 3: at the time. But you know, I'll go back to
Speaker 3: college where. You know, when I came out of undergrad
Speaker 3: was that post savings and loan crisis era or early nineties,
Speaker 3: you know, when we first really started using the term
Speaker 3: jobless recovery. The reason I went to grad school and
Speaker 3: got my PhD a number of reasons, but in part
Speaker 3: it was because of the job market and because again
Speaker 3: we were in this aftermath of a real estate boom
Speaker 3: and bust, and I also wanted to try to make
Speaker 3: sense of it, you know, I mean again, you see
Speaker 3: the recession, you see the stress, and I think economics
Speaker 3: is a natural thing to try to turn to to
Speaker 3: try to make sense of those things. So when I
Speaker 3: was in grad school, you know, Fidisia, Fyria, these things
Speaker 3: were past, and there was included the ninety two Act
Speaker 3: in terms of Feni and Freddy, So that really was
Speaker 3: something that was kind of on my mind at the time,
Speaker 3: Like anybody who gets to phdx economics. My professors had
Speaker 3: impressed upon me that the only thing of value to
Speaker 3: do with my life would be to teach. But I
Speaker 3: didn't really like the offers I was getting, and you know,
Speaker 3: ended up working at trade associations first at the National
Speaker 3: Social Homebuilders naturalis of Realtors, had done a fellowship with
Speaker 3: Harvard Joint Center for Housing Studies, so really early in
Speaker 3: my career had started learning mortgage finance, housing issues from
Speaker 3: day one out of grad school. And I should say
Speaker 3: this on the side, you know, my graduate work was
Speaker 3: really kind of anti trust and dust organization market structure.
Speaker 3: So it's always the way I've really thought about financial
Speaker 3: services is kind of a market structure perspective rather than
Speaker 3: say a macroeconomic perspective. Let's see, I was, i think
Speaker 3: at the Realtors when I got a phone call from
Speaker 3: a friend on the banking committee and asked me if
Speaker 3: I was interested in coming up and taking a job.
Speaker 3: And I've been very fortunate and a number of people
Speaker 3: have reached out to me and asked me if I
Speaker 3: was willing to do the job in question. And as
Speaker 3: you mentioned, spent eight years on the Banking Committee, helped
Speaker 3: create the regulator for Feanning and Freddie. Also it led
Speaker 3: the committee's response to Katrina, worked on a not had
Speaker 3: my fair share disasters, unfortunately. I feel like you know,
Speaker 3: it's also on the whole of nine to eleven. So
Speaker 3: you talk about so and you know, again having seen
Speaker 3: a lot of lens, and let me end with this
Speaker 3: and saying you know it. When I was on the
Speaker 3: committee and we would have new staff join, I would
Speaker 3: always give them a stack of like Savings Alone Crisis
Speaker 3: reading list and point to it and say, this stuff happens,
Speaker 3: we need to think about it, we need to be
Speaker 3: prepared for it. And really kind of a lot of
Speaker 3: the lens of my career is just looking back at
Speaker 3: how badly the Savings Alone crisis went and trying to
Speaker 3: essentially avoid similar outcomes.
Speaker 1: One of the quotes that you used to say when
Speaker 1: you were lenon goth HFA, which I always appreciate, it
Speaker 1: was you know, the time to fix your roof is
Speaker 1: when when the sun is shining or not, not when
Speaker 1: it's raining, which I appreciate.
Speaker 3: Which I believe JFK or some speech writer JFK came
Speaker 3: up with. But yeah, and you know, and that's kind
Speaker 3: of also been a theme of my career, which is
Speaker 3: to try and to nudge people in Washington to perhaps
Speaker 3: have a longer time horizon than two weeks and to
Speaker 3: think about you know, housing market, macroeconomy. I mean, these
Speaker 3: things in my opinion, running cycles, housing markets, boom and bust.
Speaker 3: I see zero reason to believe that that that's not
Speaker 3: the future for us. And how do you, you know,
Speaker 3: build a foundation, how do you build a financial system
Speaker 3: that's that's robust to that? And I think that's the
Speaker 3: fundamental problem. We've got a financial system, We've got a
Speaker 3: mortgage finance system that's works great as long as everything
Speaker 3: keeps going up. That's does it work great? If you
Speaker 3: think that there's the possibility of downturns?
Speaker 2: Yeah, Mark, this is bringing me back to to your
Speaker 2: time and at the FHFA and bringing me right back
Speaker 2: to those sort of heavy days of the onset of
Speaker 2: the of the of the pandemic and your response to
Speaker 2: that crisis. And I guess, you know, I guess we
Speaker 2: can start with kind of the headline issue, which I
Speaker 2: know a lot of our clients will be sort of
Speaker 2: most interested in. And we went back and we found
Speaker 2: an interesting, interesting tweet from you in March, you know,
Speaker 2: said there are a number of issues that still need
Speaker 2: to be addressed at both the GSS and FHFA before
Speaker 2: a Conservative ship exit, but those can be done within
Speaker 2: two to three years and without Congress. So maybe just
Speaker 2: kind of give us a little background of where you
Speaker 2: left off when you left f HFA and and maybe
Speaker 2: what some of these issues are that could be in
Speaker 2: the first two to three years of you know, everyone
Speaker 2: is the situation is, if there's a Trump second administration,
Speaker 2: can they come out of the gate focused on this?
Speaker 2: Will they and what sort of policy steps might they take?
Speaker 3: Absolutely, let's try to untangle some of that. And let
Speaker 3: me preface with this. This was mentioned. I worked on
Speaker 3: the statute creating FHFA. I worked on the provisions for conservatorship,
Speaker 3: receivership these things, and it's certainly my very strong view
Speaker 3: that you know, the current administration has a legal obligation
Speaker 3: to fix them and get them out. I don't believe
Speaker 3: they will, but that is the legal obligation, you know,
Speaker 3: and it's I and I'm certainly the view that regulators
Speaker 3: should do what Congress has told them to do, whether
Speaker 3: they like it or not. But with that said, yes,
Speaker 3: absolutely the regulator FHVA has all the tools it needs
Speaker 3: and the mandate to fix them without Congress doing anything.
Speaker 3: Now we'll get into it. I'm sure at a second
Speaker 3: you know why some people want Congress to get involved now.
Speaker 3: First and foremost is a reminder. When I walked in
Speaker 3: the door at FHFA in April twenty nineteen, Fannie and
Speaker 3: Freddie were leveraged one thousand to one. That's fair to say.
Speaker 3: Nobody survives to long in that kind of situation. And
Speaker 3: in fact, one of the reasons I wrote the book,
Speaker 3: I wanted to impress upon people how close Fanning and
Speaker 3: Freddie were to family during COVID. You know, their losses
Speaker 3: from COVID, which you know we knowingly took to keep
Speaker 3: people in their homes, came very close to wiping out
Speaker 3: all of their capital and so getting them in a
Speaker 3: situation where they could be a support for the market.
