Uncertainty As New Era Begins in Washington

PALM SPRINGS, CALIF.–“Politics and policy are two different things,” says MBA Vice Chairman Chris George. “Policy is working toward a common goal or conclusion. Politics is nothing like that.”

The most unusual election cycle in recent history has policy analysts looking at developments in Washington very carefully. And in some cases, they’re shaking their heads.

“What we are seeing at the onset of the Trump Administration is about what we expected,” said Bill Killmer, MBA senior vice president of legislative and political affairs here at the MBA Independent Mortgage Bankers Conference. “They said they going to be disruptive, and so far they have been so.”

Meg Burns, partner with The Collingwood Group, Washington, D.C., and other panelists expressed concern by the slow pace of filing key administrative positions.

“They are already falling behind,” Burns said. “They are way behind in putting policy people in key positions. It may be that the Trump team was surprised by its victory and did not have a deep bench of people to fill positions.”

Burns noted, however, that it might not matter. “All transitions are unique,” she said. “Traditionally policy people come from people who have worked in previous administrations and once those people are on board, it will appear to be more normal.”

Jaret Seiberg, managing director with Cowen Group, Washington, D.C., said the lack of preparation by the Trump team is “troubling.”

“Expectations are high,” Seiberg said. “There’s a perception that the Trump Administration if focusing on the wrong things, like crowd estimates, when they should be focusing on policy.”

Doyle Bartlett, partner with Eris Group LLC, Washington, D.C., said things are likely to continue to move slowly. “Now that he’s filled the Cabinet, he have to fill the sub-Cabinet positions,” he said. “You have about 4,000 positions to fill. If you think they’re moving slow now, wait a few months when things really slow down.”

This is disconcerting, Bartlett said, “Because at the end of the day, it’s the deputy secretaries and sub-secretaries who run the departments.”

“The power structure is still evolving, and that’s going to slow things down even more,” Seiberg noted. “What are we going to do if it’s August and we still don’t have key positions filled?”

“The comfort I take from the nomination process so far is that at the Cabinet level, the nominees have been thoughtful and reasonable,” Burns said.

For example, Ben Carson, whose nomination as HUD secretary was approved by the Senate Banking Committee this week, faced a relatively tame confirmation hearing (his nomination received support from MBA). Panelists said they are less concerned about Carson’s ability to run the housing agency with relatively little experience than they are with whom Carson surrounds himself.

“I worked at HUD, and the most effective HUD secretary I worked with (Steve Preston) was fantastic and he had no housing experience at all,” Burns said. “I’m encouraged that Carson has said that one of the first things he’s going to do as HUD secretary is to go on a listening tour.”

“If he gets good people as FHA commissioner and as Ginnie Mae president, then the visibility he brings to HUD will be a good thing,” Seiberg said.

On legislation, Congress, and not the Administration, is going to drive the process. “But the House is going to have to work with the Senate,” Bartlett said. “House Financial Services Committee Chairman Jeb Hensarling [R-Texas] can pass all the legislation he wants–Dodd-Frank repeal, GSE reform–but if he can’t get the Senate to work with him, it’s not going to mean much.”

Senate Banking Committee Chairman Mike Crapo, R-Idaho, is “much more likely to reach out to Democrats and others on GSE reform than his predecessor (Sen. Richard Shelby, R-Ala.),” Bartlett added. “At the end of the day–and that could be two or three years down the road–the Senate needs 60 votes; the House needs a simple majority. So at the end of the day, legislation is going to reflect what the Senate wants.”

“The fact that you have a Senate Banking Committee chairman who is committed to getting things done is going to be a catalyst for action,” Seiberg said.

Meanwhile, the Federal Housing Finance Agency continues to serve as the conservator of Fannie Mae and Freddie Mac. “I don’t see a lot of changes going on there,” Burns said. “FHFA Director Mel Watt [a Democrat] has made two things clear: that he’s not going anywhere and that it is up to Congress to move reform forward.”

And what of the Consumer Financial Protection Bureau? Republicans have already re-introduced legislation that would restructure the Bureau with a five-person commission, replacing Director Richard Cordray, who enjoys little support from Republicans.

“The smart thing for Trump to do is wait for resolution of the PHH case,” Seiberg said, referring to a recent court case in which PHH Corp. won a suit challenging a CFPB legal action against the bank. “If the appeals court declines to take up the case, then I think it sets the stage for the Trump Administration to remove Cordray.”

“It’s to Cordray’s political benefit to be fired, rather than resign,” Bartlett said. “Cordray is popular in Ohio and is considering a run for governor. It’s better for him politically to be fired and become a martyr. Whatever the case, Cordray won’t go quietly. But removing Cordray, and the potential weakening of the CFPB, could scare Democrats into negotiating legislation that could establish a commission.”