As we all are painfully aware, the Affordable Care Act (aka, Obamacare) had a disastrous launch. Not to mention $940 million to CGI for a non-working website. Obamacare is so complex that it is likely unworkable … and unpopular once everyone gets a load of how their insurance premiums and deductibles have risen.
Who in their right mind would design such a disaster? An overly complex mess that is unworkable.
The government, of course, and their cronies and apparatchiks.
Like it or not, it is the insertion of government into the system that causes the problem. Just like the Corker-Warner housing finance reform legislation.
Consider The New Fair Deal Banking and Housing Stability Act of 2013 from Congressman Amash. 113-amash-nfdbhsa-onepager-agencyaction The height of simplicity … because it removes government from the mortgage market.
On the other hand, we have Corker-Warner that requires that we shut down two mortgage insurance companies (well regulated by the current FHFA Director Ed DeMarco) and create a leviathan insurance company that may or may not be well-regulated.
An example of the complexity of Corker-Warner is addressing the concern that big banks are the big winners with smaller banks acting as suppliers of loans to the big banks.
Mark Zandi of Moody’s suggests the following: “Under the Corker-Warner plan, no single financial institution can account for more than 15% of mortgages eligible for the government guarantee. But there is an exception for institutions that securitize their own mortgages. The risk is that the Corker-Warner system could become dominated by large financial institutions, potentially limiting competition and increasing worries about too-big-to-fail.
To address this potential problem, issuers of mortgage securities should be restricted from also owning the institutions that collect the private capital needed to obtain the government guarantee.
Big banks would be able to originate and service mortgages, as well as issue mortgage securities, but they would be prohibited from owning the institutions that ultimately guarantee the timely payment of principal and interest on those mortgages.”
Now that does NOT fix the problem. It simply skirts the issue.
Consider a local bank that wants to originate a loan and sell it with government backing. They would probably go through one of the big banks that operate with sufficient economies of scale to pool mortgages and issue securities. Joe’s Bank of Keokuk Iowa wouldn’t be able to do that, but Citi would be able to buy the loans … without purchasing Joe’s bank.
So how do we get smaller banks into the GSE reform game? Senators Mike Crapo (R-ID) and Tim Johnson (D-SD) are working on a bill in the Senate to build a new co-op and give more authority to the Federal Home Loan Banks to help smaller lenders better than under Corker-Warner.
But HOW will Crapo-Johnson accomplish this feat? Can you imagine the Senate joining the two bills (Corker-Warner and Crapo-Johnson)? What a complex disaster this will be.
The bottom line is that Corker-Warner has more holes than a huge wheel of Swiss cheese and tears down two existing companies and replaces them with an one insurance agency of unknown quantity. With lots of bandaids on it.
If you want simplicity and a clear vision, go with the Amash House bill. If you want Idiocracy reform, stick with Corker-Warner.
Corker-Warner has Brawndo. It is what affordable housing activists crave (more affordable housing goals).