Speaker 3: It's like when you're on the airplane and they tell
Speaker 3: you to put your oxygen mask on first. We really
Speaker 3: were trying to strengthen Faning Freddy so that Fana and
Speaker 3: Freddie could be, you know, a foundation for the rest
Speaker 3: of the market. So first and foremost you needed to
Speaker 3: raise capital, and a significant amount of capital has been raised.
Speaker 3: I think at the time in twenty nineteen twenty twenty,
Speaker 3: we expected that there'd have to be an external raise
Speaker 3: of some sort. Fortunately, we were able to reprice much
Speaker 3: of the book during COVID because of the refive boom,
Speaker 3: so Fan and Freddie are arguably in the best cash
Speaker 3: flow position they've ever been in. I would still say
Speaker 3: that to get them out, you know, by say twenty
Speaker 3: twenty seven, I think it's advantageous to do an external race.
Speaker 3: It will just have to be a lot smaller than
Speaker 3: we thought it would have to be. And you also
Speaker 3: want to try to get the government out of its position.
Speaker 3: So I'm of the view that you don't want to
Speaker 3: be a decade after they're out and have the Treasury
Speaker 3: still be the largest shareholder. So having an excess strategy
Speaker 3: for the government's investment is incredibly important, and we had
Speaker 3: worked on that. So again let me emphasize capital. As
Speaker 3: I mentioned, you know, we were looking at what would
Speaker 3: have been pre COVID the largest equity offerings ever. They're
Speaker 3: probably a bit smaller now. But let me kind of
Speaker 3: put it this way as a reminder, before two thousand
Speaker 3: and eight, Fienni and Freddie were not under the thirty
Speaker 3: four Security Exchange Act. They were not under starvanz Oxley
Speaker 3: where they were starting two thousand and eight. And I
Speaker 3: would simply say, from my own perspective, and I'm sure
Speaker 3: you could find people at the companies to disagree with this,
Speaker 3: I did not feel like when we were looking to
Speaker 3: go to market that they would have met my definition
Speaker 3: of Sarven's octually compliant for instance. So if you're going
Speaker 3: to go out and do large public offerings, you know,
Speaker 3: you need to meet the letter spirit of the securities laws.
Speaker 3: A lot of progress has been made on that now.
Speaker 3: The plus with that is it's really only a matter
Speaker 3: of hiring enough accountants and analysts and being focused on
Speaker 3: actually fixing the problem. And there were some cultural aspects.
Speaker 3: We had actually started a number of initiatives on corporate
Speaker 3: culture that to me, if we had not done that,
Speaker 3: these companies would have absolutely been, you know, some class
Speaker 3: action security suit waiting to happen. So there are things
Speaker 3: we needed to fix there is as importantly, you are
Speaker 3: probably both aware that there was established the uniform mortgage
Speaker 3: backed security, So there's a kind of co mingled security
Speaker 3: out there in the mortgage market. Well it may become
Speaker 3: as a surprise to many people, but Feed and Freddie
Speaker 3: are actually not exempt from the anti trust loss. So
Speaker 3: so we have a co mingled duopoly joint venture that
Speaker 3: is almost certain to fold. I mean, I guess I
Speaker 3: just put it this way. My understanding is the expectation
Speaker 3: of my predecessors had been that Congress was going to
Speaker 3: come in, you know, and essentially merge Fanny and Freddie
Speaker 3: and you'd have this single platform with one GSE. Well
Speaker 3: none of that happened. So you have a number of
Speaker 3: options in front of you. But one of the things
Speaker 3: that needs to be fixed is the single platform needs
Speaker 3: to be made legal. For lack of a better term,
Speaker 3: we were constructed in such a way that other market
Speaker 3: participants would be able to use it, but you know,
Speaker 3: you need to fix the UMBs. It's almost certainly not
Speaker 3: legal under our antitrust laws as is. You know, if
Speaker 3: there's a theme that you should take away both from
Speaker 3: my book and my experience at FAHFA, a tremendous amount
Speaker 3: of our mortgage finance system, which is a multi trillion
Speaker 3: dollar market, is held together by the legal equivalent of
Speaker 3: paper clips and bubblegum.
Speaker 2: It's so, do you think that there's any sort of
Speaker 2: an inherent kind of conflict between wanting to or being
Speaker 2: legally obligated to get the companies out of conservatorship and
Speaker 2: also raising capital requirements to the point where it seems
Speaker 2: like it could take many years for the companies to
Speaker 2: retain enough capital.
Speaker 3: Yeah, that was, obviously, you know, a tension, and of
Speaker 3: course the statute creates a number of tensions that one
Speaker 3: has to resolve. So first and foremost my view was
Speaker 3: a it did not make sense to put them out
Speaker 3: of conservatorships simply to see them come back in, you know.
Speaker 3: And again this goes back to my earlier point about
Speaker 3: you know, twenty nineteen, twenty twenty, we had been over
Speaker 3: a decade since the sort of last inflection point in
Speaker 3: the housing market. In where we looked at when we
Speaker 3: were doing the capital rule was it would take maybe
Speaker 3: a decade of every time earnings, which is why we
Speaker 3: felt you needed to do an external raise. I felt
Speaker 3: very strongly that the odds of us making it another
Speaker 3: decade without a downturn in the housing market were slim,
Speaker 3: and so, for instance, there was a capital rule that
Speaker 3: had been proposed before I got there by my predecessor,
Speaker 3: Director Watt. Under Watt's capital rule, had you hit another
Speaker 3: two thousand and eight scenario, the GSS would have failed.
Speaker 3: And of course, the entire purpose of HERA, the construction
Speaker 3: of FHFA was that Fading and Freddie should be able
Speaker 3: to survive a two thousand and eight scenario. Because it's
Speaker 3: also important to keep in mind that these entities are
Speaker 3: unique and interesting in the sense that while depositories are
Speaker 3: inherently pro cyclical, the gcs are supposed to be countercyclical.
Speaker 3: I Congress, in my opinion, and I think is very
Speaker 3: clear from the statute, created an obligation for capital rules
Speaker 3: to make sure that in a stressed environment they had
Speaker 3: positive going concern value. So a lot of the commentary
Speaker 3: around the capital rule was, you know, implied that you
Speaker 3: should set capital with the objective of hitting zero, which
Speaker 3: I thought was kind of nutty, to be frank about it,
Speaker 3: because if your entire purpose of being for these entities
Speaker 3: is to be a floor at a time of stress,
Speaker 3: then you buy necessity have to be strong at a
Speaker 3: time of stress and not hit zero. So again there
Speaker 3: was some criticism out there the rule being onerous. Again,
Speaker 3: in my opinion, the rule was too weak if anything,
Speaker 3: you know, the notion that you shouldn't want Fan and
Speaker 3: Freddy to be well capitalized so that they can support
Speaker 3: the market. Again, to me, a lot of the criticism
Speaker 3: really was just people who were focused on Roe and
Speaker 3: didn't necessarily appreciate that the entire reason these companies exist
Speaker 3: is to be a counter cyclical balance to the market.
