WEBVTT - Calabria on Fannie, Freddie Conservatorships 0:00:12.400 --> 0:00:16.040 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:16.040 --> 0:00:19.880 by the litigation and policy team at Bloomberg Intelligence, the 0:00:19.920 --> 0:00:24.960 investment research platform of Bloomberg LP. Bloomberg Intelligence has five 0:00:25.040 --> 0:00:28.560 hundred analysts and strategists working across the globe and focused 0:00:28.560 --> 0:00:32.480 on all major markets. Our coverage includes over two thousand 0:00:32.560 --> 0:00:34.960 equities and credits, and we have outlooks on more than 0:00:35.040 --> 0:00:39.120 ninety industries and one hundred market indices, currencies and commodities. 0:00:39.960 --> 0:00:44.880 This podcast series examines the intersection of business policy and law. 0:00:45.400 --> 0:00:49.640 I'm Elliott Stein and analysts with Bloomberg Intelligence covering financials litigation, 0:00:51.000 --> 0:00:51.520 and I'm. 0:00:51.360 --> 0:00:55.160 Ben Elliott I'm an analyst with Bloomberg Intelligence covering consumer finance. 0:00:56.080 --> 0:01:00.120 So our guest today is Mark Calabria, Senior Advisor to 0:01:00.160 --> 0:01:04.320 the Cato Institute, where he provides strategic input and direction 0:01:04.440 --> 0:01:08.920 on the federal economic policy making process. Mark previously served 0:01:08.959 --> 0:01:12.280 as Director of Financial Regulation at the Cato Institute, where 0:01:12.280 --> 0:01:17.120 he co founded cato's Center for Monetary and Financial Alternatives. 0:01:17.680 --> 0:01:20.920 Mark is also the former director of the Federal Housing 0:01:21.040 --> 0:01:26.080 Finance Agency, better known as the FAHFA, which regulates and 0:01:26.160 --> 0:01:30.520 supervises Fannie May, Freddie Mack and the Federal Home Loan Banks, 0:01:31.080 --> 0:01:34.800 and prior to heading the FAHFA, Mark served as chief 0:01:34.840 --> 0:01:39.360 economist to Vice President Mike Pence, and before that, Mark 0:01:39.440 --> 0:01:42.600 served as a senior aide to the US Senate Committee 0:01:42.600 --> 0:01:47.280 on Banking, Housing, and Urban Affairs under chairs Richard Shelby 0:01:47.360 --> 0:01:51.720 and Phil Graham. During his Senate service, Mark acted as 0:01:51.760 --> 0:01:55.240 the primary drafter of the Housing and Economic Recovery Act 0:01:55.280 --> 0:01:58.880 of two thousand and eight, better known as HARA, which 0:01:58.960 --> 0:02:03.720 established a regululatory framework for the government sponsored housing enterprises. 0:02:04.360 --> 0:02:07.480 Mark recently released a book called Shelter from the Storm 0:02:07.600 --> 0:02:11.520 How COVID Mortgage Meltdown Was Averted, which covers how the 0:02:11.520 --> 0:02:14.920 government responded to the COVID nineteen crisis without bailing out 0:02:14.960 --> 0:02:18.519 Wall Street. It's a very informative read and I highly 0:02:18.560 --> 0:02:21.560 recommend it to our listeners. And I also enjoyed that 0:02:21.639 --> 0:02:26.200 the book title is sort of homage to Bob Dylan. 0:02:27.480 --> 0:02:29.840 So with all that, Mark, Welcome to the Votes on 0:02:29.919 --> 0:02:31.000 Verdicts podcast. 0:02:31.480 --> 0:02:33.600 Elliott Bennet, It's such a pleasure. 0:02:33.280 --> 0:02:37.240 To be here, So Mark, the first question we always 0:02:37.400 --> 0:02:40.440 ask our guests is to sort of walk us through 0:02:40.480 --> 0:02:44.720 their career history. Their career path. You know, I just 0:02:44.760 --> 0:02:48.360 mentioned the highlights of your official bio. It's obviously very impressive, 0:02:49.000 --> 0:02:50.440 but you know, we'd love to know how you got 0:02:50.440 --> 0:02:52.720 to where you are, what took you into government service 0:02:52.760 --> 0:02:55.480 and in particular housing and financial regulation. 0:02:56.560 --> 0:02:59.160 Well, you know, the out of the in some way, 0:02:59.240 --> 0:03:02.120 because in respect it all seems to have made sense, 0:03:02.160 --> 0:03:05.480 but it certainly certainly didn't feel like a clear path 0:03:05.520 --> 0:03:07.960 at the time. But you know, I'll go back to 0:03:08.400 --> 0:03:11.559 college where. You know, when I came out of undergrad 0:03:11.840 --> 0:03:15.960 was that post savings and loan crisis era or early nineties, 0:03:16.080 --> 0:03:18.119 you know, when we first really started using the term 0:03:18.200 --> 0:03:22.600 jobless recovery. The reason I went to grad school and 0:03:22.639 --> 0:03:25.320 got my PhD a number of reasons, but in part 0:03:26.000 --> 0:03:28.760 it was because of the job market and because again 0:03:28.800 --> 0:03:31.240 we were in this aftermath of a real estate boom 0:03:31.280 --> 0:03:34.280 and bust, and I also wanted to try to make 0:03:34.320 --> 0:03:36.640 sense of it, you know, I mean again, you see 0:03:36.960 --> 0:03:40.680 the recession, you see the stress, and I think economics 0:03:40.800 --> 0:03:42.880 is a natural thing to try to turn to to 0:03:43.240 --> 0:03:44.880 try to make sense of those things. So when I 0:03:44.960 --> 0:03:48.640 was in grad school, you know, Fidisia, Fyria, these things 0:03:48.640 --> 0:03:51.839 were past, and there was included the ninety two Act 0:03:51.840 --> 0:03:54.480 in terms of Feni and Freddy, So that really was 0:03:54.520 --> 0:03:57.560 something that was kind of on my mind at the time, 0:03:58.440 --> 0:04:01.440 Like anybody who gets to phdx economics. My professors had 0:04:01.480 --> 0:04:03.800 impressed upon me that the only thing of value to 0:04:03.840 --> 0:04:06.800 do with my life would be to teach. But I 0:04:06.800 --> 0:04:09.440 didn't really like the offers I was getting, and you know, 0:04:09.560 --> 0:04:12.080 ended up working at trade associations first at the National 0:04:12.200 --> 0:04:17.479 Social Homebuilders naturalis of Realtors, had done a fellowship with 0:04:17.520 --> 0:04:20.800 Harvard Joint Center for Housing Studies, so really early in 0:04:20.839 --> 0:04:26.600 my career had started learning mortgage finance, housing issues from 0:04:26.720 --> 0:04:29.279 day one out of grad school. And I should say 0:04:29.279 --> 0:04:31.640 this on the side, you know, my graduate work was 0:04:31.720 --> 0:04:35.240 really kind of anti trust and dust organization market structure. 0:04:35.320 --> 0:04:38.880 So it's always the way I've really thought about financial 0:04:38.920 --> 0:04:42.640 services is kind of a market structure perspective rather than 0:04:42.680 --> 0:04:47.440 say a macroeconomic perspective. Let's see, I was, i think 0:04:47.440 --> 0:04:49.680 at the Realtors when I got a phone call from 0:04:49.680 --> 0:04:52.840 a friend on the banking committee and asked me if 0:04:52.839 --> 0:04:55.479 I was interested in coming up and taking a job. 0:04:55.560 --> 0:04:57.920 And I've been very fortunate and a number of people 0:04:57.960 --> 0:05:00.760 have reached out to me and asked me if I 0:05:00.839 --> 0:05:03.680 was willing to do the job in question. And as 0:05:03.680 --> 0:05:07.359 you mentioned, spent eight years on the Banking Committee, helped 0:05:07.400 --> 0:05:10.600 create the regulator for Feanning and Freddie. Also it led 0:05:10.640 --> 0:05:15.400 the committee's response to Katrina, worked on a not had 0:05:15.400 --> 0:05:18.120 my fair share disasters, unfortunately. I feel like you know, 0:05:18.400 --> 0:05:20.120 it's also on the whole of nine to eleven. So 0:05:20.200 --> 0:05:24.520 you talk about so and you know, again having seen 0:05:25.600 --> 0:05:28.039 a lot of lens, and let me end with this 0:05:28.160 --> 0:05:31.760 and saying you know it. When I was on the 0:05:31.800 --> 0:05:34.760 committee and we would have new staff join, I would 0:05:34.760 --> 0:05:38.080 always give them a stack of like Savings Alone Crisis 0:05:38.120 --> 0:05:41.840 reading list and point to it and say, this stuff happens, 0:05:42.360 --> 0:05:44.080 we need to think about it, we need to be 0:05:45.120 --> 0:05:47.520 prepared for it. And really kind of a lot of 0:05:47.520 --> 0:05:50.000 the lens of my career is just looking back at 0:05:50.000 --> 0:05:54.280 how badly the Savings Alone crisis went and trying to 0:05:54.480 --> 0:05:57.039 essentially avoid similar outcomes. 0:05:57.480 --> 0:05:59.280 One of the quotes that you used to say when 0:05:59.320 --> 0:06:02.280 you were lenon goth HFA, which I always appreciate, it 0:06:02.320 --> 0:06:03.640 was you know, the time to fix your roof is 0:06:03.680 --> 0:06:05.960 when when the sun is shining or not, not when 0:06:06.000 --> 0:06:08.039 it's raining, which I appreciate. 0:06:08.279 --> 0:06:11.800 Which I believe JFK or some speech writer JFK came 0:06:11.880 --> 0:06:14.640 up with. But yeah, and you know, and that's kind 0:06:14.640 --> 0:06:17.719 of also been a theme of my career, which is 0:06:17.760 --> 0:06:20.760 to try and to nudge people in Washington to perhaps 0:06:20.839 --> 0:06:23.159 have a longer time horizon than two weeks and to 0:06:23.240 --> 0:06:28.240 think about you know, housing market, macroeconomy. I mean, these 0:06:28.240 --> 0:06:31.559 things in my opinion, running cycles, housing markets, boom and bust. 0:06:31.600 --> 0:06:34.599 I see zero reason to believe that that that's not 0:06:34.680 --> 0:06:38.560 the future for us. And how do you, you know, 0:06:38.680 --> 0:06:41.760 build a foundation, how do you build a financial system 0:06:41.800 --> 0:06:45.279 that's that's robust to that? And I think that's the 0:06:45.320 --> 0:06:48.200 fundamental problem. We've got a financial system, We've got a 0:06:48.200 --> 0:06:51.880 mortgage finance system that's works great as long as everything 0:06:51.960 --> 0:06:55.640 keeps going up. That's does it work great? If you 0:06:55.720 --> 0:06:58.640 think that there's the possibility of downturns? 