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369: Big Government Craziness in a Troubled Economy

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Buck: Welcome back to the show, everyone, today. My guest on Wealth Formula podcast is Marc Calabria. Marc is senior adviser to the Cato Institute and co-founder of the Cato Center for Monetary and Financial Tentatives, who provide strategic input and direction on the federal economic policy making process. He’s also former director of the Federal Housing Finance Agency, which regulates and supervises Fannie Mae, Freddie Mac and the Federal Home Loan Banks. He is the author of Shelter from the Storm How a COVID Mortgage Meltdown Was Averted. Marc, welcome to the podcast. Thanks for joining us.

Mark: Buck It’s great to be here.

Buck: So, you know, your your background is is interesting. And for those people who don’t know. Tell us a little bit about the Cato Institute.

Mark: So the Cato Institute is a think tank. And again, you can kind of think about think tanks as academics who don’t teach and generally share a point on the political spectrum, a broad point of view. So Cato, founded in 1977, in the Bay Area of San Francisco, moved in the early 80s to Washington, DC, is generally considered, you know, libertarian-ish. So there are issues in where we agree with the left, there are issues we agree on the right. And we tend to be very nonpartisan about it and tend to, you know, really call out things we disagree

with and call out things we agree with. But again, we work on a broad set of policy issues. I’m in where the economic space but we at Cato do work on immigration, criminal justice, I mean, pretty much, you know, healthcare reform, everything under the sun that has a policy angle and should say we are, we don’t take any government money, we are 100% supported by kind contributions from people who want to share our philosophy and want to see us change the world.

Buck: That’s great. And and, you know, obviously from your perspective, your your focus is a lot of it has been on mortgages and things like, you know, financial markets that way. I’m curious, there was some recent there’s a recent article that I saw in The Wall Street Journal regarding this concept of upside down mortgage policies. You and I, I mean, this I think this is going to be kind of a surprise to people. Like, do you want to tell tell us what this is? Because this is like a new essentially new law. Right? It’s not something that’s being discussed real.

Mark: Well, it’s an it’s a new pricing. So as you touched upon. You know, I’ve spent a lot of my professional career in the financial services space, particularly mortgage. You know, what was the primary regulator for the mortgage market during COVID And since about the 1980s, you know, pre 1980s, that was really the case that everybody kind of paid the same for a mortgage. But if you were a higher risk, you didn’t really get a mortgage or you went you got it from a hard money lender or you got it from from the seller like, you know, the typical going to a bank. Again, if you were a marginal credit, you simply didn’t get a loan then. So certain about the eighties, you know, we had the development of risk based pricing largely because of the creation of the credit rating agencies and other things.

And so you developed over time a system where if you had a if you were a lower risk, that is like you had a higher FICO, you were able to put a lower down, you know, bigger down payment down, you know, you pay the lower rate. And again, over time, that really started to reflect tightly. And again, the flip side of that, of course, is if you’re high risk and you have a low FICO and you’re putting very little down, you tend to pay a higher rate. And again, we’ve seen the financial markets kind of gravitating that way. And of course, it’s not just mortgages. That’s true in auto credit card, other lines of credit as well.

Buck: By the way, that makes a lot of sense. Right? Basically from the lending side, you’re de-risking you know, you’re de-risking the the opportunity for the lender here. And you should be paying less if you’re providing them less risk. So that that makes us.

Mark: 100%. I would also argue from the borrower side, I mean, I understand that nobody likes to have to pay a higher rate, but first of all, price just convey information. And if you are going for a loan of some sort and it’s a high rate, that’s the information about perhaps you’re in fits the initial situation. In many instances, you can six, 12 months make considerable progress in your credit history if you work on fixing it.

So to me, A, you know, if the markets charge you higher rate to borrow, the market is telling you something, perhaps you should listen. So that’s one factor. And the other factor is, you know, as I mentioned earlier, before, the risk based advent of risk based pricing, higher risk are simply just to get mortgages. And so it’s increased access. So we can debate whether paying a higher rate and get in a mortgage is better than not being able to get a mortgage. At any rate, personally, I think it is, but it’s increased access. So I think it’s a win win. Now, what the Biden administration has proposed doing is using their control of Fannie and Freddie to kind of flatten that relationship between what you pay and the risk.