Speaker 3: If it's not for that, then there's no reason to
Speaker 3: have them.
Speaker 2: Yeah, I suppose what you know, what what sort of
Speaker 2: investors say when they when they speak to us, is
Speaker 2: that you know, there need there There seems to need
Speaker 2: to be some sort of compromise, right maybe say there
Speaker 2: has been.
Speaker 3: I've been about four percent at most capital. I mean,
Speaker 3: you know, it's interesting. So you know, PIMCO submitted a
Speaker 3: comment letter during the They're in the capital rule where
Speaker 3: they claimed they never showed their math, but they claimed
Speaker 3: you would need twelve percent capital to create an equivalent
Speaker 3: of the of an explicit guarantee. Now, of course, Congress
Speaker 3: is not given an explicit guarantee for the g s S.
Speaker 3: Whatever guarantee may or may not be in the in
Speaker 3: the share agreements are quite limited. So to me, if
Speaker 3: we're trying to create an objective where you're having a
Speaker 3: foundation where these companies can survive a stress period, then
Speaker 3: you know, to me, four percent is on the low end.
Speaker 3: And and that's kind of my concern. Now people can argue, certainly,
Speaker 3: the perspective that Fanning and Freddie was that they felt,
Speaker 3: you know, entitled to a certain ROE. And again, I
Speaker 3: you know, whether they should be a twelve percent ROE
Speaker 3: or an eight percent I mean, they're functionally utilities for
Speaker 3: the financial market, so g and I should note while
Speaker 3: my predecessor in the current administration give the agencies give
Speaker 3: the companies RO targets, I did not. I didn't think
Speaker 3: it was my job to tell you what you RO
Speaker 3: should be. It was my job, first and foremost to
Speaker 3: make sure they fail. And my pushback with some of
Speaker 3: the argument, I mean, again, you know, we don't need
Speaker 3: to go full Medigliani Miller, but we should keep in
Speaker 3: mind that the higher amount of leverage at these companies
Speaker 3: should would raise funding costs because at the end of
Speaker 3: the day, the objective of here was to get rid
Speaker 3: of any expectation of a government guarantee. And if you
Speaker 3: want stability in the mortgage market, higher leverage means higher
Speaker 3: funding costs for homeowners, which again is the entire purpose
Speaker 3: to be here. So to some extent, you wanted to
Speaker 3: make sure there was efficient capital to keep the MBS
Speaker 3: market going. So to me, again, at risk return trade off,
Speaker 3: I mean, if if we had been if we had
Speaker 3: gone with say a two and a half, which what
Speaker 3: some people wanted, I mean, you're almost certain as a
Speaker 3: shareholder to get wiped out in the future because there's
Speaker 3: just simply no way those companies would survive over long
Speaker 3: periods of time with only two and a half percent equity.
Speaker 3: So all that said, you know, we went through the arguments,
Speaker 3: actually walk through the entire chapter of my book on
Speaker 3: capital if people want to know why we ended up
Speaker 3: where it was. But first and foremost, you know, and
Speaker 3: a certainly very strong theme of my book is I
Speaker 3: wasn't pursuing my own agenda. I was pursuing the agenda
Speaker 3: that Congress placed upon me. And an agenda that Congress
Speaker 3: placed upon me was that the risk based capital standards
Speaker 3: should make sure that the companies have a positive going
Speaker 3: concern value during a stressed environment. And that's what we did.
Speaker 3: And if people don't like that, they can take it
Speaker 3: up with Congress.
Speaker 2: You know, I don't, so I don't want to imply
Speaker 2: that people don't like it. People don't like it. But
Speaker 2: but so I think that when I say compromise that
Speaker 2: I don't mean necessarily in them in the absolute value
Speaker 2: of or level of the leverage component of the cop requirement.
Speaker 2: I think people are they sort of understand the need
Speaker 2: to get to that larger number. I think what they
Speaker 2: are trying to square is, as you know that I'm sure,
Speaker 2: as you're extremely well, where the company is disclose a
Speaker 2: short fall to their adjusted total copper requirement. So if
Speaker 2: you look at it just nominally, it appears to be
Speaker 2: several hundred billion dollars both enterprises. And then if you
Speaker 2: look at their earnings, which are you know, ten to
Speaker 2: twenty billion, just depending on how far out in the
Speaker 2: future you look, that just seems like a huge shortfall
Speaker 2: to overcome in any sort of reasonable time frame. And yet,
Speaker 2: you know, unless we sort of adjust the profitability side
Speaker 2: of the equation, change the ROE, which is obviously not.
Speaker 2: And and let me just take a step back here
Speaker 2: and say I enjoyed your book. I got to read
Speaker 2: most of it before this recording. I really liked how
Speaker 2: you said that housing finance is sort of the upside
Speaker 2: down world in Washington now. And a big problem for
Speaker 2: me is the clients call me up and say, you know,
Speaker 2: what are Democrats believe in? What are Republicans believe in now?
Speaker 2: In housing finance? And it's it's seems challenging to say,
Speaker 2: it seems to sort of shift over time.
Speaker 3: That's Wort's fair, that's I mean again, my perspective was
Speaker 3: always because you know, as I say in the book,
Speaker 3: and I've got a long history of writings, you know,
Speaker 3: my views on what I would do, and you know
Speaker 3: if I was you know Czar or Congress are very
Speaker 3: different from what does as a regulator. The second I
Speaker 3: took the oath, whatever views or preferences of my own
Speaker 3: went out the window. We did so. For instance, I'm
Speaker 3: not a fan as I have made explicit of the
Speaker 3: Housing Trust fun or the housing goals, but we did them.
Speaker 3: And I entered the agency with a commitment of we
Speaker 3: will do everything Congress has told us to do. That
Speaker 3: is our job. Our job is not to think whether
Speaker 3: we think it's good or bad policy. It's Congress's prerogative
Speaker 3: to pass stupid policy. It's not the prerogative of regulators
Speaker 3: to question whether the policy is stupid or not. The
Speaker 3: regulators just do it. That's the That's that's at least
Speaker 3: my perspective, and I wish that was the wider perspective
Speaker 3: because it would shift the broader debates back to where
Speaker 3: they should be, which is Congress, our elected representatives.
Speaker 2: Yeah, and that you know, it makes total sense. Well,
Speaker 2: we seem to be stuck in this situation where Congress
Speaker 2: either doesn't want to or can't do anything about this.
Speaker 2: I mean that if they seem to have done most
Speaker 2: of what they should and can do at least, you know,
Speaker 2: while you while you were there, and now the challenge
Speaker 2: seems to be mostly political, So I guess the I mean,
Speaker 2: the real question is, you know, what, what does a
Speaker 2: deal look like? Is treasure the obstacle? Will Treasury ever
Speaker 2: feel the need to sort of get off their hands
Speaker 2: and get to a final deal?