0:07:00.560 --> 0:07:03.080 Yeah, Mark, this is bringing me back to to your 0:07:03.120 --> 0:07:06.840 time and at the FHFA and bringing me right back 0:07:06.880 --> 0:07:09.360 to those sort of heavy days of the onset of 0:07:09.400 --> 0:07:12.200 the of the of the pandemic and your response to 0:07:12.200 --> 0:07:15.240 that crisis. And I guess, you know, I guess we 0:07:15.280 --> 0:07:17.520 can start with kind of the headline issue, which I 0:07:17.560 --> 0:07:19.880 know a lot of our clients will be sort of 0:07:19.920 --> 0:07:23.880 most interested in. And we went back and we found 0:07:23.880 --> 0:07:27.240 an interesting, interesting tweet from you in March, you know, 0:07:27.640 --> 0:07:29.520 said there are a number of issues that still need 0:07:29.560 --> 0:07:33.040 to be addressed at both the GSS and FHFA before 0:07:33.080 --> 0:07:35.560 a Conservative ship exit, but those can be done within 0:07:35.600 --> 0:07:39.800 two to three years and without Congress. So maybe just 0:07:39.920 --> 0:07:42.400 kind of give us a little background of where you 0:07:42.480 --> 0:07:45.560 left off when you left f HFA and and maybe 0:07:45.600 --> 0:07:48.480 what some of these issues are that could be in 0:07:48.520 --> 0:07:51.080 the first two to three years of you know, everyone 0:07:51.160 --> 0:07:54.440 is the situation is, if there's a Trump second administration, 0:07:55.760 --> 0:07:57.800 can they come out of the gate focused on this? 0:07:58.000 --> 0:08:02.640 Will they and what sort of policy steps might they take? 0:08:03.000 --> 0:08:05.200 Absolutely, let's try to untangle some of that. And let 0:08:05.240 --> 0:08:07.400 me preface with this. This was mentioned. I worked on 0:08:07.560 --> 0:08:11.640 the statute creating FHFA. I worked on the provisions for conservatorship, 0:08:11.680 --> 0:08:15.560 receivership these things, and it's certainly my very strong view 0:08:15.640 --> 0:08:18.600 that you know, the current administration has a legal obligation 0:08:18.720 --> 0:08:20.640 to fix them and get them out. I don't believe 0:08:20.680 --> 0:08:24.840 they will, but that is the legal obligation, you know, 0:08:24.920 --> 0:08:27.880 and it's I and I'm certainly the view that regulators 0:08:27.880 --> 0:08:29.880 should do what Congress has told them to do, whether 0:08:29.920 --> 0:08:34.240 they like it or not. But with that said, yes, 0:08:34.320 --> 0:08:38.280 absolutely the regulator FHVA has all the tools it needs 0:08:38.400 --> 0:08:41.679 and the mandate to fix them without Congress doing anything. 0:08:42.080 --> 0:08:44.280 Now we'll get into it. I'm sure at a second 0:08:44.559 --> 0:08:47.880 you know why some people want Congress to get involved now. 0:08:47.920 --> 0:08:50.520 First and foremost is a reminder. When I walked in 0:08:50.559 --> 0:08:53.680 the door at FHFA in April twenty nineteen, Fannie and 0:08:53.679 --> 0:08:58.000 Freddie were leveraged one thousand to one. That's fair to say. 0:08:58.200 --> 0:09:02.000 Nobody survives to long in that kind of situation. And 0:09:02.040 --> 0:09:04.040 in fact, one of the reasons I wrote the book, 0:09:04.760 --> 0:09:07.360 I wanted to impress upon people how close Fanning and 0:09:07.360 --> 0:09:11.240 Freddie were to family during COVID. You know, their losses 0:09:11.280 --> 0:09:14.400 from COVID, which you know we knowingly took to keep 0:09:14.480 --> 0:09:17.400 people in their homes, came very close to wiping out 0:09:17.480 --> 0:09:21.520 all of their capital and so getting them in a 0:09:21.559 --> 0:09:24.320 situation where they could be a support for the market. 0:09:24.360 --> 0:09:26.200 It's like when you're on the airplane and they tell 0:09:26.240 --> 0:09:29.240 you to put your oxygen mask on first. We really 0:09:29.280 --> 0:09:31.559 were trying to strengthen Faning Freddy so that Fana and 0:09:31.559 --> 0:09:35.679 Freddie could be, you know, a foundation for the rest 0:09:35.679 --> 0:09:38.199 of the market. So first and foremost you needed to 0:09:38.280 --> 0:09:41.600 raise capital, and a significant amount of capital has been raised. 0:09:42.400 --> 0:09:44.720 I think at the time in twenty nineteen twenty twenty, 0:09:44.800 --> 0:09:47.280 we expected that there'd have to be an external raise 0:09:47.360 --> 0:09:51.160 of some sort. Fortunately, we were able to reprice much 0:09:51.160 --> 0:09:53.600 of the book during COVID because of the refive boom, 0:09:53.800 --> 0:09:55.880 so Fan and Freddie are arguably in the best cash 0:09:55.880 --> 0:09:59.520 flow position they've ever been in. I would still say 0:09:59.720 --> 0:10:03.760 that to get them out, you know, by say twenty 0:10:03.840 --> 0:10:07.960 twenty seven, I think it's advantageous to do an external race. 0:10:08.440 --> 0:10:10.360 It will just have to be a lot smaller than 0:10:10.400 --> 0:10:13.559 we thought it would have to be. And you also 0:10:13.600 --> 0:10:15.720 want to try to get the government out of its position. 0:10:15.800 --> 0:10:18.439 So I'm of the view that you don't want to 0:10:18.480 --> 0:10:21.040 be a decade after they're out and have the Treasury 0:10:21.080 --> 0:10:25.360 still be the largest shareholder. So having an excess strategy 0:10:25.440 --> 0:10:29.040 for the government's investment is incredibly important, and we had 0:10:29.080 --> 0:10:31.800 worked on that. So again let me emphasize capital. As 0:10:31.800 --> 0:10:34.480 I mentioned, you know, we were looking at what would 0:10:34.520 --> 0:10:38.720 have been pre COVID the largest equity offerings ever. They're 0:10:38.760 --> 0:10:40.880 probably a bit smaller now. But let me kind of 0:10:40.880 --> 0:10:43.640 put it this way as a reminder, before two thousand 0:10:43.679 --> 0:10:46.520 and eight, Fienni and Freddie were not under the thirty 0:10:46.559 --> 0:10:50.120 four Security Exchange Act. They were not under starvanz Oxley 0:10:50.120 --> 0:10:52.640 where they were starting two thousand and eight. And I 0:10:52.679 --> 0:10:55.240 would simply say, from my own perspective, and I'm sure 0:10:55.280 --> 0:10:57.480 you could find people at the companies to disagree with this, 0:10:58.160 --> 0:10:59.960 I did not feel like when we were looking to 0:11:00.040 --> 0:11:02.679 go to market that they would have met my definition 0:11:02.760 --> 0:11:06.440 of Sarven's octually compliant for instance. So if you're going 0:11:06.520 --> 0:11:10.200 to go out and do large public offerings, you know, 0:11:10.240 --> 0:11:14.200 you need to meet the letter spirit of the securities laws. 0:11:15.200 --> 0:11:16.920 A lot of progress has been made on that now. 0:11:16.960 --> 0:11:19.880 The plus with that is it's really only a matter 0:11:19.920 --> 0:11:23.360 of hiring enough accountants and analysts and being focused on 0:11:23.400 --> 0:11:27.559 actually fixing the problem. And there were some cultural aspects. 0:11:27.760 --> 0:11:30.199 We had actually started a number of initiatives on corporate 0:11:30.200 --> 0:11:34.720 culture that to me, if we had not done that, 0:11:34.800 --> 0:11:37.720 these companies would have absolutely been, you know, some class 0:11:37.720 --> 0:11:41.000 action security suit waiting to happen. So there are things 0:11:41.000 --> 0:11:45.440 we needed to fix there is as importantly, you are 0:11:45.520 --> 0:11:48.760 probably both aware that there was established the uniform mortgage 0:11:48.760 --> 0:11:51.480 backed security, So there's a kind of co mingled security 0:11:51.480 --> 0:11:54.559 out there in the mortgage market. Well it may become 0:11:54.600 --> 0:11:56.640 as a surprise to many people, but Feed and Freddie 0:11:56.679 --> 0:11:59.840 are actually not exempt from the anti trust loss. So 0:12:00.000 --> 0:12:06.360 so we have a co mingled duopoly joint venture that 0:12:07.520 --> 0:12:11.200 is almost certain to fold. I mean, I guess I 0:12:11.240 --> 0:12:13.760 just put it this way. My understanding is the expectation 0:12:13.880 --> 0:12:16.400 of my predecessors had been that Congress was going to 0:12:16.480 --> 0:12:19.439 come in, you know, and essentially merge Fanny and Freddie 0:12:19.480 --> 0:12:22.280 and you'd have this single platform with one GSE. Well 0:12:22.320 --> 0:12:26.040 none of that happened. So you have a number of 0:12:26.080 --> 0:12:28.360 options in front of you. But one of the things 0:12:28.360 --> 0:12:31.600 that needs to be fixed is the single platform needs 0:12:31.679 --> 0:12:35.000 to be made legal. For lack of a better term, 0:12:35.600 --> 0:12:39.040 we were constructed in such a way that other market 0:12:39.080 --> 0:12:41.679 participants would be able to use it, but you know, 0:12:41.720 --> 0:12:45.080 you need to fix the UMBs. It's almost certainly not 0:12:45.679 --> 0:12:48.720 legal under our antitrust laws as is. You know, if 0:12:48.760 --> 0:12:52.439 there's a theme that you should take away both from 0:12:52.440 --> 0:12:56.280 my book and my experience at FAHFA, a tremendous amount 0:12:56.400 --> 0:12:59.120 of our mortgage finance system, which is a multi trillion 0:12:59.200 --> 0:13:02.440 dollar market, is held together by the legal equivalent of 0:13:02.440 --> 0:13:03.679 paper clips and bubblegum. 0:13:04.000 --> 0:13:06.520 It's so, do you think that there's any sort of 0:13:06.559 --> 0:13:12.079 an inherent kind of conflict between wanting to or being 0:13:12.200 --> 0:13:15.280 legally obligated to get the companies out of conservatorship and 0:13:15.440 --> 0:13:20.760 also raising capital requirements to the point where it seems 0:13:20.760 --> 0:13:23.280 like it could take many years for the companies to 0:13:23.320 --> 0:13:24.280 retain enough capital. 