Now, there still be a connection between if you’re better, risky or get a better rate, but they’re really trying to flatten that to create more of a cross-subsidy. So they are trying to essentially make you the better borrower, pay more to somewhat subsidize the lower borrower. But I do want to be very clear. This is this in no way suggests you should stop paying your bills and ruin your credit because you think you’ll get a better mortgage rate. You won’t. So you should still work at your credit and do those things. But it is very much geared to be, you know, a cross-subsidy within the system only applies in the Fannie and Freddie space. So.

Buck: So to be clear, though, Mark, to be clear, you’re saying that if you are so so the stratification here is based on purely on a credit score.

Mark: Yes. And again, you know, it’s important to remember part of the argument from the Biden administration that this is meant to help low income folks. But let’s make two observations important. First of all, it’s only the Fannie Freddie space. So if you’re the jumbo, if you you know, if you’re truly rich, this isn’t affecting you because you’re not in the Fannie and Freddie space.

And then it may surprise some folks, but I think you probably know this for a while. The relationship between income, a person’s income and credit is positive. It’s actually quite weak. There are a lot of well-off people who don’t pay their bills on time the basis and there are lots of poor people who actually do pay their bills on a timely basis. So even if you is a social policy, you feel like, well, you know, let’s do something to help the less off. This is what it is. It actually and again, most of most of poor households are likely to be renters. This is really, in a sense, a cross-subsidy within the middle class between those who have better credit and have taken years to build that and those who have weaker credit. I should also note one of the biggest connections between your credit is your age. And you know, it’s not, you know, fair to say with many of us who are at our toes, perhaps we weren’t as responsible as we were later in life. And, you know, it often takes years to build up a good credit score. So this is, in a sense, a subsidy from those in their forties and fifties to those in their twenties and thirties.

Buck: Yeah. And you know, that credit thing is, is is really interesting to me in general because I mean, after a certain point too, it becomes a lot less important. Like I know in my case my credit is not perfect at all and I don’t know exactly why. You know, like I’m, you know, maybe just a little bit over 700 or something like that. So when I was buying, you know, I was getting a few mortgages around here. And I have a lot of real estate debt, tons of real estate, like, you know, and and I suspect that’s part of what it is. But when I went to a private bank that that I get my mortgage from, they didn’t really even care what my credit report said. That was not part of their you know that was you.

Mark: Raise your grace a grade point, which is that credit scores are important, but they’re not the end all be all a lot. And again, perhaps the biggest takeaway from this change is for better credit borrowers, there’s going to be a bigger difference in rates. So this only affects Fannie and Freddie borrowers a lot of higher income, but not necessarily rich borrowers. You know, the bank wants that loan. So if if you’re getting a mortgage for, say, seven or $800,000, often the bank will want it to want that relationship and they’ll want to keep that loan on their books and they’ll give you a better deal. But if you’re sold to Fannie and Freddie. So the first and most important takeaway for for folks is that this makes it all the more important to shop for rates because it will be a bigger diversion.

And again, if the bank has a bigger distribution, if the bank has an existing relationship with you, they try to take that holistic plea. So in your case, if you’ve got all these other deals with the bank, I’d rather you got loans and you’re doing business and they want to keep the relationship, They might look at it and say, well, you know, okay, the overall relationship is important. It’s also obviously important to keep in mind that, you know, the bigger down payment. So before there was a real growth in Fannie and Freddie sub prime, if you go back to kind of what subprime looked at look like in the 1990s, you know, if you had a 60, 6685 CO you would get a you know, you would get a loan and they would require you to have like 30 or 40% down.