Speaker 3: It depends who. I mean. Manuchin and I were quite
Speaker 3: close to a deal, and I would go as far
Speaker 3: to say if it wasn't for the pandemic, the companies
Speaker 3: would be out today. And if it wasn't for you know,
Speaker 3: some small group of shareholders suing to remove me, the
Speaker 3: companies would be out today. There's a fair amount that
Speaker 3: FXVA can do younilaterally. Now that's a question of like leadership.
Speaker 3: I had connections obviously, as mentioned, I came from the
Speaker 3: Vice President's office. You know, I had connections to the
Speaker 3: president vice president you know any c I mean I
Speaker 3: had my own channels to the White House and wasn't
Speaker 3: dependent on Treasury to get stuff done. So, for instance,
Speaker 3: you know, some people have made a question of well, boy,
Speaker 3: how did you guys end this sweep when a wimb
Speaker 3: had it in the baseline. And it helps that when
Speaker 3: I first started on the Hill, we had a young
Speaker 3: man in our personal office named Russ Vote, who I've
Speaker 3: known for twenty years, who happened to be O and
Speaker 3: B director at that point. So I mean some of this,
Speaker 3: I guess I'm not knocking on current leadership. This administration
Speaker 3: chose leadership FORFHV did that did not have the political stature,
Speaker 3: in political connections to actually get anything done. That's a
Speaker 3: choice they made. They decided they you know, when when
Speaker 3: something when when the White House sends somebody from the
Speaker 3: White House over to an agency, that is a signal
Speaker 3: to that agency that these issues are important and we're
Speaker 3: going to put the political capital behind and get them done.
Speaker 3: When a White House elevates somebody who's a longtime career
Speaker 3: person at an agency, that is a signal that we
Speaker 3: don't care about this issue and that we will uh,
Speaker 3: we won't spend a minute thinking about it. And that's
Speaker 3: so that's the choice that was made. I find it
Speaker 3: frustrating because this administration has a legal obligation to do
Speaker 3: it and simply want not. But let's get to maybe
Speaker 3: the more why the political you know, so some of
Speaker 3: this is very much and again I want to emphasize
Speaker 3: that Mnuchin was was was there in terms of an exit.
Speaker 3: We did have to spend. I remember when I first
Speaker 3: came into FHFA and Minuchin was convinced we could get
Speaker 3: Congress to create a limited, you know, targeted guarantee. And
Speaker 3: I was like, Steven, never going to happen, but I
Speaker 3: will go and I'll do meetings with you on the
Speaker 3: Hill and we'll we'll talk it up. And we did that,
Speaker 3: and it took him eight months to figure out Congress
Speaker 3: was going to do anything. I always say this because
Speaker 3: you know, I went through GSE reform in the two
Speaker 3: thousands to get heros, So I think I have a
Speaker 3: fairly good sense of what Congress will. It will not
Speaker 3: too now for a very long time, certainly in the
Speaker 3: Obama administration, but this administration, there is this kind of
Speaker 3: game of chicken where asset managers who hold agency mbs
Speaker 3: believe that the conservatorship hardens the guarantee, and they believe
Speaker 3: that if there's an exit from the conservators ship that
Speaker 3: the odds of Congress coming in and giving them not
Speaker 3: only in explicit guarantee going forward, but also in their
Speaker 3: current holdings is far less likely. And they are correct.
Speaker 3: One sits out of conservatorship, Congress will no longer be
Speaker 3: interested in the topic. So you kind of have this
Speaker 3: game of chicken. Wear it again. Keep in mind the
Speaker 3: asset managers who are large holders of mbs are also
Speaker 3: large holders of treasuries. That is who Treasury hears from
Speaker 3: every day, and what Treasury is hearing is, oh my god,
Speaker 3: if you let them out of conservatorship or you don't
Speaker 3: give it us an explicit guarantee everybody will be living
Speaker 3: in caves again, obviously you have to. This is where
Speaker 3: if you start from the premise of it's not my job,
Speaker 3: the second guest Congress, it's my job to follow the law.
Speaker 3: We spend a tremendous amount of time in twenty nineteen
Speaker 3: on the Hill, and I regularly told members you will
Speaker 3: have more than sufficient time if you'd like to go
Speaker 3: a different direction to pass law and telling us to
Speaker 3: do that, and if you do that, we'll follow whatever
Speaker 3: you pass. I'll note for the record, both sides of
Speaker 3: the aisle, of both sides of the hill, not a
Speaker 3: single person told me to stop. They were all, you know.
Speaker 3: I mean, certainly they were like, yep, you know, we'll
Speaker 3: criticize you if it because, but in fact they were
Speaker 3: largely happy for me to fix their problem. So I
Speaker 3: do think that the fundamental problem right now is an
Speaker 3: absolute lack of leadership in the administration and a lack
Speaker 3: of willingness to actually make hard choices.
Speaker 2: I guess so we're mostly resigned to a change in
Speaker 2: administration for there to be any movement on this, I
Speaker 2: think correct.
Speaker 3: I mean, you know, I think a wild card would
Speaker 3: be I mean, you're certainly not going to see any
Speaker 3: movement under a Secretary Yellen. So if she leaves in
Speaker 3: a second Biden term and you see a change a
Speaker 3: Treasury maybe, but that's what it would take.
Speaker 2: And then maybe just as sort of to round out
Speaker 2: this topic, maybe you can explain. So. So one of
Speaker 2: the sort of signature achievements at the end of your
Speaker 2: time at fh Avay was to sort of put an
Speaker 2: end to the sweep and to allow the companies to
Speaker 2: start retaining capital. But on the other hand, there's sort
Speaker 2: of this accounting fiction where the senior preferred liquidation preference
Speaker 2: continues to grow, and everyone always asks me, how do
Speaker 2: I wrap my head around this? What does the federal
Speaker 2: government want in exchange for forgiving this? Can they Maybe
Speaker 2: you can talk us through that a little bit.
Speaker 3: So you know, it really was something we had to
Speaker 3: accept to make Treasury happy. So start from the premise
Speaker 3: that the view of the Treasury lawyers who are still
Speaker 3: there and this guide's any Treasury secretary, is that you
Speaker 3: can't give value away. And so the view of the
Speaker 3: Treasury lawyers was that they were entitled to the sweep
Speaker 3: because the sweep was in exchange for some sort of
Speaker 3: hardening of you know, the line of credit if you will,
Speaker 3: in the PSPA, and so for us to end the sweep,
Speaker 3: the Treasury lawyers said, we need to be held harmless,
Speaker 3: and the only way we could be held harmless is
Speaker 3: to have the liquidity preference. I didn't like it. I
Speaker 3: don't like it now. My expectation at the time, in
Speaker 3: my expectation going forward is they'll have to be a
Speaker 3: cram down of the liability side of the balance sheets
Speaker 3: of these companies, and that will include a cram down
Speaker 3: of the liquidity preference. I think people have to keep
Speaker 3: in mind that administratively, Treasury does not believe they can
Speaker 3: simply forgive. The treasury legal view is they haven't been
Speaker 3: all paid back, so you know, it's a nice interesting argument,
Speaker 3: but that's not what the lawyers say, and it's and
Speaker 3: you know, most Treasury secretaries are not lawyers, and they're
Speaker 3: not going to fight with the lawyers. I thought the
Speaker 3: treasure lawyers got a number of things wrong in my opinion,
Speaker 3: But that said, the liquidity preference will have to be
Speaker 3: either crammed down or converted in some way, and there
Speaker 3: are on the emphasize we spend a lot of money
Speaker 3: on options, And I'll simply say, while a particular choice
Speaker 3: was not made, the number of choices and directions you'd
Speaker 3: have to go we're well explored and are on the shelf.