0:13:24.920 --> 0:13:28.920 Yeah, that was, obviously, you know, a tension, and of 0:13:28.960 --> 0:13:31.240 course the statute creates a number of tensions that one 0:13:31.320 --> 0:13:34.640 has to resolve. So first and foremost my view was 0:13:35.440 --> 0:13:38.240 a it did not make sense to put them out 0:13:38.240 --> 0:13:41.520 of conservatorships simply to see them come back in, you know. 0:13:42.200 --> 0:13:44.760 And again this goes back to my earlier point about 0:13:45.320 --> 0:13:48.400 you know, twenty nineteen, twenty twenty, we had been over 0:13:48.480 --> 0:13:51.480 a decade since the sort of last inflection point in 0:13:51.520 --> 0:13:55.640 the housing market. In where we looked at when we 0:13:55.640 --> 0:13:59.040 were doing the capital rule was it would take maybe 0:13:59.120 --> 0:14:01.120 a decade of every time earnings, which is why we 0:14:01.120 --> 0:14:04.280 felt you needed to do an external raise. I felt 0:14:04.400 --> 0:14:07.160 very strongly that the odds of us making it another 0:14:07.280 --> 0:14:09.960 decade without a downturn in the housing market were slim, 0:14:10.960 --> 0:14:13.440 and so, for instance, there was a capital rule that 0:14:13.480 --> 0:14:16.760 had been proposed before I got there by my predecessor, 0:14:17.400 --> 0:14:22.200 Director Watt. Under Watt's capital rule, had you hit another 0:14:22.240 --> 0:14:24.720 two thousand and eight scenario, the GSS would have failed. 0:14:25.040 --> 0:14:28.040 And of course, the entire purpose of HERA, the construction 0:14:28.120 --> 0:14:31.000 of FHFA was that Fading and Freddie should be able 0:14:31.000 --> 0:14:33.720 to survive a two thousand and eight scenario. Because it's 0:14:33.720 --> 0:14:36.680 also important to keep in mind that these entities are 0:14:37.120 --> 0:14:40.200 unique and interesting in the sense that while depositories are 0:14:40.200 --> 0:14:44.480 inherently pro cyclical, the gcs are supposed to be countercyclical. 0:14:45.200 --> 0:14:48.720 I Congress, in my opinion, and I think is very 0:14:48.720 --> 0:14:53.480 clear from the statute, created an obligation for capital rules 0:14:53.560 --> 0:14:56.040 to make sure that in a stressed environment they had 0:14:56.080 --> 0:14:59.600 positive going concern value. So a lot of the commentary 0:14:59.640 --> 0:15:02.600 around the capital rule was, you know, implied that you 0:15:02.600 --> 0:15:05.920 should set capital with the objective of hitting zero, which 0:15:06.080 --> 0:15:08.080 I thought was kind of nutty, to be frank about it, 0:15:08.800 --> 0:15:13.120 because if your entire purpose of being for these entities 0:15:13.560 --> 0:15:15.960 is to be a floor at a time of stress, 0:15:16.400 --> 0:15:19.320 then you buy necessity have to be strong at a 0:15:19.360 --> 0:15:22.960 time of stress and not hit zero. So again there 0:15:23.000 --> 0:15:25.680 was some criticism out there the rule being onerous. Again, 0:15:25.680 --> 0:15:28.560 in my opinion, the rule was too weak if anything, 0:15:30.120 --> 0:15:32.880 you know, the notion that you shouldn't want Fan and 0:15:32.960 --> 0:15:35.760 Freddy to be well capitalized so that they can support 0:15:35.800 --> 0:15:39.040 the market. Again, to me, a lot of the criticism 0:15:39.080 --> 0:15:42.240 really was just people who were focused on Roe and 0:15:42.440 --> 0:15:46.800 didn't necessarily appreciate that the entire reason these companies exist 0:15:47.400 --> 0:15:50.080 is to be a counter cyclical balance to the market. 0:15:50.480 --> 0:15:52.080 If it's not for that, then there's no reason to 0:15:52.120 --> 0:15:52.480 have them. 0:15:53.600 --> 0:15:57.960 Yeah, I suppose what you know, what what sort of 0:15:58.080 --> 0:16:01.280 investors say when they when they speak to us, is 0:16:01.320 --> 0:16:05.960 that you know, there need there There seems to need 0:16:06.000 --> 0:16:08.520 to be some sort of compromise, right maybe say there 0:16:08.560 --> 0:16:11.000 has been. 0:16:11.040 --> 0:16:14.000 I've been about four percent at most capital. I mean, 0:16:14.200 --> 0:16:18.080 you know, it's interesting. So you know, PIMCO submitted a 0:16:18.120 --> 0:16:20.720 comment letter during the They're in the capital rule where 0:16:21.440 --> 0:16:24.400 they claimed they never showed their math, but they claimed 0:16:24.400 --> 0:16:27.720 you would need twelve percent capital to create an equivalent 0:16:28.200 --> 0:16:32.640 of the of an explicit guarantee. Now, of course, Congress 0:16:32.720 --> 0:16:35.280 is not given an explicit guarantee for the g s S. 0:16:36.520 --> 0:16:38.720 Whatever guarantee may or may not be in the in 0:16:38.760 --> 0:16:42.640 the share agreements are quite limited. So to me, if 0:16:42.800 --> 0:16:47.880 we're trying to create an objective where you're having a 0:16:48.040 --> 0:16:51.200 foundation where these companies can survive a stress period, then 0:16:51.320 --> 0:16:54.440 you know, to me, four percent is on the low end. 0:16:55.200 --> 0:16:59.080 And and that's kind of my concern. Now people can argue, certainly, 0:16:59.800 --> 0:17:02.640 the perspective that Fanning and Freddie was that they felt, 0:17:02.720 --> 0:17:07.679 you know, entitled to a certain ROE. And again, I 0:17:07.760 --> 0:17:10.000 you know, whether they should be a twelve percent ROE 0:17:10.160 --> 0:17:13.199 or an eight percent I mean, they're functionally utilities for 0:17:13.280 --> 0:17:18.000 the financial market, so g and I should note while 0:17:18.080 --> 0:17:22.080 my predecessor in the current administration give the agencies give 0:17:22.119 --> 0:17:24.520 the companies RO targets, I did not. I didn't think 0:17:24.520 --> 0:17:26.040 it was my job to tell you what you RO 0:17:26.240 --> 0:17:29.240 should be. It was my job, first and foremost to 0:17:29.240 --> 0:17:32.000 make sure they fail. And my pushback with some of 0:17:32.040 --> 0:17:34.640 the argument, I mean, again, you know, we don't need 0:17:34.640 --> 0:17:37.760 to go full Medigliani Miller, but we should keep in 0:17:37.800 --> 0:17:41.520 mind that the higher amount of leverage at these companies 0:17:41.720 --> 0:17:44.480 should would raise funding costs because at the end of 0:17:44.520 --> 0:17:46.879 the day, the objective of here was to get rid 0:17:46.920 --> 0:17:49.960 of any expectation of a government guarantee. And if you 0:17:50.000 --> 0:17:54.200 want stability in the mortgage market, higher leverage means higher 0:17:54.200 --> 0:17:56.879 funding costs for homeowners, which again is the entire purpose 0:17:56.920 --> 0:17:59.280 to be here. So to some extent, you wanted to 0:17:59.280 --> 0:18:01.880 make sure there was efficient capital to keep the MBS 0:18:01.920 --> 0:18:05.880 market going. So to me, again, at risk return trade off, 0:18:06.240 --> 0:18:08.760 I mean, if if we had been if we had 0:18:08.760 --> 0:18:10.520 gone with say a two and a half, which what 0:18:10.720 --> 0:18:13.960 some people wanted, I mean, you're almost certain as a 0:18:13.960 --> 0:18:16.520 shareholder to get wiped out in the future because there's 0:18:16.520 --> 0:18:19.119 just simply no way those companies would survive over long 0:18:19.440 --> 0:18:22.440 periods of time with only two and a half percent equity. 0:18:23.720 --> 0:18:25.800 So all that said, you know, we went through the arguments, 0:18:25.840 --> 0:18:28.000 actually walk through the entire chapter of my book on 0:18:28.040 --> 0:18:29.960 capital if people want to know why we ended up 0:18:29.960 --> 0:18:33.000 where it was. But first and foremost, you know, and 0:18:33.680 --> 0:18:37.080 a certainly very strong theme of my book is I 0:18:37.160 --> 0:18:39.880 wasn't pursuing my own agenda. I was pursuing the agenda 0:18:39.880 --> 0:18:43.280 that Congress placed upon me. And an agenda that Congress 0:18:43.280 --> 0:18:46.960 placed upon me was that the risk based capital standards 0:18:46.960 --> 0:18:49.480 should make sure that the companies have a positive going 0:18:49.560 --> 0:18:54.280 concern value during a stressed environment. And that's what we did. 0:18:54.400 --> 0:18:56.080 And if people don't like that, they can take it 0:18:56.160 --> 0:18:57.240 up with Congress. 0:18:57.920 --> 0:18:59.120 You know, I don't, so I don't want to imply 0:18:59.200 --> 0:19:02.280 that people don't like it. People don't like it. But 0:19:03.600 --> 0:19:06.000 but so I think that when I say compromise that 0:19:06.040 --> 0:19:09.199 I don't mean necessarily in them in the absolute value 0:19:09.720 --> 0:19:13.440 of or level of the leverage component of the cop requirement. 0:19:13.920 --> 0:19:16.560 I think people are they sort of understand the need 0:19:16.640 --> 0:19:19.240 to get to that larger number. I think what they 0:19:19.480 --> 0:19:24.040 are trying to square is, as you know that I'm sure, 0:19:24.040 --> 0:19:27.399 as you're extremely well, where the company is disclose a 0:19:27.440 --> 0:19:30.959 short fall to their adjusted total copper requirement. So if 0:19:31.000 --> 0:19:32.959 you look at it just nominally, it appears to be 0:19:33.160 --> 0:19:36.879 several hundred billion dollars both enterprises. And then if you 0:19:36.920 --> 0:19:39.960 look at their earnings, which are you know, ten to 0:19:40.000 --> 0:19:42.159 twenty billion, just depending on how far out in the 0:19:42.160 --> 0:19:46.080 future you look, that just seems like a huge shortfall 0:19:46.320 --> 0:19:52.240 to overcome in any sort of reasonable time frame. And yet, 0:19:52.640 --> 0:19:55.840 you know, unless we sort of adjust the profitability side 0:19:55.880 --> 0:20:00.720 of the equation, change the ROE, which is obviously not. 0:20:01.160 --> 0:20:02.959 And and let me just take a step back here 0:20:03.000 --> 0:20:05.600 and say I enjoyed your book. I got to read 0:20:05.600 --> 0:20:08.679 most of it before this recording. I really liked how 0:20:08.720 --> 0:20:11.000 you said that housing finance is sort of the upside 0:20:11.040 --> 0:20:15.000 down world in Washington now. And a big problem for 0:20:15.040 --> 0:20:16.760 me is the