So there are other offsets there that can factor into it. So yeah, you’re credit’s important. It’s good to have good credit. It tends to be more buckets if you will. I’m not saying you shouldn’t strive to have that. 850 but if you’ve got seven 8800, it’s it’s fairly similar. There may be some differences in some products, but again, a lot of other factors. But it’s a smart thing to do to try to get to try to keep the best credit you can. I wouldn’t necessarily worry about it on a month to month basis, but if you are applying for a rate have in prime credit is extremely helpful.

Buck: So let’s go to a different topic. You were at once the federal Housing Finance Agency director when you were. How did you determine that rent forbearance was the right policy during the pandemic? And I guess a follow up on that is, are you satisfied with, you know, what was achieved from that?

Mark: Well, it’s one of the reasons to write the book is I felt very strongly about trying to tell the story of not only where I thought we were successful, but where we were constrained and perhaps in some areas fell short. And I should clarify, you know, later in the summer of 2020 was when the CDC invoked their eviction moratorium, we’d have anything to do with that in March of 2020. You know, we initially saw that only about and again, remember from about February to May, we lost 22 million jobs. So shockingly quick and deep job loss. But the thing that we immediately saw in our data was only about 40% of those people using they’re losing their jobs and mortgages. And of course, this is not surprising. We all remember bars, restaurants, I think.

So we saw immediately that renters were being most impacted. So because we didn’t have a way to mandate it, what we essentially set up was a system where the landlord because again, keep in mind, I’m running Fannie and Freddie. I have information on the mortgage, I have information on who holds the mortgage. We don’t even know whether the units occupied to be to be frank. All we know is this is a rental unit with a mortgage on it. And so we set up a system where the landlord could agree to not evict for nonpayment. Of course they can evict for nuisance and all the other legitimate things beside that. And then we would give them a pause on their mortgage. Now, the reasons why I say there’s some limitations to this between us and FHA, which is also obviously a big landlord, not only public housing but multifamily.

Maybe we got about 40% of the rental market. Some of this, of course, is, you know, it’s easy to think about big high rises when you think rental, but half of renters live in units with in properties with under five units. Most renters live actually in like a third of renters, single family housing or a surprisingly large number of renters. Renting households have the rental property has no mortgage on it. And if there’s not mortgage, we have no way to offer assistance. So on one hand, I thought we were very effective in this small part of the market in which we had an influence.

Buck: Well, I think, yeah, I was kind of getting at that a little bit. You know, our group, you know, we deal in larger apartment complexes, a lot of Freddie Fannie stuff. And there wasn’t really a whole lot of relief for landlords in those situations. Right. It was forbearance type thing. And then the landlords were kind of like and the investors were kind of like, you know, out to dry and try to figure out what to do about it. And I’m just curious on the justification on that.

Mark: It was a very tough situation. You know, and I had, you know, only one. So I had a single rental property for much of COVID myself and lost a fair amount of COVID rent from one of the tenants who lost their job. And they eventually moved out and oh, I hate it. I mean, it sucked. But it was it it was the situation. And, you know, later Congress, of course, provided assistance directly to landlords kind of before, but that was pretty late in the game. Not so I think 2021. And and even that it was so bureaucratic. So the truth is, is most landlords hate that. And again, while the homeowner side most people who took COVID forbearance as I talk about in the book, had a lot of equity restructured the forbearance in a way that they were incentivized to pay it back.

But it was very different with tenants. We didn’t have a direct relationship with the tenants. We had no way to penalize anybody who took six months, didn’t pay their rent and left. And there was a lot of that. So I’d be the first to say I think this was the situation was extremely unfair to landlords. That’s why we made, unlike the CDC moratorium, what we did. We made voluntary, but we also had no ability, you know, the most we could do is give the landlord a break time wise on the mortgage because we had no ability, just forgive it. Obviously, if they were going to be landlords who were stressed, we would work with them to try to work out a modification plan. But ultimately we had FHA overseeing Fannie and Freddie, had no way to make landlords whole, and I think that was a real tension and stress point during the crisis.

Buck: Yeah, now I get it. I mean, it it wasn’t really any great, great solutions to I mean I truly unusual situation like that.

