Default Dean Adds To His Tea Party Creds

Dean Heller DoubleOn Halloween 2013 Senator “Default Dean” Heller (R-NV) voted to sustain the Senate Republican filibuster of  Congressman Mel Watt’s nomination to be the Director of the Federal Housing Finance Agency. [roll call 226]   “Default Dean” added another Gold Star to his Tea Party Helper chart with his next vote, another vote to sustain a filibuster — this time of the nomination of Patricia Millett to fill a vacancy on the D.C. Circuit Court of Appeals. [roll call 227] * see previous post and The Republican Argument is Bogus. (pfaw)

Some Republicans groused that Rep. Watt, a Yale Law graduate with extensive experience in North Carolina politics, and a Congressman from N.C. in several sessions “lacked the experience to administer an agency as large as the FHFA.”   By the end of the day on October 29th it was obvious there were going to be Senate Republicans who would block an “up or down” vote on Watt’s nomination. [Reuters]

It would be instructive at this point to mention that the Federal Housing Finance Agency is the outfit that oversees Fannie Mae and Freddie Mac, the Mortgage Twins, and the objects of GOP calls for a full privatization of the secondary mortgage market.  Additionally, it should be noted that Rep. Watt’s nomination is the second to be blocked by Senate Republicans; former N.C. banking commissioner Joseph Smith withdrew his nomination to head FHFA in 2011 in the face of GOP opposition.  Finally, Rep. Watt is on record as supporting measures to allow bankruptcy judges to trim the principal owed on home loans.  It appears that this position is sufficient to render his service on the House Financial Services Committee inadequate to Republican purposes.  [BloombergNews]

Given the opposition to both Smith and Watts a sentient person could logically conclude that in this instance the GOP doesn’t want the FHFA to be fully functional.   If the deregulation of the secondary mortgage market is the desire outcome, and the repeal of the oversight agency is impolitic, then the obvious way to impede the regulatory process is to keep the agency headless.  That sentient person could also conclude that St. Peter’s nomination would be blocked, on the grounds that his previous experience was only as a “community organizer” and that his most recent housing experience comes solely from his residency in a gated community.

Senator Heller’s opposition fits neatly into this scenario when we notice that he is a supported of S. 1217 — a bill to privatize the secondary mortgage market.

“In 2008, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. As a result of this bailout, the private market has almost completely disappeared, and so nearly every loan made in America today comes with a full government guarantee.  Despite this unsustainable situation, there has still been no real reform to our housing finance system since the financial crisis.”  [Heller]

The statement from Senator Heller doesn’t whitewash history — it merely leaves out a significant piece — like anything that happened prior to 2008.  Prior to 2008 the Mortgage Twins were hybrid-privatized secondary market financial agencies, and in the process of behaving like privatized secondary market finance operators they succumbed to the same avarice infecting the rest of the secondary home loan market — cutting back on home loan requirements and passing along risky financial products in the name of “managing risk.”   Further, there was a ‘silent agreement’ implicit in the operations of the Mortgage Twins before 2008 that the products it sold into the financial market did have the imprimatur of the federal government.

To boil things down to the core — what Senator Heller’s support of S. 1217 means is that he wants a return to the pre-2008 system, without any federal regulation of the secondary mortgage market at all.  Why would Senator “Default Dean” Heller want to confirm any nominee to head the FHFA when he’s supporting a bill that would eliminate Fannie Mae, Freddie Mac, and the FHFA within five years of the bill’s passage?

S. 1217 is warmly supported by the American Bankers Association and the Mortgage Bankers Association, and why shouldn’t it since it contains the following lovely loophole:

“Amends the Securities Act of 1933 and the Securities Exchange Act of 1934 to exempt covered securities insured by FMIC from Securities and Exchange Commission (SEC) regulation in general and from credit risk retention requirements…”  [OC]

The “FMIC” is supposed to be modeled on the FDIC, and notice that according to S. 1217,  introduced by Senator Bob Corker (R-TN), if the FMIC issues any “securities” those are exempt from regulation by the SEC.   Those who like deregulation of the financial markets will love this one.

Time and again, Senator Heller is fond of telling anyone who happens to be within range that he “voted against the bailout” as if he were somehow beyond the pressure of the lobbyists from the Mortgage Bankers Association and the American Bankers Association — and yet rarely can one find a Senator so ready and willing to carry the water for MBA and ABA interests.

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