clients call me up and say, you know, 0:20:17.840 --> 0:20:21.320 what are Democrats believe in? What are Republicans believe in now? 0:20:21.320 --> 0:20:25.600 In housing finance? And it's it's seems challenging to say, 0:20:25.640 --> 0:20:27.200 it seems to sort of shift over time. 0:20:28.880 --> 0:20:32.840 That's Wort's fair, that's I mean again, my perspective was 0:20:32.880 --> 0:20:35.160 always because you know, as I say in the book, 0:20:35.160 --> 0:20:38.800 and I've got a long history of writings, you know, 0:20:39.240 --> 0:20:42.720 my views on what I would do, and you know 0:20:42.840 --> 0:20:45.440 if I was you know Czar or Congress are very 0:20:45.440 --> 0:20:48.520 different from what does as a regulator. The second I 0:20:48.560 --> 0:20:52.800 took the oath, whatever views or preferences of my own 0:20:52.800 --> 0:20:54.919 went out the window. We did so. For instance, I'm 0:20:54.960 --> 0:20:57.840 not a fan as I have made explicit of the 0:20:57.880 --> 0:21:00.440 Housing Trust fun or the housing goals, but we did them. 0:21:00.640 --> 0:21:03.919 And I entered the agency with a commitment of we 0:21:04.000 --> 0:21:06.240 will do everything Congress has told us to do. That 0:21:06.359 --> 0:21:09.720 is our job. Our job is not to think whether 0:21:09.760 --> 0:21:13.200 we think it's good or bad policy. It's Congress's prerogative 0:21:13.200 --> 0:21:17.080 to pass stupid policy. It's not the prerogative of regulators 0:21:17.080 --> 0:21:19.280 to question whether the policy is stupid or not. The 0:21:19.320 --> 0:21:22.120 regulators just do it. That's the That's that's at least 0:21:22.119 --> 0:21:24.800 my perspective, and I wish that was the wider perspective 0:21:25.040 --> 0:21:27.760 because it would shift the broader debates back to where 0:21:27.760 --> 0:21:30.760 they should be, which is Congress, our elected representatives. 0:21:32.320 --> 0:21:36.200 Yeah, and that you know, it makes total sense. Well, 0:21:36.320 --> 0:21:39.400 we seem to be stuck in this situation where Congress 0:21:39.480 --> 0:21:42.080 either doesn't want to or can't do anything about this. 0:21:42.640 --> 0:21:44.760 I mean that if they seem to have done most 0:21:44.800 --> 0:21:49.359 of what they should and can do at least, you know, 0:21:49.400 --> 0:21:52.200 while you while you were there, and now the challenge 0:21:52.200 --> 0:21:54.239 seems to be mostly political, So I guess the I mean, 0:21:54.280 --> 0:21:57.919 the real question is, you know, what, what does a 0:21:57.960 --> 0:22:00.840 deal look like? Is treasure the obstacle? Will Treasury ever 0:22:01.920 --> 0:22:03.600 feel the need to sort of get off their hands 0:22:03.680 --> 0:22:06.120 and get to a final deal? 0:22:06.520 --> 0:22:09.240 It depends who. I mean. Manuchin and I were quite 0:22:09.240 --> 0:22:11.080 close to a deal, and I would go as far 0:22:11.160 --> 0:22:13.600 to say if it wasn't for the pandemic, the companies 0:22:13.600 --> 0:22:16.679 would be out today. And if it wasn't for you know, 0:22:16.840 --> 0:22:20.439 some small group of shareholders suing to remove me, the 0:22:20.520 --> 0:22:23.840 companies would be out today. There's a fair amount that 0:22:23.960 --> 0:22:28.760 FXVA can do younilaterally. Now that's a question of like leadership. 0:22:29.760 --> 0:22:32.720 I had connections obviously, as mentioned, I came from the 0:22:32.760 --> 0:22:35.439 Vice President's office. You know, I had connections to the 0:22:35.440 --> 0:22:38.480 president vice president you know any c I mean I 0:22:38.480 --> 0:22:42.359 had my own channels to the White House and wasn't 0:22:42.680 --> 0:22:45.479 dependent on Treasury to get stuff done. So, for instance, 0:22:45.520 --> 0:22:48.160 you know, some people have made a question of well, boy, 0:22:48.200 --> 0:22:50.560 how did you guys end this sweep when a wimb 0:22:51.119 --> 0:22:54.720 had it in the baseline. And it helps that when 0:22:54.760 --> 0:22:56.680 I first started on the Hill, we had a young 0:22:56.720 --> 0:23:00.280 man in our personal office named Russ Vote, who I've 0:23:00.320 --> 0:23:01.960 known for twenty years, who happened to be O and 0:23:02.000 --> 0:23:05.040 B director at that point. So I mean some of this, 0:23:05.160 --> 0:23:10.800 I guess I'm not knocking on current leadership. This administration 0:23:11.040 --> 0:23:14.760 chose leadership FORFHV did that did not have the political stature, 0:23:14.760 --> 0:23:17.840 in political connections to actually get anything done. That's a 0:23:17.920 --> 0:23:22.400 choice they made. They decided they you know, when when 0:23:22.480 --> 0:23:25.000 something when when the White House sends somebody from the 0:23:25.040 --> 0:23:27.359 White House over to an agency, that is a signal 0:23:27.400 --> 0:23:31.040 to that agency that these issues are important and we're 0:23:31.040 --> 0:23:33.240 going to put the political capital behind and get them done. 0:23:33.840 --> 0:23:36.800 When a White House elevates somebody who's a longtime career 0:23:36.840 --> 0:23:38.840 person at an agency, that is a signal that we 0:23:38.880 --> 0:23:41.320 don't care about this issue and that we will uh, 0:23:41.840 --> 0:23:44.760 we won't spend a minute thinking about it. And that's 0:23:44.960 --> 0:23:47.600 so that's the choice that was made. I find it 0:23:47.640 --> 0:23:50.720 frustrating because this administration has a legal obligation to do 0:23:50.760 --> 0:23:53.160 it and simply want not. But let's get to maybe 0:23:53.240 --> 0:23:57.159 the more why the political you know, so some of 0:23:57.160 --> 0:23:59.840 this is very much and again I want to emphasize 0:23:59.840 --> 0:24:03.320 that Mnuchin was was was there in terms of an exit. 0:24:04.680 --> 0:24:07.680 We did have to spend. I remember when I first 0:24:07.680 --> 0:24:10.680 came into FHFA and Minuchin was convinced we could get 0:24:10.680 --> 0:24:14.679 Congress to create a limited, you know, targeted guarantee. And 0:24:15.000 --> 0:24:17.399 I was like, Steven, never going to happen, but I 0:24:17.440 --> 0:24:19.080 will go and I'll do meetings with you on the 0:24:19.160 --> 0:24:21.479 Hill and we'll we'll talk it up. And we did that, 0:24:21.560 --> 0:24:23.399 and it took him eight months to figure out Congress 0:24:23.440 --> 0:24:26.760 was going to do anything. I always say this because 0:24:26.760 --> 0:24:28.840 you know, I went through GSE reform in the two 0:24:28.920 --> 0:24:31.159 thousands to get heros, So I think I have a 0:24:31.160 --> 0:24:33.080 fairly good sense of what Congress will. It will not 0:24:33.200 --> 0:24:36.040 too now for a very long time, certainly in the 0:24:36.040 --> 0:24:40.879 Obama administration, but this administration, there is this kind of 0:24:40.880 --> 0:24:45.359 game of chicken where asset managers who hold agency mbs 0:24:45.520 --> 0:24:50.119 believe that the conservatorship hardens the guarantee, and they believe 0:24:50.160 --> 0:24:52.800 that if there's an exit from the conservators ship that 0:24:52.840 --> 0:24:55.199 the odds of Congress coming in and giving them not 0:24:55.240 --> 0:24:57.960 only in explicit guarantee going forward, but also in their 0:24:57.960 --> 0:25:01.200 current holdings is far less likely. And they are correct. 0:25:01.680 --> 0:25:04.280 One sits out of conservatorship, Congress will no longer be 0:25:04.320 --> 0:25:06.919 interested in the topic. So you kind of have this 0:25:07.000 --> 0:25:09.440 game of chicken. Wear it again. Keep in mind the 0:25:09.480 --> 0:25:12.040 asset managers who are large holders of mbs are also 0:25:12.119 --> 0:25:15.080 large holders of treasuries. That is who Treasury hears from 0:25:15.119 --> 0:25:18.760 every day, and what Treasury is hearing is, oh my god, 0:25:18.880 --> 0:25:21.000 if you let them out of conservatorship or you don't 0:25:21.000 --> 0:25:23.760 give it us an explicit guarantee everybody will be living 0:25:23.760 --> 0:25:28.200 in caves again, obviously you have to. This is where 0:25:28.240 --> 0:25:30.600 if you start from the premise of it's not my job, 0:25:30.640 --> 0:25:33.320 the second guest Congress, it's my job to follow the law. 0:25:34.119 --> 0:25:36.480 We spend a tremendous amount of time in twenty nineteen 0:25:36.520 --> 0:25:40.640 on the Hill, and I regularly told members you will 0:25:40.640 --> 0:25:42.719 have more than sufficient time if you'd like to go 0:25:42.760 --> 0:25:44.760 a different direction to pass law and telling us to 0:25:44.760 --> 0:25:47.040 do that, and if you do that, we'll follow whatever 0:25:47.080 --> 0:25:51.440 you pass. I'll note for the record, both sides of 0:25:51.480 --> 0:25:52.959 the aisle, of both sides of the hill, not a 0:25:53.000 --> 0:25:56.800 single person told me to stop. They were all, you know. 0:25:56.840 --> 0:25:58.800 I mean, certainly they were like, yep, you know, we'll 0:25:58.800 --> 0:26:01.760 criticize you if it because, but in fact they were 0:26:01.840 --> 0:26:04.679 largely happy for me to fix their problem. So I 0:26:04.720 --> 0:26:08.000 do think that the fundamental problem right now is an 0:26:08.040 --> 0:26:10.760 absolute lack of leadership in the administration and a lack 0:26:10.800 --> 0:26:12.720 of willingness to actually make hard choices. 0:26:13.880 --> 0:26:16.280 I guess so we're mostly resigned to a change in 0:26:16.640 --> 0:26:19.159 administration for there to be any movement on this, I 0:26:19.160 --> 0:26:20.959 think correct. 