Mark: You know and I’m really you know I guess personally, you know, I worry that particularly 2020 but we’ve seen this broader trend, you know in the public of demonizing landlords and, you know, personally, I don’t think there’s a better you know, it’s a noble thing to provide shelter for somebody else, you know, And and I think it’s a great profession. It’s a hard profession. And I don’t think policymakers appreciate how difficult it is to be a landlord. And you get very little sympathy. And I wish we could have done more, but we were in our own box, if you will.

Buck: Well, at least we get the tax benefit.

Mark: That’s it’s true.

Buck: So we shift gears a little bit here and talk a little bit about the, you know, the the bank failures and maybe more specifically the the the bailouts. And again, I’m I’m looking at this from your perspective, as you know, as a libertarian and the outcome of this in the long term and the implications of all of this, frankly, I mean, even going back to our discussion here of, you know, essentially demonizing owners and not providing anything, any support for them in the large apartment building space and then going here and, you know, and then the banks have these bailouts that, you know, we’ve had FDIC protections and all that kind of thing for years and years. And the next thing you know, it’s actually challenged and boom, you change it a lot. So tell me, tell me what’s what do you think all this?

Mark: I’m extremely frustrated with the response. And, you know, one of the things you may recall and I know this is probably little weeds per COVID, but in 2020 there were big calls to assist have the government assist mortgage servicers because of some of the assistance that was provided. And I walk through in the book, you know what it’s like to be in the hot seat of getting 99% of the phone calls.

You’re getting to rescue companies and bailouts. And of course, there were lots of industries, airlines, others, cruise ships that got bailouts in 2020. So one of the reasons I write the book was I wanted to convey to that to the public, you know, what it’s like to be the recipient of all of demands for bailouts. Personally, I don’t I still don’t think that while we’re still getting information that the Silicon Valley Bank rescue of the depositors was was justified, I don’t think it’s systemically important. It’s not a big bank, obviously, it’s an important bank for Silicon Valley. But, you know, the uninsured depositors would have gotten $0.90 on the dollar, which to me, I understand who wants to take a haircut. But, you know, you have to have that market discipline. I thought the initial messaging on the part of the administration was muddled. You know, you didn’t know from day to day whose deposits and what banks were covered. So to their credit, the first Republic assistance was done better. It’s not it’s not perfect or not well, because the cost of it still looks extremely. I so I do worry that, you know, we have set out a standard where, you know, if you’ve got deposits over to 50, are they covered by the government or are they not?

And those are depending on what banks are in. And I very much worry that, you know, people are going to look at this and say, I’m much better off if I’ve got big deposits. Having it with Chase or, you know, Bank of America than I am with a community bank. And one of the reasons this concerns me, of course, is the community banks and the regional banks are incredibly important sources of small business lending. They’re important, you know, as you know from being a physician, if you’re you’re not going to go to chase necessarily for your loan to start your your doctor’s office, you’re going to go to community regional bank. And they’re also important sources of construction lending. So I worry that part of this consolidation that this will drive is going to make it harder to get certain types of lending.

know, obviously, I mean, I mean, this is probably a contrarian view, but I think the uninsured depositors pulling their money out of Silicon Valley Bank did us a favor because judging from the reports and the research was done, it would have taken the regulators another six or 12 months to do anything and the hole would have been deeper and it would have been more so to me. Having uninsured depositors forced the closure of a bank that the regulators should have been closed in already is generally a good thing. And I think we need more market discipline, not less. You know, the Fed and the FDIC have all done kind of back after action reports. And it’s not pretty. I mean, it really is. I guess I put it this way for an investors perspective, if you don’t have strong faith in the management of a bank, then you should have nothing to do with that bank because the regulators are not going to address it on a timely basis.

So and the reason I guess I’d almost put it this way, the kind of regulatory failures we saw at Silicon Valley Bank by the Fed are more the norm than they are the exception. And you should never necessarily, I guess, a roundabout way of saying I don’t trust the government to do your due diligence for you. They’re not going to do it.

