Morning Report: More GSE reform.

Vital Statistics:


Last Change
S&P futures 2990.5 9.25
Oil (WTI) 56.96 0.44
10 year government bond yield 1.59
30 year fixed rate mortgage 3.72%


Stocks are higher this morning on no real news. Bonds and MBS are down small.


No economic data today, and this week should be relatively data-light, with retail sales on Friday the only potential market-moving number. No Fed-speak as we are in the quiet period ahead of next week’s meeting.


Jerome Powell vowed to act “as appropriate” to maintain the current US expansion, which was largely taken as an admission the Fed will cut rates another quarter point at next week’s meeting. The Fed funds futures are pricing this in as a certainty, although there is disagreement within the Fed over whether it is necessary to cut rates given the strong consumer spending. He also threw cold water on political considerations affecting monetary policy. “Political factors play absolutely no role in our process, and my colleagues and I would not tolerate any attempt to include them in our decision-making or our discussions,” he said. “We are going to act as appropriate to sustain the expansion.” This was presumably in response to comments from ex-NY Fed president William Dudley to  “consider how their decisions will affect the political outcome in 2020.”


Interesting data point: Compass Point Analytics upped their price target for Fannie Mae stock to $7.75. which is almost 3x the current trading price of $2.71. Fannie Mae stock got hit last week on disappointment with the lack of specifics in the government’s housing reform plan.


Despite the disappointment from Fannie Mae stockholders and pref holders, the housing industry generally likes what the saw in the plan. “The reports recognize the need to better coordinate the roles of FHA and the GSEs,” Mortgage Bankers Association CEO Robert Broeksmit said. “Such coordination must preserve affordable financing options for a wide range of borrowers and reflect the vital role FHA plays in the larger housing finance system.” Talks about getting rid of the GSEs altogether seem to be over: “Both in the Obama administration and during periods of bipartisan negotiations the focus was on whiteboarding a totally new system,” said David M. Dworkin, who was a senior adviser in the Treasury Department on housing finance during the Obama and Trump administrations. “It is too hard. The current system is too embedded and the unintended consequences are too unpredictable.” The GSE affordable housing goals would also go away, to be replaced by a fee paid to HUD, who would then distribute the funds themselves. This is likely to be a non-starter with Democrats.


Mortgage interest deductions fell 62% last year as tax reform encouraged most people to take the standard deduction instead of itemizing.



12 Responses

  1. Vox wonders why defenders of classical liberalism aren’t more effective, not realizing that the answer is evident in their own piece, namely their own embarrassment over it’s actual origins:

    “The anti-liberal moment

    Critics on the left and right are waging war on liberalism. And liberals don’t seem to have a good defense.

    By Zack Beauchamp
    Sep 9, 2019, 8:20am EDT

    This foundational liberal vision is typically associated with a group of European and American thinkers — from John Locke in the 17th century to John Rawls in the 20th — and thus often treated as a Western political inheritance. But seeing liberalism as a product of a particular cultural tradition is a mistake.

    As Amartya Sen argued in a brilliant 1997 essay, many of the core principles we identify with liberalism today — religious toleration, popular sovereignty, equal freedom for all citizens — can be found in writings from pre-modern Europe, the ancient Buddhist tradition, and a 16th-century Indian king, among a range of sources. Liberalism has taken root in diverse societies across the globe today, from Japan to Uruguay to Namibia.

    Sen’s paper suggests that instead of defining liberalism by books written by dead white men, it makes more sense to treat it as a set of parts: a grouping of principles and animating ideas that, when combined, add up to an overarching framework for understanding political life.”

    This sort of mush will never persuade those on the left (or really anyone else) who view it as a product of the European Enlightenment that was spread through colonialism, largely because they in fact have a better grasp of the history than the Vox crowd trying to synthesize it with Buddhism to obfuscate it’s problematic “dead white men” origins.


    • The problem is they can talk about how classical liberalisms origins amongst primarily white men is problematic at all. The implication is that anything that originated with this morally inferior race is tainted–no doubt the paleness of their skin revealing the frozen whiteness of their hearts. And so on.

      It’s the sort of identitarian bigotry and entrenched racism that they had no trouble recognizing when they say it applied to other races, now or historically, but it’s fine to do it to one race in particular–because that’s the bad race.

      That being said, I’m sure a variety of nonwhite cultures and peoples contributed to the enlightenment, but that doesn’t make the ideas any more or less valid because of skin complexion. So it’s a bad and vaguely racist basis for the argument, anyway. Ideas aren’t better or worse because of the race or gender of who had them.


    • classical liberalism and progressivism have very little in common with each other.

      Liked by 1 person

  2. For all the Gen X people here, or even if you have just seen the original Karate Kid once, I highly recommend the YouTube series Cobra Kai.

    Original cast and it flips the premise of Karate Kid on it’s head.

    YouTube recently made it free to stream.

    Liked by 1 person

    • It’s great. I’m mean, a really good show. It’s like a bunch of individual awesome 80s movies, going from one to the other. Stylistically hits all the nostalgia buttons without wallowing. Just outstanding.

      Speaking of which, I’ve got to go cancel my Youtube paid subscription. Only reason I get it is for Cobra Kai.


  3. The latest driver of TDS:

    Reading carefully, one would note that:

    A. Trump didn’t disclose anything related to this asset to anyone.
    B. Concerns about the asset’s exposure predated Trump and were driven by media disclosures (that were never identified).
    C. The CIA did the exfiltration with Trump’s knowledge and approval.

    But of course, the story being pushed is that this was done because the “intelligence community” determined that it was too great of a risk to leave the asset in place because orange man can’t be trusted.

    Oh, and there’s no Deep State.


    • CNN is withholding several details about the spy to reduce the risk of the person’s identification.

      Look! We’re better than Trump. Also, we don’t presume it’s not illegal for us to have any of this information (let alone potentially disclose it) because we’re journalists and we’re in the constitution!

      I don’t get the “deep state” thing. It’s just a term to describe something there obviously is and would always be–a bunch of people in a bunch of bureaucracies, in their own little fiefdoms, looking out for their interests and maybe their agency’s interest, because that’s how humans work and have always worked. “Deep state” may be a term that evokes an emotional response where a “bunch of people working primarily towards their own individual and agency goals without a lot of respect to the original mission of their agency or any oaths of office they might have sworn because people are like that” is kind of a mouthful.

      I feel like in the Trump era almost all news has turned into Fox news, but I also feel like that had been happening for awhile. Not in terms of inaccuracy–all news is fake news, as a practical matter–but in terms of self-aggrandizement.


    • And NYT’s reporting on it minimizes the Orange Man Bad angle.


      • There’s going to have to be another all hands meeting where the editors explain themselves. An obvious opportunity to tell the TRUTH about TRUMP, and the NYT blew it. And there has to be a way to say racism is involved. THERE HAS TO BE.


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