0:26:21.000 --> 0:26:23.080 I mean, you know, I think a wild card would 0:26:23.080 --> 0:26:25.760 be I mean, you're certainly not going to see any 0:26:25.760 --> 0:26:28.879 movement under a Secretary Yellen. So if she leaves in 0:26:28.920 --> 0:26:31.320 a second Biden term and you see a change a 0:26:31.440 --> 0:26:34.440 Treasury maybe, but that's what it would take. 0:26:35.440 --> 0:26:37.360 And then maybe just as sort of to round out 0:26:37.359 --> 0:26:40.879 this topic, maybe you can explain. So. So one of 0:26:40.920 --> 0:26:43.080 the sort of signature achievements at the end of your 0:26:43.400 --> 0:26:47.239 time at fh Avay was to sort of put an 0:26:47.280 --> 0:26:50.159 end to the sweep and to allow the companies to 0:26:50.160 --> 0:26:52.880 start retaining capital. But on the other hand, there's sort 0:26:52.880 --> 0:26:56.520 of this accounting fiction where the senior preferred liquidation preference 0:26:56.560 --> 0:26:58.720 continues to grow, and everyone always asks me, how do 0:26:58.760 --> 0:27:01.040 I wrap my head around this? What does the federal 0:27:01.040 --> 0:27:04.840 government want in exchange for forgiving this? Can they Maybe 0:27:04.880 --> 0:27:06.439 you can talk us through that a little bit. 0:27:07.119 --> 0:27:09.560 So you know, it really was something we had to 0:27:09.640 --> 0:27:13.000 accept to make Treasury happy. So start from the premise 0:27:13.200 --> 0:27:15.400 that the view of the Treasury lawyers who are still 0:27:15.440 --> 0:27:18.359 there and this guide's any Treasury secretary, is that you 0:27:18.440 --> 0:27:20.919 can't give value away. And so the view of the 0:27:20.960 --> 0:27:24.800 Treasury lawyers was that they were entitled to the sweep 0:27:24.880 --> 0:27:27.639 because the sweep was in exchange for some sort of 0:27:27.680 --> 0:27:30.000 hardening of you know, the line of credit if you will, 0:27:30.000 --> 0:27:33.200 in the PSPA, and so for us to end the sweep, 0:27:33.640 --> 0:27:36.160 the Treasury lawyers said, we need to be held harmless, 0:27:36.160 --> 0:27:38.040 and the only way we could be held harmless is 0:27:38.080 --> 0:27:41.480 to have the liquidity preference. I didn't like it. I 0:27:41.480 --> 0:27:45.120 don't like it now. My expectation at the time, in 0:27:45.160 --> 0:27:47.800 my expectation going forward is they'll have to be a 0:27:47.840 --> 0:27:51.240 cram down of the liability side of the balance sheets 0:27:51.240 --> 0:27:54.440 of these companies, and that will include a cram down 0:27:54.520 --> 0:27:58.080 of the liquidity preference. I think people have to keep 0:27:58.080 --> 0:28:02.040 in mind that administratively, Treasury does not believe they can 0:28:02.080 --> 0:28:05.880 simply forgive. The treasury legal view is they haven't been 0:28:05.880 --> 0:28:08.800 all paid back, so you know, it's a nice interesting argument, 0:28:08.840 --> 0:28:11.600 but that's not what the lawyers say, and it's and 0:28:11.960 --> 0:28:15.080 you know, most Treasury secretaries are not lawyers, and they're 0:28:15.080 --> 0:28:16.639 not going to fight with the lawyers. I thought the 0:28:16.680 --> 0:28:19.000 treasure lawyers got a number of things wrong in my opinion, 0:28:19.440 --> 0:28:23.040 But that said, the liquidity preference will have to be 0:28:23.440 --> 0:28:27.240 either crammed down or converted in some way, and there 0:28:27.280 --> 0:28:30.160 are on the emphasize we spend a lot of money 0:28:30.200 --> 0:28:34.159 on options, And I'll simply say, while a particular choice 0:28:34.240 --> 0:28:37.600 was not made, the number of choices and directions you'd 0:28:37.640 --> 0:28:41.280 have to go we're well explored and are on the shelf. 0:28:42.000 --> 0:28:44.440 And I explained them all to the current Treasury team 0:28:44.440 --> 0:28:47.160 on way it went my way out the door. So 0:28:47.240 --> 0:28:49.280 one thing I would look for, you know, if there 0:28:49.320 --> 0:28:52.920 is a Trump return is you know, who goes to Treasury? 0:28:53.080 --> 0:28:55.600 Do you see people who have some who are either 0:28:55.640 --> 0:28:58.840 part of the conversation last time? You know, I think 0:28:58.880 --> 0:29:02.080 the real fear would be that you have to go 0:29:02.160 --> 0:29:05.760 through this relearning, you get new people who again want 0:29:05.800 --> 0:29:08.000 to go through the same cycle again. And obviously it 0:29:08.040 --> 0:29:10.080 would probably be six seven months before you get a 0:29:10.120 --> 0:29:13.760 new FHFA director in. You know, you have a new 0:29:13.760 --> 0:29:16.160 Treasury secretary in pretty soon. But who do they bring in? 0:29:16.200 --> 0:29:18.680 Is staffing? You know? This is why I you know, 0:29:18.720 --> 0:29:20.800 when people ask me, it's like, you know, even in 0:29:20.840 --> 0:29:23.520 a Trump term, it's not a twenty twenty five exit, 0:29:23.560 --> 0:29:26.120 it's more like a twenty six at best, twenty seven 0:29:26.240 --> 0:29:26.840 more likely. 0:29:27.920 --> 0:29:29.800 Do you feel like the twenty twenty eight warrants are 0:29:29.880 --> 0:29:31.600 any sort of meaningful deadline? 0:29:32.000 --> 0:29:32.160 No? 0:29:33.120 --> 0:29:36.080 And I get that question a lot The reason it's 0:29:36.200 --> 0:29:38.960 really not is because if you look at the total 0:29:39.080 --> 0:29:43.280 value PIE for Treasury, it's a rounding error. The value 0:29:43.360 --> 0:29:47.360 really is in the senior preferreds And so I don't 0:29:47.400 --> 0:29:51.000 think people I mean, it's nice, people will talk about it, 0:29:51.040 --> 0:29:53.640 you know, it'll be circled on the calendar, but in 0:29:53.720 --> 0:29:56.360 terms of you know, is Treasury giving up a lot 0:29:56.360 --> 0:29:59.360 of value by letting the warrants expire? No, they're not. 0:30:00.480 --> 0:30:02.600 Yeah, it'll be interesting to watch on the senior preferred 0:30:02.680 --> 0:30:05.520 trade ahead of the election. I think they've already traded 0:30:05.560 --> 0:30:08.720 up a bit, so that'll be interesting. That's helpful, helpful 0:30:08.720 --> 0:30:09.480 contour on theasure. 0:30:09.480 --> 0:30:12.840 Appreciate it absolutely, Yeah, super interesting, Mark, I want to 0:30:12.920 --> 0:30:15.360 shift topics just a little bit and talk a little 0:30:15.360 --> 0:30:18.480 bit more about FAHFA and its independence. You sort of 0:30:18.480 --> 0:30:23.320 alluded to it in terms of the shareholder litigation, but 0:30:23.840 --> 0:30:27.640 I want to kick it off by talking about another 0:30:27.760 --> 0:30:32.080 recent tweet of yours, also from March, and this was 0:30:32.120 --> 0:30:35.480 in connection with f HFA reviving a pilot program to 0:30:35.520 --> 0:30:39.400 waive title insurance on some mortgage refinance scenes and you 0:30:39.440 --> 0:30:44.280 tweeted quote, Congress wanted an independent FAHFA to prevent this 0:30:44.440 --> 0:30:47.200 very thing a white house playing election in your games 0:30:47.240 --> 0:30:50.280 with that wur housing market. Congress really needs to restore 0:30:50.440 --> 0:30:55.080 fahfa's independence. End quote. You know this this issue was 0:30:55.120 --> 0:30:59.160 obviously in terms of fahfa's independence, was obviously a critical 0:30:59.200 --> 0:31:01.880 issue in the Collins case that went up to the 0:31:01.920 --> 0:31:06.440 Supreme Court resulted in the ATHTF Ferry director becoming determinable 0:31:07.280 --> 0:31:10.680 at will by the president. But I'm curious, you know, 0:31:10.680 --> 0:31:13.960 what steps would you recommend that Congress takes to restore 0:31:14.240 --> 0:31:17.880 athletes as independence so to become a board something like that. 0:31:18.240 --> 0:31:21.560 Yeah, and I'll note isn't a side that even though 0:31:22.640 --> 0:31:27.520 Collins case struck the you know, four cause removal requirements, 0:31:27.720 --> 0:31:31.840 hera still says that the conservatorship you know, doesn't report 0:31:31.840 --> 0:31:36.200 to any other agency or entity. So yes, the president 0:31:36.240 --> 0:31:39.280 could could fire the FAHAY director, but by law, the 0:31:39.320 --> 0:31:42.680 president cannot direct the actions of the Conservatorship. And that's 0:31:42.680 --> 0:31:46.000 what really bothered, kind of disturbed me about the state 0:31:46.040 --> 0:31:48.680 of the Union commentary on Title and otherwise, because the 0:31:48.720 --> 0:31:52.560 only avenue there is no regulatory authority to do the 0:31:52.600 --> 0:31:54.840 title changes that I've protected. This is all being done 0:31:54.920 --> 0:31:57.920 via the conservatorship. And again the law still says that 0:31:57.960 --> 0:32:02.400 there's no authority for the president in terms of the conservatorship. 0:32:02.480 --> 0:32:07.360 So I just again concerned about the politicization of the agency. 0:32:07.800 --> 0:32:09.440 So you know, we have to take the Supreme Court 0:32:09.440 --> 0:32:11.400 where it is. You know, this is the oddity of 0:32:11.440 --> 0:32:14.360 you know, I wrote the language, and you know, we 0:32:14.440 --> 0:32:18.480 had we had boards in certain certain versions the committee 0:32:18.520 --> 0:32:21.200 draft here, and those were some options we were looking at. 0:32:21.760 --> 0:32:25.040 We fundamentally thought having a single director would allow us 0:32:25.080 --> 0:32:28.120 to recruit somebody of higher stature than a board. I 0:32:28.120 --> 0:32:31.440 mean that was really the trade off, and the oversight 0:32:31.520 --> 0:32:35.000 board at FHVA, which is Treasury hud SEC, was kind 0:32:35.000 --> 0:32:38.440 of a compromise of having you know, some external review. 