Buck: You know, the party line, literally the party line, right. Yelling Paul Biden, they they’re they’re insisting that the banking system is sound. Right. I’m curious in your take on that because to me, you know, obviously and maybe this is stratified in terms of the community banks and the big banks in all that. But is your what’s your take?

Mark: Well, first, let’s note what seems to be, at a minimum, a tension, if not a contradiction, which is they tell us on one hand the system is fine and sound, but they also tell us the system can’t withstand uninsured depositors. In the Silicon Valley Bank taking a 10% haircut. So in which is it? If the system can’t take that, that it’s probably not fine inside. So they need they kind of need to make their choice. Personally, I think, you know, the way they look at this is Silicon Valley Bank had about half a dozen serious problems or serious vulnerabilities. Your typical bank, your typical regional small bank has one or two of those, like a lot of banks have Treasuries and Fannie and Freddie securities that they haven’t fully, perfectly hedged against and they’re going to take losses on.

So at this point, I would say I’m expecting four or five more regional banks to get in trouble and to perhaps even fail. And in fact, or at least the reality of it. But that said, I think it’s I think it is concentrated in a handful of banks. This isn’t a problem where the entire system, if you think back to the savings and loan crisis in the eighties, you were at points for the at that entire industry was insolvent economically. That’s not the case with the banking industry today. You have important but not systemically overwhelming chunks that are in trouble. And my view is I think you need to deal with those institutions directly. You know, you get you get this argument from the administration that there’s contagion. It’s not really contagion. It’s the fact that you’ve got some of these institutions that are functionally insolvent and investors are waking up to it.

You also have the situation where, you know, in the year or so leading up to the failure of Silicon Valley Bank, you’re about 800 billion in deposits taken out of the system. That’s not surprising because the banking system during the pandemic grew by $5 trillion in deposits on a base of 13 trillion. And, you know, when people were getting zero for their alternatives and maybe that was acceptable, but in a world where you can get four or 5% on three month T-bills, you’re going to leave that deposit. So I guess one way is I expect over the next 12 months to at least another trillion. On the positive side, the banking system for no other reason that you’ve got much better alternatives, whether it’s mutual funds or whether it’s T-bills directly. And that’s going to put stress on some banks, but it’s not going to be enough to sink the system. It will be enough to sink again, another four or five.

Buck: Right. And that that also has, you know, I guess, confidence implications as well. Right. And then we’re talking about, you know, almost certainly a significantly compromised lending environment for small business in all of this. And so, in effect, there is there is a little bit of contagion in terms of what the net net result is on the economy. Presumably.

Mark: There’s an impact. I mean, I’ve never been I mean, I know it’s a commonly used term. I feel like contagion just assumes that like, you know, Silicon Valley bank sneezes and everybody else catches it. Where I think it’s a little more nuanced than that. I mean, first of all, we’re already seeing the regulators clamp down in response. So there’s nothing like a bank failure to make the regulators feel embarrassed that they weren’t doing their jobs.

Mark: And of course, their response to being embarrassed about not doing their jobs is to clamp down on Monday in your particularly got to see this remember signature bank in New York was one of the more important multifamily commercial real estate lenders there as well as a little bit in the crypto space. And you’re certainly seeing already bank regulators clamped down on commercial real estate.

So getting construction lending, getting apartment lending. And you were obviously at a point in the cycle. Well, my view is the apartment sector writ large is already going to be overbuilt. But that said, it’s going to get tougher to get construction lending, small business lending in many instances because of the regulators and sometimes overreacting. But all that said, that’s one part of it. Certainly, you know, I kind of describe it this way, and I’m sure you run into this a lot. As I mentioned, the spreads between alternative investments and deposits have been widening for some time now in many of us, you know, tell ourselves for sometimes days, weeks, months on end, you know, I’m going to rebalance my portfolio at some point and then, you know, you take a while to do that and then all of a sudden there’s a shock like this and you’re just sort of like, okay, today, the next two days, today I’m really going to do it.