Speaker 3: And I explained them all to the current Treasury team
Speaker 3: on way it went my way out the door. So
Speaker 3: one thing I would look for, you know, if there
Speaker 3: is a Trump return is you know, who goes to Treasury?
Speaker 3: Do you see people who have some who are either
Speaker 3: part of the conversation last time? You know, I think
Speaker 3: the real fear would be that you have to go
Speaker 3: through this relearning, you get new people who again want
Speaker 3: to go through the same cycle again. And obviously it
Speaker 3: would probably be six seven months before you get a
Speaker 3: new FHFA director in. You know, you have a new
Speaker 3: Treasury secretary in pretty soon. But who do they bring in?
Speaker 3: Is staffing? You know? This is why I you know,
Speaker 3: when people ask me, it's like, you know, even in
Speaker 3: a Trump term, it's not a twenty twenty five exit,
Speaker 3: it's more like a twenty six at best, twenty seven
Speaker 3: more likely.
Speaker 2: Do you feel like the twenty twenty eight warrants are
Speaker 2: any sort of meaningful deadline?
Speaker 1: No?
Speaker 3: And I get that question a lot The reason it's
Speaker 3: really not is because if you look at the total
Speaker 3: value PIE for Treasury, it's a rounding error. The value
Speaker 3: really is in the senior preferreds And so I don't
Speaker 3: think people I mean, it's nice, people will talk about it,
Speaker 3: you know, it'll be circled on the calendar, but in
Speaker 3: terms of you know, is Treasury giving up a lot
Speaker 3: of value by letting the warrants expire? No, they're not.
Speaker 2: Yeah, it'll be interesting to watch on the senior preferred
Speaker 2: trade ahead of the election. I think they've already traded
Speaker 2: up a bit, so that'll be interesting. That's helpful, helpful
Speaker 2: contour on theasure.
Speaker 1: Appreciate it absolutely, Yeah, super interesting, Mark, I want to
Speaker 1: shift topics just a little bit and talk a little
Speaker 1: bit more about FAHFA and its independence. You sort of
Speaker 1: alluded to it in terms of the shareholder litigation, but
Speaker 1: I want to kick it off by talking about another
Speaker 1: recent tweet of yours, also from March, and this was
Speaker 1: in connection with f HFA reviving a pilot program to
Speaker 1: waive title insurance on some mortgage refinance scenes and you
Speaker 1: tweeted quote, Congress wanted an independent FAHFA to prevent this
Speaker 1: very thing a white house playing election in your games
Speaker 1: with that wur housing market. Congress really needs to restore
Speaker 1: fahfa's independence. End quote. You know this this issue was
Speaker 1: obviously in terms of fahfa's independence, was obviously a critical
Speaker 1: issue in the Collins case that went up to the
Speaker 1: Supreme Court resulted in the ATHTF Ferry director becoming determinable
Speaker 1: at will by the president. But I'm curious, you know,
Speaker 1: what steps would you recommend that Congress takes to restore
Speaker 1: athletes as independence so to become a board something like that.
Speaker 3: Yeah, and I'll note isn't a side that even though
Speaker 3: Collins case struck the you know, four cause removal requirements,
Speaker 3: hera still says that the conservatorship you know, doesn't report
Speaker 3: to any other agency or entity. So yes, the president
Speaker 3: could could fire the FAHAY director, but by law, the
Speaker 3: president cannot direct the actions of the Conservatorship. And that's
Speaker 3: what really bothered, kind of disturbed me about the state
Speaker 3: of the Union commentary on Title and otherwise, because the
Speaker 3: only avenue there is no regulatory authority to do the
Speaker 3: title changes that I've protected. This is all being done
Speaker 3: via the conservatorship. And again the law still says that
Speaker 3: there's no authority for the president in terms of the conservatorship.
Speaker 3: So I just again concerned about the politicization of the agency.
Speaker 3: So you know, we have to take the Supreme Court
Speaker 3: where it is. You know, this is the oddity of
Speaker 3: you know, I wrote the language, and you know, we
Speaker 3: had we had boards in certain certain versions the committee
Speaker 3: draft here, and those were some options we were looking at.
Speaker 3: We fundamentally thought having a single director would allow us
Speaker 3: to recruit somebody of higher stature than a board. I
Speaker 3: mean that was really the trade off, and the oversight
Speaker 3: board at FHVA, which is Treasury hud SEC, was kind
Speaker 3: of a compromise of having you know, some external review.
Speaker 3: But at the end of the day, if what it
Speaker 3: takes to make this an independent agency is a board,
Speaker 3: then I think that that's something, you know, you could do,
Speaker 3: and you'd have to do it sort of like NCUA
Speaker 3: where the chair is appointed by the president. It could
Speaker 3: be you know, the chairmanship could be moved. I think
Speaker 3: that's one way to thread the needle. I mean, certainly
Speaker 3: a broader case is you know, I think there are
Speaker 3: two three votes on the Court for striking down any
Speaker 3: independent agency is probably even including the FED. So you
Speaker 3: know how the question is, you know, in retrospect what
Speaker 3: we wrote in past in two thousand and eight, we
Speaker 3: was well within constitutional norms at the time, you know,
Speaker 3: but how do you think about how constitutional norms change
Speaker 3: every time. But that said, I think a board would
Speaker 3: be an improvement. I wouldn't make it more than three
Speaker 3: you know people at this point. Uh, you know, I've
Speaker 3: always I've also talked about maybe you know, given that
Speaker 3: you've got at least two members of FDIC that are
Speaker 3: removable at will by the President O c C F CFPB,
Speaker 3: you know, I think it's time for Congress to perhaps
Speaker 3: rethink our financial regulatory structure. And I would probably take FDIC,
Speaker 3: OCC FHFA and roll them all into one and have
Speaker 3: a three person board oversee that. And I think that
Speaker 3: would probably pass constitutional muster and would give a lot
Speaker 3: better alignment of interest within the regulatory structure.
Speaker 1: Do you think Congress would never do anything that?