0:32:39.760 --> 0:32:42.200 But at the end of the day, if what it 0:32:42.320 --> 0:32:45.040 takes to make this an independent agency is a board, 0:32:45.200 --> 0:32:47.440 then I think that that's something, you know, you could do, 0:32:47.560 --> 0:32:49.520 and you'd have to do it sort of like NCUA 0:32:49.600 --> 0:32:53.240 where the chair is appointed by the president. It could 0:32:53.280 --> 0:32:56.440 be you know, the chairmanship could be moved. I think 0:32:56.480 --> 0:32:59.000 that's one way to thread the needle. I mean, certainly 0:32:59.040 --> 0:33:01.560 a broader case is you know, I think there are 0:33:01.560 --> 0:33:04.560 two three votes on the Court for striking down any 0:33:04.600 --> 0:33:07.960 independent agency is probably even including the FED. So you 0:33:08.000 --> 0:33:10.880 know how the question is, you know, in retrospect what 0:33:11.000 --> 0:33:15.120 we wrote in past in two thousand and eight, we 0:33:15.200 --> 0:33:19.880 was well within constitutional norms at the time, you know, 0:33:20.000 --> 0:33:22.800 but how do you think about how constitutional norms change 0:33:22.800 --> 0:33:25.680 every time. But that said, I think a board would 0:33:25.680 --> 0:33:28.400 be an improvement. I wouldn't make it more than three 0:33:29.920 --> 0:33:32.200 you know people at this point. Uh, you know, I've 0:33:32.200 --> 0:33:35.640 always I've also talked about maybe you know, given that 0:33:36.360 --> 0:33:39.239 you've got at least two members of FDIC that are 0:33:39.280 --> 0:33:43.120 removable at will by the President O c C F CFPB, 0:33:44.920 --> 0:33:47.080 you know, I think it's time for Congress to perhaps 0:33:47.200 --> 0:33:52.160 rethink our financial regulatory structure. And I would probably take FDIC, 0:33:52.400 --> 0:33:56.960 OCC FHFA and roll them all into one and have 0:33:57.120 --> 0:34:00.800 a three person board oversee that. And I think that 0:34:00.920 --> 0:34:04.480 would probably pass constitutional muster and would give a lot 0:34:04.720 --> 0:34:08.040 better alignment of interest within the regulatory structure. 0:34:09.920 --> 0:34:11.400 Do you think Congress would never do anything that? 0:34:11.560 --> 0:34:14.400 Well, probably not. I mean it's I mean that the 0:34:14.520 --> 0:34:17.160 fact that Congress has shown no interest in dealing with 0:34:17.280 --> 0:34:20.839 any of the issues. I mean, it's been interesting, you know, because, 0:34:20.840 --> 0:34:24.479 as you perhaps recall, I mean, the original Elizabeth Warren 0:34:24.600 --> 0:34:27.400 planned for CFPB was a board and now that's you know, 0:34:27.880 --> 0:34:31.680 off limits. That's a radical right wing view. Apparently despite 0:34:31.719 --> 0:34:36.279 that was the Kennedy, Durbin, Warren drafted bill. So you know, 0:34:36.440 --> 0:34:42.120 these parameters have obviously changed a lot over time, you know, perhaps, 0:34:42.600 --> 0:34:44.000 I mean, I think there is an odd let me 0:34:44.040 --> 0:34:46.160 put it this way. I think if Trump gets re 0:34:46.239 --> 0:34:50.000 elected Republicans, it's hard to imagine a situation where Trump 0:34:50.040 --> 0:34:55.000 gets re elected and Republicans don't pick up the Senate houses. 0:34:55.520 --> 0:34:58.040 A bit of a wild card, but you could see 0:34:58.080 --> 0:35:00.239 an alignment and you could see in attempt to do 0:35:00.360 --> 0:35:03.960 in financial reform. But I do think Republicans have largely 0:35:04.080 --> 0:35:07.560 moved on to no more independent agencies. So it's just 0:35:07.640 --> 0:35:11.359 hard to see a world where the Democrats don't want 0:35:11.400 --> 0:35:15.399 boards and the Republicans don't want independent agencies. So where 0:35:15.880 --> 0:35:19.600 is the where's the overlap? Anymore? So I think we're 0:35:19.600 --> 0:35:24.359 stuck with a bit of lumbo, you know, forever, for indefinitely, 0:35:24.600 --> 0:35:28.320 until you know there's a change, perhaps you know, in 0:35:28.400 --> 0:35:29.799 the Overton window, if you will. 0:35:31.120 --> 0:35:33.880 So Mark speaking about it gaps sort of in some 0:35:34.040 --> 0:35:38.040 of our regulatory oversight regular chapter on non bank servicing. 0:35:39.080 --> 0:35:44.239 First off, the math around forbearance very interesting in retrospect, 0:35:44.880 --> 0:35:47.759 do you think that non bank services are still a gap? 0:35:48.320 --> 0:35:51.720 And maybe also talk a little bit about whether SAPHI 0:35:51.840 --> 0:35:54.959 designation is or something like it is an appropriate tool. 0:35:55.719 --> 0:35:59.239 So I think they are still a gap. I don't 0:35:59.320 --> 0:36:02.279 think saphies and partly because I can't think of any 0:36:02.360 --> 0:36:05.680 one servicer that's so large and so systemic that they 0:36:05.719 --> 0:36:08.360 would be designated, you know. And obviously there was an 0:36:08.480 --> 0:36:11.279 f SoC report recently on non bank I find it 0:36:11.400 --> 0:36:14.840 really ironic in some ways because this administration made a 0:36:14.920 --> 0:36:19.200 big lot of noise about rejecting Manuchins activities based and 0:36:19.320 --> 0:36:21.719 wanting to move to an entity based, but their entire 0:36:21.760 --> 0:36:24.520 review on non bank services is a activities based so 0:36:24.680 --> 0:36:27.719 they sort of, you know, they're embracing what Mnuchin did 0:36:27.800 --> 0:36:30.719 without calling it that in a way. And of course 0:36:30.880 --> 0:36:33.880 their approach has been to ask Congress for a liquidity facility, 0:36:33.920 --> 0:36:35.880 which I think is the absolute long approach and the 0:36:35.920 --> 0:36:38.960 reason why I think it's rong approach. You're obviously creating 0:36:39.520 --> 0:36:43.719 expectations to guarantees and in fact, to me, the very 0:36:44.040 --> 0:36:47.080 the very action of f SoC calling for Congress to 0:36:47.120 --> 0:36:50.280 create a liquidity facility reduces market discipline, which is completely 0:36:50.360 --> 0:36:53.440 counter to the statutory obligations for f SoC. So to me, 0:36:53.520 --> 0:36:56.560 they've completely dropped the ball on their very job. The 0:36:56.680 --> 0:36:58.239 job at what f S BOCH is supposed to do 0:36:58.440 --> 0:37:01.759 is identify risks until delators to deal with them. If 0:37:01.800 --> 0:37:04.960 the core concerns about non bank servicers is what is 0:37:05.000 --> 0:37:09.360 the knockoff effect on the positories that provide warehouse funding 0:37:09.400 --> 0:37:12.799 to non banks or Vanny Freddie or Ginny May, then 0:37:12.840 --> 0:37:15.680 how then you should really be directing those entities, whether 0:37:15.719 --> 0:37:20.000 it's occ FED, FHFA HUD, to take actions to increase 0:37:20.160 --> 0:37:24.080 counterparty management of those non banks. So, on one hand, 0:37:24.200 --> 0:37:26.600 I agree with a number of the risks that the 0:37:26.719 --> 0:37:30.759 report and FSOC have identified. I just very much disagree 0:37:30.880 --> 0:37:34.400 with they've thrown their hands up at at dealing having anybody, 0:37:34.440 --> 0:37:36.879 as an FSOC member, actually deal with it. I can't 0:37:36.920 --> 0:37:38.759 remember whether I say this is my book, but I've 0:37:38.800 --> 0:37:42.040 certainly said on many occasions f SoC is really good 0:37:42.120 --> 0:37:44.719 at identifying problems that none of its members can do 0:37:44.800 --> 0:37:49.759 anything about. So it's as a former f SOCC member, 0:37:49.880 --> 0:37:52.600 it's a it's a frustrating process. But again I would 0:37:52.680 --> 0:37:56.359 use a reminder. In September twenty twenty, f SoC did 0:37:56.400 --> 0:37:59.279 a similar review of the secondary mortgage market and it 0:37:59.480 --> 0:38:03.120 directed FHFA to take a number of actions to strengthen it. 0:38:03.480 --> 0:38:06.480 That's actually how Congress intended have sought to work. So 0:38:06.719 --> 0:38:09.560 I'm very frustrated with the FSOC report on non banks. 0:38:09.600 --> 0:38:13.320 It's complete punning of their responsibility to Congress and with 0:38:13.719 --> 0:38:16.680 authorities that they have to fix, and fundamentally they don't 0:38:16.680 --> 0:38:20.960 really get it the underlying problem of why have depositories 0:38:21.120 --> 0:38:24.480 left mortgage servicing in a big way. You know, it's 0:38:24.480 --> 0:38:27.120 a sort of like, well, rather than try to fix 0:38:27.160 --> 0:38:30.840 the regulatory structure so that depositories who are more stable 0:38:30.960 --> 0:38:34.239 and are actually providing the warehouse funding to non bank services, 0:38:34.600 --> 0:38:37.640 rather than get them back into servicing, let's just ultimately 0:38:37.760 --> 0:38:41.680 regulate service non bank services like banks, rather than dealing 0:38:41.760 --> 0:38:44.799 with the first problem. So again, I think again, I'm 0:38:44.840 --> 0:38:48.120 sympathetic to the problems identified, and the report is a 0:38:48.200 --> 0:38:50.839 worthwhile overview. I'm not sure it came up with anything new, 0:38:51.440 --> 0:38:53.520 but I'm very frustrated with its approach. 0:38:54.520 --> 0:38:57.680 Yeah, so that actually brings us to another question. Your 0:38:58.000 --> 0:39:01.360 Twitter feed is rich with potential count. 0:39:01.200 --> 0:39:04.600 And I'm sure that. My next confirmation here in if. 0:39:08.200 --> 0:39:10.520 Yeah, you said the buzzle end game is a mess 0:39:10.680 --> 0:39:13.320 and should be reproposed. I know you don't like the 0:39:13.400 --> 0:39:16.839 term gold plating, and yet it does seem as though 0:39:16.920 --> 0:39:20.920 regulators increasingly try to make mortgage servicing less attractive for 0:39:20.960 --> 0:39:24.200 depositories and push it towards banks. Give me thoughts on 0:39:24.480 --> 0:39:27.480 maybe what they should do to sort of finalize the 0:39:27.560 --> 0:39:28.000 endgame here. 0:39:28.400 --> 0:39:31.440 Yeah, I mean, you know, I would repropose it. I 0:39:31.560 --> 0:39:34.799 know that that's not what bar and others others want 0:39:34.840 --> 0:39:37.200 to do. Let me say, you know, I come from 0:39:37.239 --> 0:39:40.279 the perspective that I think I think both the regulators 0:39:40.400 --> 0:39:44.840 and the banks are wrong, but in different ways obviously. 0:39:45.600 --> 0:39:50.080 So let's start out with I think our banking system 0:39:50.360 --> 0:39:53.520 is still under capitalized in my view, and I think 0:39:53.640 --> 0:39:58.600 the actual cost in terms of lending from increases in 0:39:58.719 --> 0:40:02.000 capital are not as large anywhere is near the bank's claim. 