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Wednesday, December 23, 2015

Congressional Record: On January 2, 2018, FHFA Director Mel Watt may release GSEs from conservatorship

(Clarification: The headline is based on my  construction of the conservator's powers under HERA. The dialogue below simply quashes the notion that release from conservatorship would be at odds with Congressional intent.)

From The Congressional Record, December 18, 2015 S8850-S8851:

Mr. Sherrod BROWN. Madam President, today I wish to discuss section 702 in division O of the Omnibus appropriations bill. It is a provision that would prohibit the Treasury Department from selling, transferring or otherwise disposing of the senior preferred shares of Fannie Mae and Freddie Mac for 2 years.

In 2008, Treasury Secretary Hank Paulson and Federal Housing Finance Agency Director James Lockhart placed Fannie Mae and Freddie Mac into conservatorship and created an agreement that gave the Treasury Department senior preferred shares in both entities. Since that time, the GSEs helped stabilize the housing market by ensuring that families had access to 30-year fixed-rate mortgages at reasonable rates and lenders had access to a functioning secondary market. While the government was initially forced to inject $188 billion into shoring up these two agencies, it has since collected $241 billion. Taxpayers have thus earned $53 billion during the conservatorship.

Mr. Charles SCHUMER. Madam President, will the Senator yield for a question? I am concerned that someone could read the provision as limiting a future administration’s authority to end the conservatorship after the 2-year prohibition absent congressional action. Does the provision prohibit a future administration from taking any action after January 1, 2018, if it is in the best interest of the housing market, taxpayers or the broader economy?

Mr. BROWN. I will say to my colleague from New York that it does not. That is not the effect of the language. Any number of decisions could be made after that date, when a new Congress and a new President will be in place. Nor does this provision have any effect on the court cases and settlements currently underway challenging the validity of the third amendment. As the Senator from Tennessee said yesterday, ‘‘this legislation does not prejudice’’ any of those cases.

Mr. Harry REID. I associate myself with the comments of the Senator from Ohio, Mr. BROWN. If it turns out to be in the best interest of borrowers, the economy or to protect taxpayers, the next administration could elect to end the conservatorship on January 2, 2018. This is the view of the Treasury Department as well. I would like to submit a letter written to me on this issue that states that the provision binds the Treasury only until January 1, 2018, and has no effect after that.

The agreement for this language to be included in the omnibus was that the prohibition would sunset after 2 years and not create a perpetual con-servatorship. As then-Secretary Paulson described, conservatorship was meant to be a ‘‘time out’’ not an indefinite state of being.
Madam President, I ask unanimous consent that the Treasury letter be printed in the RECORD at the conclu- sion of the remarks by Senator BROWN.

Mr. BROWN. Madam President, I thank the Majority Leader. The FHFA and Treasury Department could have placed the GSEs into receivership if the intent was to liquidate them. The purpose of a conservatorship is to preserve and conserve the assets of the entities in conservatorship until they are in a safe and solvent condition as determined by their regulator.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

Washington, DC, December 17, 2015.
Democratic Leader, U.S. Senate, Washington, DC.
DEAR MR. LEADER: In response to your request for our view, the Treasury Department interprets the language of Section 702 of Division O of the Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016, to mean that subsection (b) imposes a prohibition that is binding until January 1, 2018. It would not be binding after that date.

Assistant Secretary for Legislative Affairs.


  1. Thanks David for starting this excellent blog! I'm excited to see the updates. Here's a reminder for all that Corker's "political persuasion" goes way back. Take for instance this entire chapter on his racist campaign tactics back in 2006. Why the political world continues to put up with his antics and allow this crony politician to continue effecting change is beyond me. He's a stain on both parties by now.


    Perhaps the most egregious example of a successful racist appeal occurred during the midterm election of Democrats outflanked Republicans in every closely contested Senate race except one: Tennessee. At first blush, the loss in Tennessee was surprising, given that Harold Ford, like so many of the other Democrats who defeated Republican incumbents (e.g., Bob Casey, Sherrod Brown, Claire McCaskill), was an emotionally compelling candidate. Ford, however, was taken down by an extraordinarily sophisticated stealth campaign orchestrated by now Senator Bob Corker and the Republican National Committee. The centerpiece of that campaign was an infamous ad created by a protégé of Karl Rove.

    The stealth attack, designed to fly far enough below the radar to allow plausible deniability, played unconscious racial networks like a fiddle at Opryland. As Corker began to run into trouble in public opinion polls, he began describing himself as the “real Tennessean,” using as a cover story that Ford was a city slicker from Washington. The Republican National Committee then ran an ad the Corker campaign predictably disavowed, allowing Corker to claim distance while taking advantage of its effects. Corker then followed it up with another ad of his own that made clear that the ads were coordinated.