And so I think you’re certainly going to see a stress. Like I mentioned, you’re going to see at least a trillion. The deposits leave the system. That’s going to put stress, particularly on regionals and small banks. You know, some of them are going to do fine. But again, it’s going to be tougher to get credit. Certainly, it changes the pessimism. You know, people are you know, despite that, we still continue to have, you know, strong enough job growth. I mean, obviously, I think people are getting much more pessimistic about the economy and that that hits, you know, your willingness to want to invest and start a business in many things. So I do think that these events, you know, are putting a damper in you need to be cautious of numbers that are pre bank failures. Say, for instance, a lot of the, you know, real estate, you know, the single family sales numbers from February were strong, but they were before the these bank failures. And so are we starting to see that put a drag on the market. So what I would say is you got to pay attention to the next two months worth of data to really figure out, you know, are we going to be lucky and have a soft landing or is this going to be a hard landing?

And I think it’s just too early to tell. But, you know, it’s also a reminder, you know, the some of the best investments are made at the bottom of the market. You know, if you’re the person sitting there with us with the liquidity and you can be a provider and seller of liquidity in a stress environment, you can do quite well. And I would argue that’s kind of the Warren Buffett model. And that’s, you know, he waits around for five years or so for everybody else to mess up and then comes in and provides the floor. That’s a great investment strategy if you’ve got the patience and liquidity for it. Yeah.

Buck: What do you think? You know, one of the things that we’re kind of watching is the uncertainty. Certainly apartment building sector things are at a snail’s pace. I mean, there’s virtually like zero market rate, very little liquidity in this market right now. And a lot of that is because of the lending environment. And, you know, Fannie, Freddie, Fannie kind of debt that we’re usually typically looking at in that it’s dried up pretty well in terms of or made the requirements are have been very stringent. Do you what do you think you think that’s going to loosen up any time soon or or what?

Mark: It’ll be at least 6 to 12 months. And I would say we’re in the second or third inning of this game in terms of multifamily correction. And I hate to put it this way, but it’s going to get worse before it gets better. And, you know, we’ve been building apartments at a higher rate than we have since since like the eighties. And so a tremendous amount of apartment construction, A big difference between now and then is a huge amount of it is subsidized. I mean, something like a third to half is typically tax credit properties, and then there’s a lot of local subsidies involved. The reason the importance of that one and one importance to that is it takes a longer for that ship to turn because once you’ve gotten all these subsidies and you’ve gone through all the approval process, you’re going to finish that and you’re going to open it up regardless of whether it covers its costs or whether, you know, you’re going to be able to have, you know, high level absorption of the properties.

So I think we’ve got a lot of inventory coming online and the apartment market, you know, I would probably be someone who would want to be in that cellar right now. But, you know, in 12 months you’re going to get to a spot where perhaps it’s wise to come back into that market as an investor. Of course, you know, as our realtor friends tell us, location, location, location.

So, for instance, I mean, New York is a very different market. Multifamily within, say, Sacramento. And in of course, we’re also in the bizarre world of the California. And your real estate has taken a beating while Florida real estate’s doing well. So, you know, you really have to I’m not going to quite say that we’ve abandoned having some sort of national convergence or similarities or core aspects to it.

But this is one of those things where what’s going on out west is very different for what’s going on in the Southeast. And so you have to be aware of local market conditions because at the end of the day, I mean, the fundamentals for real estate are demographics and income. You know, is the population growing in that area. And, you know, I think after prices reset, which will be painful for California, you’ll start to stabilize. But a lot of people moved out of California during the pandemic. A lot of people were, you know, stretched in terms of affordability. And until that really resets and until you get a little more construction going, their prices just aren’t sustainable.

Relative rents are unsustainable relative to where incomes are in California. So you’re going to continue. We’ve seen it. We’ve seen a painful correction there. We’re going to continue to see that. But again, I would really emphasize for those who really kind of want to be in the real estate game, there are markets of opportunity. You just need to do a lot of research and appreciate that Miami is not you know, it’s not soccer is not Los Angeles. And there’s very big differences.

Buck: I guess the last topic I want to touch on is inflation. This is a Fed on track to kill inflation. And.