0:40:02.080 --> 0:40:04.960 And we went through and did fairly extensive lit reviews, 0:40:05.000 --> 0:40:07.160 and we were doing Fanning Freddie and there's a lot 0:40:07.239 --> 0:40:10.200 of empirical work on this, and so to me, I 0:40:10.320 --> 0:40:14.160 think the kind of sky is fallowing arguments from the 0:40:14.239 --> 0:40:17.680 banks is a bit exaggerated. That said, I don't think 0:40:17.719 --> 0:40:20.160 that Basil endgaming. Again, there are elements of it I'm 0:40:20.200 --> 0:40:24.320 not unsympathetic about, such as operational risk, But to me, 0:40:24.640 --> 0:40:28.319 I think the whole risk weighting regime I mean to mean, 0:40:28.360 --> 0:40:31.160 you're not addressing why Silicon Valley Bank failed, And in fact, 0:40:31.239 --> 0:40:33.720 one of the reasons Silicon Valley Bank failed was because 0:40:33.840 --> 0:40:37.759 Basil itself encourages banks to load up on treasuries and agencies, 0:40:38.440 --> 0:40:40.279 and you're not really kind of getting away from that 0:40:40.480 --> 0:40:43.800 in a way that I think is dealing with fundamental 0:40:43.880 --> 0:40:46.880 problems in the system. So you know, if I had 0:40:46.880 --> 0:40:49.160 a blank piece of paper and it didn't matter where 0:40:49.239 --> 0:40:52.320 we are starting from, I would rip up Basle altogether 0:40:52.480 --> 0:40:56.240 and go to things much much simpler. And I'm also 0:40:56.320 --> 0:40:59.360 a fan of having fairly robust leverage ratios, and I 0:40:59.480 --> 0:41:02.640 recognize is that that has its own distortions. I mean, 0:41:02.680 --> 0:41:05.080 if you start with you know, there's no good way 0:41:05.200 --> 0:41:08.239 to do this, you know, there's only trade offs. I 0:41:08.280 --> 0:41:10.520 would have a simpler regime, and I would have a 0:41:10.640 --> 0:41:14.000 regime that was a lot less favorable to holding agencies 0:41:14.080 --> 0:41:18.080 and treasuries, and it would be a lot less complicated 0:41:18.120 --> 0:41:20.919 than what we have today. But I just don't see 0:41:20.960 --> 0:41:23.520 it going that direction. I think the bang for the 0:41:23.640 --> 0:41:27.360 buck with Boslin game just isn't worth it. So to me, 0:41:28.480 --> 0:41:30.880 you know, reproposed try to get a consensus. I mean 0:41:30.960 --> 0:41:33.480 my worry, of course, is that you know, endgame that 0:41:33.600 --> 0:41:36.840 nobody wants to come back. I really would love to 0:41:36.960 --> 0:41:44.200 see somebody. I think our bank capital system, capital regulatory 0:41:44.239 --> 0:41:47.000 system is deeply flawed and somebody needs to come up 0:41:47.040 --> 0:41:48.640 and fix it. But I don't see that happening. 0:41:49.480 --> 0:41:52.000 I want I want to shift topics. I go back 0:41:52.040 --> 0:41:56.280 to the Collins case from before. Unless you had anything 0:41:56.280 --> 0:41:59.399 more to say, that absolutely okay, you know I thought 0:41:59.440 --> 0:42:02.000 there the chapter in your book on the Collins case 0:42:02.120 --> 0:42:05.880 was super interesting. I was particularly heartened to see that, 0:42:06.560 --> 0:42:08.960 you know, even the FAHFA director, just like the rest 0:42:09.000 --> 0:42:11.960 of us, has to, you know, continually refresh the Supame 0:42:12.040 --> 0:42:16.040 Court's website to see if the decision came out. Those 0:42:16.080 --> 0:42:18.880 were fun times. But you know what struck me in 0:42:19.040 --> 0:42:22.200 that chapter was it seems like your view was and 0:42:22.400 --> 0:42:24.040 you know, you were one of the drafters of hair 0:42:24.120 --> 0:42:26.680 of so you were no better than anybody, but your 0:42:26.800 --> 0:42:29.800 view was that the FAHFA exceeded its authority when it 0:42:29.920 --> 0:42:33.759 implemented this sweep in twenty twelve. But that's not really 0:42:33.840 --> 0:42:36.839 what the government's position was in the litigation, of course, 0:42:36.880 --> 0:42:39.560 and the Supreme Court wound up agreeing with the government's position. 0:42:39.640 --> 0:42:42.759 So I'm sort of curious how you reconcile, you know, 0:42:42.880 --> 0:42:45.360 those different views between your own personal view and what 0:42:45.440 --> 0:42:46.240 the government argued. 0:42:47.000 --> 0:42:49.440 So let me first, you know, reiterate that my own 0:42:49.520 --> 0:42:53.160 personal view is that it was an overreach. She was 0:42:53.200 --> 0:42:56.200 inconsistent with what you should be doing as a conservator, 0:42:56.920 --> 0:42:59.000 and I think the government was wrong. But so let's 0:42:59.080 --> 0:43:02.920 dig into the what does it mean by the government now. 0:43:03.280 --> 0:43:05.640 You know, I kind of found this particularly frustrating. Now, 0:43:05.800 --> 0:43:10.040 you would normally think that when an agency is sued 0:43:10.520 --> 0:43:13.759 and DJ represents the agency, that DJ is kind of 0:43:13.800 --> 0:43:16.680 the lawyer and the agency is the client, and the 0:43:16.800 --> 0:43:19.200 client should be able to drive. Like here's where I 0:43:19.280 --> 0:43:21.880 think it was right or wrong. That's not actually how 0:43:21.960 --> 0:43:25.520 it works. I mean, DJ makes its own decisions on 0:43:25.600 --> 0:43:28.120 what he thinks the law is. So, to be frank 0:43:28.120 --> 0:43:31.200 about it, I think DJ got it wrong. One of 0:43:31.360 --> 0:43:34.799 my frustrations, and you know, maybe I would have done 0:43:34.840 --> 0:43:38.920 this differently in retrospect, you know, we had asked, for instance, 0:43:38.960 --> 0:43:42.719 the Solicitor General to give FHFA like ten minutes during 0:43:42.760 --> 0:43:45.840 the Comins case, and they wouldn't, and you know, we 0:43:45.920 --> 0:43:48.759 couldn't get time in front of the court, you know. 0:43:49.040 --> 0:43:52.520 So I again, I think the DOJ positions, certainly on 0:43:52.960 --> 0:43:55.720 the structure were wrong, and I think the DOJ position 0:43:56.040 --> 0:43:59.760 on the striep was wrong. And again, you know, DJ 0:44:00.280 --> 0:44:02.880 Solictener Generali quickly tell you, oh, we're the government. So 0:44:03.560 --> 0:44:06.080 it's just a very frustrating that, you know, you're the 0:44:06.160 --> 0:44:09.600 client and the lawyer is making arguments that are contrary 0:44:09.640 --> 0:44:10.960 to what you think the law is. 0:44:11.120 --> 0:44:14.239 So sorry to cut you off. What argument do you 0:44:14.239 --> 0:44:15.759 think of f HFA should have made that would have 0:44:15.760 --> 0:44:19.279 been different than DOJSON on that issue on whether the 0:44:19.320 --> 0:44:21.440 sweep exceeded the statutory authority, I. 0:44:21.480 --> 0:44:23.560 Think we should have acceded to it. I again, we 0:44:23.719 --> 0:44:26.680 were not defending it directly at FHFA when I was there. 0:44:26.760 --> 0:44:28.759 We ended this week, which I believe was the most 0:44:28.800 --> 0:44:31.200 important thing we could do and was somewhat an admission 0:44:31.239 --> 0:44:32.319 of that we did see it is. 0:44:32.400 --> 0:44:34.200 Wrong, you know. 0:44:35.040 --> 0:44:36.759 Granted, you know you could get in the question, like 0:44:37.239 --> 0:44:39.120 you know, if you say the sweep was wrong. Well, 0:44:39.160 --> 0:44:41.160 what does it, you know, open you up to damage? 0:44:41.239 --> 0:44:41.279 Is? 0:44:41.960 --> 0:44:44.439 You know. The frustrating thing is and this is true 0:44:44.560 --> 0:44:48.319 under almost any administration. The DOJ perspective is to try 0:44:48.360 --> 0:44:50.719 to defend the ability of the executive branch to do 0:44:50.800 --> 0:44:55.080 as much as possible. I mean to only slight exaggeration. 0:44:55.200 --> 0:44:57.680 The view of the Solicitor General is that the executive 0:44:57.680 --> 0:45:00.400 brands could do whatever it wants. And if you have 0:45:00.520 --> 0:45:03.280 any sort of you know, I fundamentally think of myself 0:45:03.320 --> 0:45:07.480 as an Article one constitutionalist. You know, we no amount 0:45:07.520 --> 0:45:09.480 of my time in the White House of the executive 0:45:09.520 --> 0:45:13.520 branch has reduced my respect and appreciation that Congress put 0:45:14.280 --> 0:45:17.400 Congress is first in the Constitution, and these legislative decisions 0:45:17.400 --> 0:45:20.920 are Congresses. Sadly, that is not the general perspective at DJ, 0:45:22.239 --> 0:45:25.719 and so our ability to argue a different side of 0:45:25.800 --> 0:45:29.120 this was handcuffed by DJ. And I just found that 0:45:29.200 --> 0:45:32.040 extremely frustrating, and that we were the agency, we were 0:45:32.040 --> 0:45:34.719 the nity most directly impacted, and yet we're not able 0:45:34.760 --> 0:45:37.759 to present our side of the case that said, you know, 0:45:37.880 --> 0:45:40.440 what would the DAMAGEES have been if we had you know, 0:45:40.560 --> 0:45:44.040 to me, we undid the sweep. So the harm, you know, 0:45:44.440 --> 0:45:49.040 essentially kind of was undone going forward. We had no money, 0:45:49.080 --> 0:45:52.759 of course, because we barely had solvent companies. You know. 0:45:52.880 --> 0:45:55.600 I think DOJ and Treasurer of course concerned that if we, 0:45:55.920 --> 0:46:00.360 you know, kind of admitted that the sweep was not legal, 0:46:00.480 --> 0:46:02.840 that they would be opened up to a bunch of damages. 0:46:02.880 --> 0:46:05.200 And again I want to reiterate the DOJ view is 0:46:05.320 --> 0:46:08.360 government can do whatever it wants pretty much. So, I mean, 0:46:08.400 --> 0:46:12.480 I'm exaggerating only only modestly when you deal with government 0:46:12.560 --> 0:46:16.960 lawyerslu general and just defend so and obviously I thought 0:46:17.000 --> 0:46:19.839 the structure part that they got the Collins case wrong 0:46:19.920 --> 0:46:21.560 in my view, and as I note in the chapter, 0:46:21.640 --> 0:46:24.719 I mean, the whole issue was around DeMarco, who was 0:46:24.840 --> 0:46:27.880 acting at the time, and it's generally accepted that acting 0:46:28.000 --> 0:46:31.239 directors are removable will. The court never had to even 0:46:31.280 --> 0:46:34.200 reach into the question of the permanent structure. So to me, 0:46:35.719 --> 0:46:39.280 I thought Collins was just a horrible example judicial activism. 