Speaker 3: Well, probably not. I mean it's I mean that the
Speaker 3: fact that Congress has shown no interest in dealing with
Speaker 3: any of the issues. I mean, it's been interesting, you know, because,
Speaker 3: as you perhaps recall, I mean, the original Elizabeth Warren
Speaker 3: planned for CFPB was a board and now that's you know,
Speaker 3: off limits. That's a radical right wing view. Apparently despite
Speaker 3: that was the Kennedy, Durbin, Warren drafted bill. So you know,
Speaker 3: these parameters have obviously changed a lot over time, you know, perhaps,
Speaker 3: I mean, I think there is an odd let me
Speaker 3: put it this way. I think if Trump gets re
Speaker 3: elected Republicans, it's hard to imagine a situation where Trump
Speaker 3: gets re elected and Republicans don't pick up the Senate houses.
Speaker 3: A bit of a wild card, but you could see
Speaker 3: an alignment and you could see in attempt to do
Speaker 3: in financial reform. But I do think Republicans have largely
Speaker 3: moved on to no more independent agencies. So it's just
Speaker 3: hard to see a world where the Democrats don't want
Speaker 3: boards and the Republicans don't want independent agencies. So where
Speaker 3: is the where's the overlap? Anymore? So I think we're
Speaker 3: stuck with a bit of lumbo, you know, forever, for indefinitely,
Speaker 3: until you know there's a change, perhaps you know, in
Speaker 3: the Overton window, if you will.
Speaker 2: So Mark speaking about it gaps sort of in some
Speaker 2: of our regulatory oversight regular chapter on non bank servicing.
Speaker 2: First off, the math around forbearance very interesting in retrospect,
Speaker 2: do you think that non bank services are still a gap?
Speaker 2: And maybe also talk a little bit about whether SAPHI
Speaker 2: designation is or something like it is an appropriate tool.
Speaker 3: So I think they are still a gap. I don't
Speaker 3: think saphies and partly because I can't think of any
Speaker 3: one servicer that's so large and so systemic that they
Speaker 3: would be designated, you know. And obviously there was an
Speaker 3: f SoC report recently on non bank I find it
Speaker 3: really ironic in some ways because this administration made a
Speaker 3: big lot of noise about rejecting Manuchins activities based and
Speaker 3: wanting to move to an entity based, but their entire
Speaker 3: review on non bank services is a activities based so
Speaker 3: they sort of, you know, they're embracing what Mnuchin did
Speaker 3: without calling it that in a way. And of course
Speaker 3: their approach has been to ask Congress for a liquidity facility,
Speaker 3: which I think is the absolute long approach and the
Speaker 3: reason why I think it's rong approach. You're obviously creating
Speaker 3: expectations to guarantees and in fact, to me, the very
Speaker 3: the very action of f SoC calling for Congress to
Speaker 3: create a liquidity facility reduces market discipline, which is completely
Speaker 3: counter to the statutory obligations for f SoC. So to me,
Speaker 3: they've completely dropped the ball on their very job. The
Speaker 3: job at what f S BOCH is supposed to do
Speaker 3: is identify risks until delators to deal with them. If
Speaker 3: the core concerns about non bank servicers is what is
Speaker 3: the knockoff effect on the positories that provide warehouse funding
Speaker 3: to non banks or Vanny Freddie or Ginny May, then
Speaker 3: how then you should really be directing those entities, whether
Speaker 3: it's occ FED, FHFA HUD, to take actions to increase
Speaker 3: counterparty management of those non banks. So, on one hand,
Speaker 3: I agree with a number of the risks that the
Speaker 3: report and FSOC have identified. I just very much disagree
Speaker 3: with they've thrown their hands up at at dealing having anybody,
Speaker 3: as an FSOC member, actually deal with it. I can't
Speaker 3: remember whether I say this is my book, but I've
Speaker 3: certainly said on many occasions f SoC is really good
Speaker 3: at identifying problems that none of its members can do
Speaker 3: anything about. So it's as a former f SOCC member,
Speaker 3: it's a it's a frustrating process. But again I would
Speaker 3: use a reminder. In September twenty twenty, f SoC did
Speaker 3: a similar review of the secondary mortgage market and it
Speaker 3: directed FHFA to take a number of actions to strengthen it.
Speaker 3: That's actually how Congress intended have sought to work. So
Speaker 3: I'm very frustrated with the FSOC report on non banks.
Speaker 3: It's complete punning of their responsibility to Congress and with
Speaker 3: authorities that they have to fix, and fundamentally they don't
Speaker 3: really get it the underlying problem of why have depositories
Speaker 3: left mortgage servicing in a big way. You know, it's
Speaker 3: a sort of like, well, rather than try to fix
Speaker 3: the regulatory structure so that depositories who are more stable
Speaker 3: and are actually providing the warehouse funding to non bank services,
Speaker 3: rather than get them back into servicing, let's just ultimately
Speaker 3: regulate service non bank services like banks, rather than dealing
Speaker 3: with the first problem. So again, I think again, I'm
Speaker 3: sympathetic to the problems identified, and the report is a
Speaker 3: worthwhile overview. I'm not sure it came up with anything new,
Speaker 3: but I'm very frustrated with its approach.
Speaker 2: Yeah, so that actually brings us to another question. Your
Speaker 2: Twitter feed is rich with potential count.
Speaker 3: And I'm sure that. My next confirmation here in if.
Speaker 2: Yeah, you said the buzzle end game is a mess
Speaker 2: and should be reproposed. I know you don't like the
Speaker 2: term gold plating, and yet it does seem as though
Speaker 2: regulators increasingly try to make mortgage servicing less attractive for
Speaker 2: depositories and push it towards banks. Give me thoughts on
Speaker 2: maybe what they should do to sort of finalize the
Speaker 2: endgame here.
Speaker 3: Yeah, I mean, you know, I would repropose it. I
Speaker 3: know that that's not what bar and others others want
Speaker 3: to do. Let me say, you know, I come from
Speaker 3: the perspective that I think I think both the regulators
Speaker 3: and the banks are wrong, but in different ways obviously.
Speaker 3: So let's start out with I think our banking system
Speaker 3: is still under capitalized in my view, and I think
Speaker 3: the actual cost in terms of lending from increases in
Speaker 3: capital are not as large anywhere is near the bank's claim.