    The ad that drew media attention featured a scantily clad white woman declaring excitedly, “I met Harold at the Playboy party!” She returned at the very end of the ad, appearing as if an afterthought, with a seductive wink, saying “Harold, call me.” The obvious goal was to activate a network about black men having sex with white women, something about which many white men still feel queasy (particularly if they imagine their daughter with a black man). Martin Luther King understood the power of this image for white men and disarmed it, declaring, “I want the white man to be my brother, not my brother-in-law.”
    The “call me” line came just after the ad had ostensibly ended with the following words on the screen, while the narrator was distracting viewers with a different message, effectively rendering the words implicit: “Harold Ford. He’s Just Not Right.”
    When I first saw the ad, something about the syntax of that last sentence struck me as peculiar. What did they mean by “He’s just not right?” That’s a phrase often used to describe someone with a psychiatric problem, and no one was suggesting that Ford was disturbed.

    Then I realized what was wrong. If you were going to use that syntax, you’d say “He’s just not right for Tennessee.” What viewers of the ad were not aware of (unless they were Tweetie Bird, or couldn’t pronounce their r's was that another network was being activated unconsciously. This second network was primed both by the racial overtones of the ad and by the broader campaign emphasizing that Ford isn’t “one of us”: He’s just not white. In fact, had the narrator spoken the words, the intent would likely have been too obvious, especially when followed by the “call me” line.

    As Corker began gaining in the polls following the “Call Me” ad, he followed it with a radio ad, whose cover story was again to compare and contrast the two candidates on the extent to which they were “real” Tennesseans. In the radio ad, music plays continuously in the background, but every time the narrator talks about Ford, the listener is exposed to the barely audible sound of what, with close listening, is the sound of an African tom-tom.



      The ads run against Ford suggest that Rove and crew are well aware of recent research on subliminal priming. It is difficult otherwise to explain the tom-toms, and I have not heard an alternative explanation for them. Unfortunately, Democrats responded to twenty-firstcentury science with twentieth-century intuition. They lacked the knowledge to respond with the only known antidote to racial appeals made below the radar of consciousness: make them conscious. George Allen was heading for an easy victory in his bid for re-election to the Senate and a serious run at the presidency in 2008, but he took a nosedive when he flew his prejudice at the wrong altitude. Bob Corker succeeded with a stealth appeal that largely stayed below the radar.

      Harold Ford couldn’t have been his own messenger in this case, as he well knew, and as evidenced by his muted response. Doing so would have activated another network that would have blown up in his face: black person crying racism. What he needed was a Southern white elder statesman to do it for him. The person who could have done it was Bill Clinton, who won Tennessee twice and stumped for Ford in the final days of the campaign. A fiery response like the following would likely have shifted the dynamics of the race from Ford’s color to Corker’s character and put Corker on the defensive:
      Mr. Corker, the people of this state know what a skunk smells like, and they know when they’ve been sprayed. You knew exactly what you were doing when you ran that ad with the white woman saying with a wink, “Call me, Harold.” The first time I saw that ad, a phrase came to my mind that I hadn’t heard in fifty years: “All they want is our white women.” And if it came to my mind, it came to a lot of people’s minds. And that was just the point. The fact is, you couldn’t beat Harold Ford Jr. in a fair fight so you decided to beat him however you could. You started talking on the stump about how he wasn’t really from Tennessee, how he wasn’t really one of us. Who, exactly, did you mean by “us,” Bob? That young man was baptized in a church in Memphis. If that doesn’t make him a “real Tennessean,” perhaps you can tell us just how you tell a real Tennessean when you see one. You want to know what it means to be a real Tennessean? It means to understand the words of our founding fathers: that all men are created equal. Mr. Corker, the difference between you and Harold Ford Jr. isn’t in the darkness of your skin. It’s in the darkness of your heart.

      As of this writing, many Democrats are expressing tremendous enthusiasm about Barack Obama in his running for the 2008 Democratic presidential nomination. And rightly so: he has enormous charisma, all the nonverbal behaviors that portend political success, and a first-rate intellect combined with an ability to talk to people where they live. But Obama, like every AfricanAmerican candidate for Senate or president in the near future, needs to study the tapes of the Ford-Corker race, and study them well. The orchestrated campaign against Ford was as psychologically sophisticated as it was racist, and it took no time for Republicans to call attention to Obama’s middle name: Hussein.

      The only way to put an end to ever more sophisticated versions of race baiting is to understand it, to use the best available science to counteract it, and most importantly, to put Republicans on notice that they will pay for it.

      Democrats failed to make Corker pay for it in 2006. But there’s no time like the present to turn Corker into a verb, as in “We’re not going to get Corkered again.” Democrats should use the phrase so frequently that it enters into popular political language. No one wants that as his legacy. And no one deserves it more. But the Corker campaign is just the latest subplot in the Republican story on race, a story Democrats should be telling and retelling in elections all over the country...

    2. Matt

      I certainly take a back seat to no one in my contempt for Corker, and, from what I've seen, I'm inclined to think the magnitude of his financial corruption has yet to come to the surface.

      Many are focused on the Senator, though I suspect at this point his efforts to affect the GSEs are a sideshow. My focus lately has been on the work products of people who are not household names, but who played a critical role in framing the GSE "reform" debate. Stay tuned.

    3. Excellent David. That's great to hear!