0:46:40.880 --> 0:46:44.440 I want to shift topics yet again, ask you about 0:46:44.880 --> 0:46:48.160 another tweet of your's. This is a preview of your 0:46:48.200 --> 0:46:51.640 next right Senate confirmation hearing, which actually maybe it's another question. 0:46:51.800 --> 0:46:53.320 Would you ever return to government service. 0:46:53.400 --> 0:46:56.160 Before I go to the question, I believe in public service, 0:46:56.200 --> 0:46:58.640 and if asked to serve again in a capacity where 0:46:58.640 --> 0:47:01.120 I could make a difference, I certainly would be hesitant 0:47:01.200 --> 0:47:01.720 to say. 0:47:01.600 --> 0:47:05.800 No any particular position. You would really want. 0:47:05.640 --> 0:47:08.200 To think I would make a great ambassador to the Bahamas. 0:47:10.960 --> 0:47:13.360 Well, we'll make sure to record our next podcast episode. 0:47:15.960 --> 0:47:18.080 But so the tweet I want to ask you about 0:47:18.239 --> 0:47:21.440 comes from May and it was in the wake of, 0:47:21.640 --> 0:47:24.799 you know, the scathing reports coming out of the coming 0:47:24.800 --> 0:47:28.800 out of the FDIC about work conditions there, and you tweeted, quote, 0:47:29.120 --> 0:47:31.239 the fd I CE is far from being the only 0:47:31.320 --> 0:47:35.200 financial regulator with a troubled work environment. I'd encourage Congress 0:47:35.320 --> 0:47:39.080 to examine others as well. End quote, can you tell 0:47:39.160 --> 0:47:40.759 us you know what what you were getting out there? 0:47:41.040 --> 0:47:43.480 Rather than name names, I'll simply say all of the 0:47:43.600 --> 0:47:47.200 regulators have public reporter what are called feb's Federal Employee 0:47:47.280 --> 0:47:49.960 Viewpoint Survey that's done every year, and you can see 0:47:50.000 --> 0:47:54.800 these declines and reflections at FDIC. And I would encourage 0:47:55.040 --> 0:47:57.640 Congress and other journalists and others to look at the 0:47:57.640 --> 0:47:59.800 fab scores of different agencies and look at trends. And 0:48:00.200 --> 0:48:02.800 I will simply say where there is smoke, there is 0:48:02.960 --> 0:48:04.000 almost certainly fire. 0:48:06.239 --> 0:48:12.319 All right, very very diplomatic. Yeah, you're already I went 0:48:12.360 --> 0:48:14.759 for an ambassador position by being diplomatic. 0:48:16.400 --> 0:48:17.880 An ambassador to for answer or anything. 0:48:19.600 --> 0:48:22.080 Well, mulvaney got an ambassadorship, right at some point. 0:48:22.280 --> 0:48:25.440 It's a special envoy iron something like that. 0:48:27.080 --> 0:48:29.200 All right. I think that's gonna do it. For the 0:48:29.360 --> 0:48:34.279 substance of questions, So we'd like to end every episode 0:48:34.480 --> 0:48:37.840 with sort of a grab bag set of questions related 0:48:37.880 --> 0:48:41.880 to music. And usually we ask our guests, you know, 0:48:42.000 --> 0:48:43.839 for three pieces of music they would want to take 0:48:43.880 --> 0:48:46.800 with them on a desert island. But we want to 0:48:46.800 --> 0:48:48.719 do something a little different with you, and we want 0:48:48.719 --> 0:48:50.719 to tailor it a little more specifically to the Dead 0:48:50.760 --> 0:48:52.719 and Fish and maybe other jam band since I know 0:48:52.760 --> 0:48:56.400 you're a big fan, and you know, actually I enjoyed 0:48:56.520 --> 0:48:59.960 reading in your book that you during part of the COVID. 0:49:00.320 --> 0:49:02.840 One of the COVID chapters, you talked about how you 0:49:02.920 --> 0:49:06.200 start each day by picking a dead show from that 0:49:06.400 --> 0:49:08.799 day on the read Listen app, which I do as well. 0:49:08.880 --> 0:49:14.120 It's a great app. Listened to June seventh, nineteen ninety one. 0:49:14.160 --> 0:49:16.600 This morning on my way into work, which was a 0:49:16.680 --> 0:49:21.520 great show Deer Creek. There's also straight there were you there? 0:49:21.840 --> 0:49:23.839 Yeah, yeah, I did Dear Creak ninety one. 0:49:24.160 --> 0:49:27.719 That's awesome, and I picked it because I love standing on. 0:49:27.719 --> 0:49:30.759 The Moon and great that was a great version of 0:49:30.880 --> 0:49:31.319 it as well. 0:49:31.480 --> 0:49:33.400 Yeah it was. I was gonna say, my my favorite 0:49:33.480 --> 0:49:36.239 is the Auttin Stadium ninety three eight twenty one, ninety three, 0:49:36.600 --> 0:49:42.320 but this was also really good. There's also great you know, 0:49:42.400 --> 0:49:46.480 the nineteen seventy seven June seven shows. You know up 0:49:46.520 --> 0:49:48.719 there it's a Winterland show and just you sort of 0:49:48.760 --> 0:49:50.560 see it as one of the top ranked shows of 0:49:50.640 --> 0:49:55.960 all time. But so a few questions for you, you know, 0:49:56.080 --> 0:49:58.359 related to the Dead and fish curious how you even 0:49:58.400 --> 0:49:58.920 got into them. 0:50:00.760 --> 0:50:03.640 You know, it was as much kind of a social circle, 0:50:03.800 --> 0:50:06.520 I think. You know, my first Dead show was actually 0:50:06.600 --> 0:50:09.600 going to see them at RFK in eighty six when 0:50:09.680 --> 0:50:12.400 it was Bob Dylan and Tom Petty and the Heartbreakers 0:50:12.440 --> 0:50:15.399 were actually doing that backup for Bob Dylan that tour, 0:50:15.640 --> 0:50:18.279 So you know, I was a big Bob Dylan fan. 0:50:18.600 --> 0:50:22.200 Has given away the title of the book, and you know, 0:50:22.320 --> 0:50:23.960 and I had kind of heard the dad I knew 0:50:24.000 --> 0:50:26.600 a few songs, but I mostly got pulled into going 0:50:26.680 --> 0:50:29.239 in eighty six because of Dylan and Tom Petty and 0:50:29.320 --> 0:50:31.480 then you know, the Dead played got to see him. 0:50:31.480 --> 0:50:34.160 I was like, Wow, this is really something I would say. 0:50:34.200 --> 0:50:36.560 I don't think it was until you know, I went 0:50:36.600 --> 0:50:38.560 and saw them in Ronot eighty seven that it was 0:50:38.640 --> 0:50:41.280 really one of those like now I get it shows. 0:50:41.680 --> 0:50:43.480 You know, that was probably the you know, there's no 0:50:43.600 --> 0:50:47.960 turning back after this kind of experience if you will, 0:50:48.800 --> 0:50:51.960 and so. But it was also for some probably very 0:50:52.080 --> 0:50:54.800 random reason. Where I went to high school and friends, 0:50:54.880 --> 0:50:56.440 there were just a lot of people who listened to 0:50:56.480 --> 0:50:59.040 the Dead tapes circulated, So, like a lot of things, 0:50:59.080 --> 0:51:01.440 you get exposed to it by your friends. 0:51:01.920 --> 0:51:03.799 Yep, yep. Where did you go to high school. 0:51:04.200 --> 0:51:07.120 In Virginia out in Falkyar if that came in our 0:51:07.680 --> 0:51:09.239 path southwestern. 0:51:10.160 --> 0:51:12.560 Area closer to d C. I was in Fairfax County. 0:51:12.920 --> 0:51:14.560 Oh yeah, I didn't you know exactly where? 0:51:15.400 --> 0:51:17.600 Yeah. But to my regret, no one took me to 0:51:17.680 --> 0:51:19.040 any Dead shows when I was in high school. I 0:51:19.040 --> 0:51:21.480 didn't get introduced to them until after Jerry died, which 0:51:21.600 --> 0:51:24.840 is one of my probably my biggest life regret. But 0:51:25.000 --> 0:51:27.920 and so what about Fish When did you get into them? Uh? 0:51:28.120 --> 0:51:31.440 In college? First show was nineteen ninety at the Bayou 0:51:31.680 --> 0:51:33.080 used to be that bar down on M Street. I 0:51:33.080 --> 0:51:35.080 can't remember whether you ever made it made it there, 0:51:35.520 --> 0:51:37.759 so saw them a number of times. Again. It was 0:51:38.320 --> 0:51:40.040 you know when I was in college. You know, we 0:51:40.160 --> 0:51:43.640 were seeing you know, Blues Traveler, Fish Mow, you know, 0:51:43.680 --> 0:51:45.880 Widespread pan Off, all the kind of you know, second 0:51:46.000 --> 0:51:49.560 gen jam bands, and you know, the Bayou was kind 0:51:49.600 --> 0:51:52.520 of where you went off and spent a lot of 0:51:52.640 --> 0:51:55.840 time with the which is no longer there. You know, 0:51:55.920 --> 0:51:58.200 it really just had a great experience exposure to all 0:51:58.280 --> 0:52:01.719 sorts of bands. There are also, you know, imber odd 0:52:01.800 --> 0:52:04.560 enough because I live in the neighborhood where the old 0:52:04.960 --> 0:52:07.680 reggae club Kilimanjari used to be. It's like two blocks 0:52:07.680 --> 0:52:10.080 from where I live now, and would go there all 0:52:10.120 --> 0:52:12.320 the time in college and see like still Pulse and 0:52:12.480 --> 0:52:14.560 you know, fans like that. So and now it's like 0:52:14.640 --> 0:52:15.040 a gym. 0:52:17.680 --> 0:52:19.719 All right, I think we'll leave it there. This was 0:52:20.120 --> 0:52:25.279 a really great discussion, wide ranging, you know, from from 0:52:25.600 --> 0:52:29.040 COVID crisis to Fanny and Freddie and fhf A to 0:52:29.200 --> 0:52:32.640 the dead and fish Mark Calabria. Thank you so much 0:52:32.960 --> 0:52:37.120 for talking with us today. Uh, you know, we're extremely 0:52:37.239 --> 0:52:39.319 grateful for your time and I think our listeners are 0:52:39.480 --> 0:52:42.279 to Ben, thank you for co hosting your first show 0:52:42.880 --> 0:52:46.160 co hosting. As a reminder to all our listeners, you 0:52:46.200 --> 0:52:48.600 can read all of our Bloomberg intelligence research on the 0:52:48.640 --> 0:52:52.359 Bloomberg terminal at Big and we'll leave it there. Thank 0:52:52.400 --> 0:52:52.800 you again. We