Speaker 3: And we went through and did fairly extensive lit reviews,
Speaker 3: and we were doing Fanning Freddie and there's a lot
Speaker 3: of empirical work on this, and so to me, I
Speaker 3: think the kind of sky is fallowing arguments from the
Speaker 3: banks is a bit exaggerated. That said, I don't think
Speaker 3: that Basil endgaming. Again, there are elements of it I'm
Speaker 3: not unsympathetic about, such as operational risk, But to me,
Speaker 3: I think the whole risk weighting regime I mean to mean,
Speaker 3: you're not addressing why Silicon Valley Bank failed, And in fact,
Speaker 3: one of the reasons Silicon Valley Bank failed was because
Speaker 3: Basil itself encourages banks to load up on treasuries and agencies,
Speaker 3: and you're not really kind of getting away from that
Speaker 3: in a way that I think is dealing with fundamental
Speaker 3: problems in the system. So you know, if I had
Speaker 3: a blank piece of paper and it didn't matter where
Speaker 3: we are starting from, I would rip up Basle altogether
Speaker 3: and go to things much much simpler. And I'm also
Speaker 3: a fan of having fairly robust leverage ratios, and I
Speaker 3: recognize is that that has its own distortions. I mean,
Speaker 3: if you start with you know, there's no good way
Speaker 3: to do this, you know, there's only trade offs. I
Speaker 3: would have a simpler regime, and I would have a
Speaker 3: regime that was a lot less favorable to holding agencies
Speaker 3: and treasuries, and it would be a lot less complicated
Speaker 3: than what we have today. But I just don't see
Speaker 3: it going that direction. I think the bang for the
Speaker 3: buck with Boslin game just isn't worth it. So to me,
Speaker 3: you know, reproposed try to get a consensus. I mean
Speaker 3: my worry, of course, is that you know, endgame that
Speaker 3: nobody wants to come back. I really would love to
Speaker 3: see somebody. I think our bank capital system, capital regulatory
Speaker 3: system is deeply flawed and somebody needs to come up
Speaker 3: and fix it. But I don't see that happening.
Speaker 1: I want I want to shift topics. I go back
Speaker 1: to the Collins case from before. Unless you had anything
Speaker 1: more to say, that absolutely okay, you know I thought
Speaker 1: there the chapter in your book on the Collins case
Speaker 1: was super interesting. I was particularly heartened to see that,
Speaker 1: you know, even the FAHFA director, just like the rest
Speaker 1: of us, has to, you know, continually refresh the Supame
Speaker 1: Court's website to see if the decision came out. Those
Speaker 1: were fun times. But you know what struck me in
Speaker 1: that chapter was it seems like your view was and
Speaker 1: you know, you were one of the drafters of hair
Speaker 1: of so you were no better than anybody, but your
Speaker 1: view was that the FAHFA exceeded its authority when it
Speaker 1: implemented this sweep in twenty twelve. But that's not really
Speaker 1: what the government's position was in the litigation, of course,
Speaker 1: and the Supreme Court wound up agreeing with the government's position.
Speaker 1: So I'm sort of curious how you reconcile, you know,
Speaker 1: those different views between your own personal view and what
Speaker 1: the government argued.
Speaker 3: So let me first, you know, reiterate that my own
Speaker 3: personal view is that it was an overreach. She was
Speaker 3: inconsistent with what you should be doing as a conservator,
Speaker 3: and I think the government was wrong. But so let's
Speaker 3: dig into the what does it mean by the government now.
Speaker 3: You know, I kind of found this particularly frustrating. Now,
Speaker 3: you would normally think that when an agency is sued
Speaker 3: and DJ represents the agency, that DJ is kind of
Speaker 3: the lawyer and the agency is the client, and the
Speaker 3: client should be able to drive. Like here's where I
Speaker 3: think it was right or wrong. That's not actually how
Speaker 3: it works. I mean, DJ makes its own decisions on
Speaker 3: what he thinks the law is. So, to be frank
Speaker 3: about it, I think DJ got it wrong. One of
Speaker 3: my frustrations, and you know, maybe I would have done
Speaker 3: this differently in retrospect, you know, we had asked, for instance,
Speaker 3: the Solicitor General to give FHFA like ten minutes during
Speaker 3: the Comins case, and they wouldn't, and you know, we
Speaker 3: couldn't get time in front of the court, you know.
Speaker 3: So I again, I think the DOJ positions, certainly on
Speaker 3: the structure were wrong, and I think the DOJ position
Speaker 3: on the striep was wrong. And again, you know, DJ
Speaker 3: Solictener Generali quickly tell you, oh, we're the government. So
Speaker 3: it's just a very frustrating that, you know, you're the
Speaker 3: client and the lawyer is making arguments that are contrary
Speaker 3: to what you think the law is.
Speaker 1: So sorry to cut you off. What argument do you
Speaker 1: think of f HFA should have made that would have
Speaker 1: been different than DOJSON on that issue on whether the
Speaker 1: sweep exceeded the statutory authority, I.
Speaker 3: Think we should have acceded to it. I again, we
Speaker 3: were not defending it directly at FHFA when I was there.
Speaker 3: We ended this week, which I believe was the most
Speaker 3: important thing we could do and was somewhat an admission
Speaker 3: of that we did see it is.
Speaker 1: Wrong, you know.
Speaker 3: Granted, you know you could get in the question, like
Speaker 3: you know, if you say the sweep was wrong. Well,
Speaker 3: what does it, you know, open you up to damage?
Speaker 2: Is?
Speaker 3: You know. The frustrating thing is and this is true
Speaker 3: under almost any administration. The DOJ perspective is to try
Speaker 3: to defend the ability of the executive branch to do
Speaker 3: as much as possible. I mean to only slight exaggeration.
Speaker 3: The view of the Solicitor General is that the executive
Speaker 3: brands could do whatever it wants. And if you have
Speaker 3: any sort of you know, I fundamentally think of myself
Speaker 3: as an Article one constitutionalist. You know, we no amount
Speaker 3: of my time in the White House of the executive
Speaker 3: branch has reduced my respect and appreciation that Congress put
Speaker 3: Congress is first in the Constitution, and these legislative decisions
Speaker 3: are Congresses. Sadly, that is not the general perspective at DJ,
Speaker 3: and so our ability to argue a different side of
Speaker 3: this was handcuffed by DJ. And I just found that
Speaker 3: extremely frustrating, and that we were the agency, we were
Speaker 3: the nity most directly impacted, and yet we're not able
Speaker 3: to present our side of the case that said, you know,
Speaker 3: what would the DAMAGEES have been if we had you know,
Speaker 3: to me, we undid the sweep. So the harm, you know,
Speaker 3: essentially kind of was undone going forward. We had no money,
Speaker 3: of course, because we barely had solvent companies. You know.
Speaker 3: I think DOJ and Treasurer of course concerned that if we,
Speaker 3: you know, kind of admitted that the sweep was not legal,
Speaker 3: that they would be opened up to a bunch of damages.
Speaker 3: And again I want to reiterate the DOJ view is
Speaker 3: government can do whatever it wants pretty much. So, I mean,
Speaker 3: I'm exaggerating only only modestly when you deal with government
Speaker 3: lawyerslu general and just defend so and obviously I thought
Speaker 3: the structure part that they got the Collins case wrong
Speaker 3: in my view, and as I note in the chapter,
Speaker 3: I mean, the whole issue was around DeMarco, who was
Speaker 3: acting at the time, and it's generally accepted that acting
Speaker 3: directors are removable will. The court never had to even
Speaker 3: reach into the question of the permanent structure. So to me,
Speaker 3: I thought Collins was just a horrible example judicial activism.
Speaker 1: I want to shift topics yet again, ask you about
Speaker 1: another tweet of your's. This is a preview of your
Speaker 1: next right Senate confirmation hearing, which actually maybe it's another question.
Speaker 1: Would you ever return to government service.