Mark: You know, they I think they’ve turned the corner and it’s been painful. Let me be very clear. They are they were so behind the curve. I mean, I’m of the view that they really should have started, you know, normalizing in the second half of 2020. I mean, what we saw that summer in June, July was just such a dramatic job recovery. So there really wasn’t a rationale for the kind of liquidity Fed was dropping in the system later part of 2020. But, you know, we are where we are. I mean, I only raised that to say the best way to deal with these situations is to not to get into them to begin with. But again, here we are. So Powell has been very aggressive.

I actually talk a little bit about in the book how I was involved in his initial selection and some of the pros and cons I saw a lot of people want a little bit of Washington insider take in some of the book. You know, we’ve seen a contraction in the money supply. We’re starting to see a contraction in lending, partly because of the regulatory response. So that said, I still think it will be 2025. And so we’re near the Fed’s 2% target. And so we were going to be the worst of inflation is behind us, but we’ve still got some painful inflation ahead of us.

Buck: It’s just that you think they’re going to keep being hawkish. I mean, they actually kind of took their foot off the pedal in the last.

Mark: Yeah, a little bit. And, you know, first, keep in mind, despite what the Fed might want you to believe, they are a deeply political organization. So perhaps a little backwards induction here, the.

Buck: Presidential election coming up too.

Mark: You. Exactly what I was going to say. So, you know, it would have to be pretty bad on the current pace for on the Fed will not raise rates, nor were they likely lower rates next year in 2024 because of the presidential election. And in fact, I would go as far to say, you know, come the November, December meetings this year, they’re going to be very hesitant to move. So my prediction would be that I think the last window for a rate increase is September, is the September meeting. They may not they may just stand pat then. But I think because, you know, we really need to start to see some changes in the strength of the job market really suggests to me that we’ve got at least one more rate increase coming.

So I don’t think we’re done. And in fact, again, I think the last increase will be a quarter point either July or September, and then I think they’ll be done until after the election. That’s, of course, contingent on things not going sideways in a big way. If we if we are in a deep recession, 20, 25, 28, 2024, they’ll cut rates. But if we’re kind of on the slow in landing inflation moderating, jobs moderating, but still positive, that again, July, September is my expectation. So the last increase.

Buck: Good stuff. Now, the book mark again is Shelter from the Storm How a COVID Mortgage Meltdown Was Averted. Tell us a little bit about that. I mean, obviously, it sounded fairly self-explanatory and.

Mark: I thought it would be, you know, well, there’s the core of it is somewhat self explanatory because, you know, the core story is the kind of how you say should roll it back and say, I was on the Senate Banking Committee in 2008 and I was of the view that much of the response to the mortgage crisis in 2008 was poorly handled.

So to be frank about it, and so part of the narrative of the book is how I looked at how poorly handled things were in 2008. And then, as fate would have it, I happened to be the person in that seat in 2020. And I talk about in the book why we did it differently in 2008. You know, when I walk through kind of decisions, the trade offs, the uncertainties, you know, and why I think it turned out much better.

Now, there are other aspects of it. You know, we talked earlier about the rental issues. Now, one aspect that I thought was incredibly important when we are setting up forbearance programs was we wanted to make sure they didn’t punish people to go back to work. And so one of the problems in 2008 was you would lose a lot of your mortgage forbearance if you started working.

And so we wanted to make sure we had a program that didn’t punish work. And that’s talked about in the book. There’s some again, I mentioned, you know, why we said no to bail out some of the mortgage industry and kind of the the ins and outs of mad games, some leadership lessons, you know, on terms of coming into a very troubled agency and give a background on that, how we kind of turned that around. And of course, a few insider stories here and there. So those are just kind of interesting, what it’s like to try to guide an agency in a mortgage market crisis. Now, I just wanted to put that out there and let people know why we made certain decisions in some way. So I think it’s a fun read, little stories and anecdotes here and there, as well as probably more than you ever want to know about the mortgage market.

Buck: Great. Mark, thanks so much for being on. Well, from your podcast.

Mark: Buck, it’s been a pleasure.

Buck: We’ll be right back.