Trending Thursday is a roundup of the stories shaping the week and what’s yet to come through the weekend — also taking into account social media reaction. Think of it as a midweek Monday Morning Cup of Coffee, but with extra caffeine.
FannieGate isn’t going anywhere and the investors who aren’t happy with the semi-permanent “temporary” conservatorship.
With the AIG lawsuit this week, they fired off a provocative missive on why the two cases are not at all alike.
Interesting decision in the AIG lawsuit this week. The judge drew a "Solomonic" line through the arguments to say that the government overreached in its actions in 2008, but that shareholders are not due any recompense because the company would have gone under if the government hadn't stepped in. Some commentators, who seem to root against Fannie Mae and Freddie Mac shareholders, have tried to link the legal cases of AIG and the GSEs, but that's in inapt comparison.
In the AIG case, shareholders protested the terms of the deal set by the government, in which it took 79.9% of the equity. Regarding the shareholder lawsuits involving the GSEs, shareholders aren't contesting the deal struck by the government, but rather the failure of the government to live by the deal it struck. In exchange for loaning Fannie and Freddie money in 2008, the government took senior preferred stock in the companies that was to pay a 10% dividend. It also took 79.9% of the common stock. Shareholders aren't contesting this arrangement – Fannie Mae and Freddie Mac were in dire straits and their likely collapse would have imperiled the country's financial foundation, so a government rescue and the tough terms the government set were necessary.
But, in 2012, the government unilaterally changed the terms of the preferred stock dividend from 10% to a 100% sweep of all profits. This was a violation of the Housing and Economic Recovery Act, the statute passed by Congress that governs the conservatorship of these companies.
Tim Pagliara told Politico that investors in the housing-finance firms aren't contesting their takeover 'but rather the failure of the government to live by the deal that it struck' — unlike the AIG case."
On a related note, two of our favorite tweeters – Josh Rosner and John Carney – are at it, and it’s always informative. And salty.
@JoshRosner It's actually more plausible that the DTAs were written up to extend the debt ceiling than the idea sweep was created for that.— John Carney (@carney) June 17, 2015
Meanwhile, back in policyland, leading Democrats are not happy about the progressive of the various “Offices of Minority and Women Inclusion” at federal regulators, which are mandated to be part of the various regulatory agencies and bureaus.
Congresswoman Maxine Waters, D-Calif., Ranking Member of the Financial Services Committee and chief architect of the provision, known as “Section 342” joined Congresswoman Joyce Beatty, D-Ohio, a leading Democrat overseeing its implementation, in expressing their deep disappointment in the structure and scope of final standards, which will be used to assess the diversity of financial services firms.
As part of the Dodd-Frank reform law, Section 342 established the Office of Minority and Women Inclusion to set-up and oversee diversity initiatives and programs designed to create fair and inclusive work environments in the financial services industry, their regulators and those who receive government contracts.
The lawmakers raised concerns about the ambiguity of the final rule, which they say reflects little-to-no meaningful adjustment from the draft released almost two years ago.
“We remain disappointed that, almost five years after the Dodd-Frank Act was enacted, our federal financial services agencies continue to provide lip service to important issues related to the diversity and inclusion of women and minorities in the financial services sector. In fact, the recently released final standards for assessing the diversity practices of financial institutions appear to do nothing to bring transparency to this industry, which has a long history of failing to promote diversity in its workforce,” they said in a joint statement. “The final rule is fraught with ambiguity, fails to make the disclosure of diversity data mandatory for financial institutions and prevents the public from easily accessing the information it was designed to provide. As we and other members of the CBC noted in 2014, this rule does not establish uniform criteria to assess workforce and supplier diversity practices and will make meaningful oversight and comparison of diversity across firms very difficult.”
Some good news for minorities can be found in a recent survey from the progressive advocacy group NeighborWorks America.
Their survey found that Americans overall are split on their assessment of their local economy and job situation, with minorities reporting more positively than Whites across all income brackets.
On average, the differences can largely be attributed to region, with Americans who live in urban areas reporting more positively about their local economies and job situation, and residents in rural areas more negatively.
The survey found that the nation’s two largest minority groups – blacks and Hispanics – have a much more positive view of their local economy and job situation, according to the survey.
Specifically, 68% of people who identify themselves as Hispanics say that their local economy is stronger than the nation, and 54% of blacks say the same.
However, just 45% of Whites say that their local economy and job situation is better than the nation overall.