Speaker 3: Before I go to the question, I believe in public service,
Speaker 3: and if asked to serve again in a capacity where
Speaker 3: I could make a difference, I certainly would be hesitant
Speaker 3: to say.
Speaker 1: No any particular position. You would really want.
Speaker 3: To think I would make a great ambassador to the Bahamas.
Speaker 1: Well, we'll make sure to record our next podcast episode.
Speaker 1: But so the tweet I want to ask you about
Speaker 1: comes from May and it was in the wake of,
Speaker 1: you know, the scathing reports coming out of the coming
Speaker 1: out of the FDIC about work conditions there, and you tweeted, quote,
Speaker 1: the fd I CE is far from being the only
Speaker 1: financial regulator with a troubled work environment. I'd encourage Congress
Speaker 1: to examine others as well. End quote, can you tell
Speaker 1: us you know what what you were getting out there?
Speaker 3: Rather than name names, I'll simply say all of the
Speaker 3: regulators have public reporter what are called feb's Federal Employee
Speaker 3: Viewpoint Survey that's done every year, and you can see
Speaker 3: these declines and reflections at FDIC. And I would encourage
Speaker 3: Congress and other journalists and others to look at the
Speaker 3: fab scores of different agencies and look at trends. And
Speaker 3: I will simply say where there is smoke, there is
Speaker 3: almost certainly fire.
Speaker 1: All right, very very diplomatic. Yeah, you're already I went
Speaker 1: for an ambassador position by being diplomatic.
Speaker 3: An ambassador to for answer or anything.
Speaker 1: Well, mulvaney got an ambassadorship, right at some point.
Speaker 3: It's a special envoy iron something like that.
Speaker 1: All right. I think that's gonna do it. For the
Speaker 1: substance of questions, So we'd like to end every episode
Speaker 1: with sort of a grab bag set of questions related
Speaker 1: to music. And usually we ask our guests, you know,
Speaker 1: for three pieces of music they would want to take
Speaker 1: with them on a desert island. But we want to
Speaker 1: do something a little different with you, and we want
Speaker 1: to tailor it a little more specifically to the Dead
Speaker 1: and Fish and maybe other jam band since I know
Speaker 1: you're a big fan, and you know, actually I enjoyed
Speaker 1: reading in your book that you during part of the COVID.
Speaker 1: One of the COVID chapters, you talked about how you
Speaker 1: start each day by picking a dead show from that
Speaker 1: day on the read Listen app, which I do as well.
Speaker 1: It's a great app. Listened to June seventh, nineteen ninety one.
Speaker 1: This morning on my way into work, which was a
Speaker 1: great show Deer Creek. There's also straight there were you there?
Speaker 3: Yeah, yeah, I did Dear Creak ninety one.
Speaker 1: That's awesome, and I picked it because I love standing on.
Speaker 3: The Moon and great that was a great version of
Speaker 3: it as well.
Speaker 1: Yeah it was. I was gonna say, my my favorite
Speaker 1: is the Auttin Stadium ninety three eight twenty one, ninety three,
Speaker 1: but this was also really good. There's also great you know,
Speaker 1: the nineteen seventy seven June seven shows. You know up
Speaker 1: there it's a Winterland show and just you sort of
Speaker 1: see it as one of the top ranked shows of
Speaker 1: all time. But so a few questions for you, you know,
Speaker 1: related to the Dead and fish curious how you even
Speaker 1: got into them.
Speaker 3: You know, it was as much kind of a social circle,
Speaker 3: I think. You know, my first Dead show was actually
Speaker 3: going to see them at RFK in eighty six when
Speaker 3: it was Bob Dylan and Tom Petty and the Heartbreakers
Speaker 3: were actually doing that backup for Bob Dylan that tour,
Speaker 3: So you know, I was a big Bob Dylan fan.
Speaker 3: Has given away the title of the book, and you know,
Speaker 3: and I had kind of heard the dad I knew
Speaker 3: a few songs, but I mostly got pulled into going
Speaker 3: in eighty six because of Dylan and Tom Petty and
Speaker 3: then you know, the Dead played got to see him.
Speaker 3: I was like, Wow, this is really something I would say.
Speaker 3: I don't think it was until you know, I went
Speaker 3: and saw them in Ronot eighty seven that it was
Speaker 3: really one of those like now I get it shows.
Speaker 3: You know, that was probably the you know, there's no
Speaker 3: turning back after this kind of experience if you will,
Speaker 3: and so. But it was also for some probably very
Speaker 3: random reason. Where I went to high school and friends,
Speaker 3: there were just a lot of people who listened to
Speaker 3: the Dead tapes circulated, So, like a lot of things,
Speaker 3: you get exposed to it by your friends.
Speaker 1: Yep, yep. Where did you go to high school.
Speaker 3: In Virginia out in Falkyar if that came in our
Speaker 3: path southwestern.
Speaker 1: Area closer to d C. I was in Fairfax County.
Speaker 3: Oh yeah, I didn't you know exactly where?
Speaker 1: Yeah. But to my regret, no one took me to
Speaker 1: any Dead shows when I was in high school. I
Speaker 1: didn't get introduced to them until after Jerry died, which
Speaker 1: is one of my probably my biggest life regret. But
Speaker 1: and so what about Fish When did you get into them? Uh?
Speaker 3: In college? First show was nineteen ninety at the Bayou
Speaker 3: used to be that bar down on M Street. I
Speaker 3: can't remember whether you ever made it made it there,
Speaker 3: so saw them a number of times. Again. It was
Speaker 3: you know when I was in college. You know, we
Speaker 3: were seeing you know, Blues Traveler, Fish Mow, you know,
Speaker 3: Widespread pan Off, all the kind of you know, second
Speaker 3: gen jam bands, and you know, the Bayou was kind
Speaker 3: of where you went off and spent a lot of
Speaker 3: time with the which is no longer there. You know,
Speaker 3: it really just had a great experience exposure to all
Speaker 3: sorts of bands. There are also, you know, imber odd
Speaker 3: enough because I live in the neighborhood where the old
Speaker 3: reggae club Kilimanjari used to be. It's like two blocks
Speaker 3: from where I live now, and would go there all
Speaker 3: the time in college and see like still Pulse and
Speaker 3: you know, fans like that. So and now it's like
Speaker 3: a gym.
Speaker 1: All right, I think we'll leave it there. This was
Speaker 1: a really great discussion, wide ranging, you know, from from
Speaker 1: COVID crisis to Fanny and Freddie and fhf A to
Speaker 1: the dead and fish Mark Calabria. Thank you so much
Speaker 1: for talking with us today. Uh, you know, we're extremely
Speaker 1: grateful for your time and I think our listeners are
Speaker 1: to Ben, thank you for co hosting your first show
Speaker 1: co hosting. As a reminder to all our listeners, you
Speaker 1: can read all of our Bloomberg intelligence research on the
Speaker 1: Bloomberg terminal at Big and we'll leave it there. Thank
Speaker 1: you again. We