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Monday Morning Cup of Coffee: Feds finally end AIG oversight

Monday Morning Cup of Coffee: Feds finally end AIG oversight

Monday Morning Cup of Coffee: Feds finally end AIG oversight
October 02
06:23 2017



Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

In just the latest chapter of the Trump administration’s deregulation playbook, The Financial Stability Oversight Council, created by Dodd-Frank and comprised of 10 senior financial regulators, including Treasury Secretary Steven Mnuchin, Consumer Financial Protection Bureau Director Richard Cordray and Federal Reserve Chair Janet Yellen, voted to remove federal oversight of American International Group Friday night.

The government bailed out AIG in 2008 with $182 billion, one week after taking over Fannie Mae and Freddie Mac. Ben Bernanke, chair of the Fed during the financial crisis, stated at the time that an AIG failure would be “catastrophic,“ but testified at a Senate committee hearing in 2009 that having to rescue AIG made him more angry than anything else that happened in the crisis.

That week in September nine years ago is painful to remember, and the move to rescue AIG while letting Lehman Brothers fail inspires strong feelings to this day. Indeed, it took until February of this year for former CEO Maurice Greenberg to admit to some of the misdeeds the company engaged in, paying $9 million to the state of New York in the process.

The government sold the last of its shares in AIG in 2012, making a profit of $23 billion, and now regulators have deemed the institution safe enough to remove from regulatory oversight.

From a CNBC article by Adam Jeffery:

“The Council has worked diligently to thoroughly reevaluate whether AIG poses a risk to financial stability,” Treasury Secretary Steven Mnuchin said in a statement. “This action demonstrates our commitment to act decisively to remove any designation if a company does not pose a threat to financial stability.”


Six members of the council voted in favor of removing AIG’s designation including Mnuchin and Federal Reserve Chair Janet Yellen. Three members voted against doing so, including Richard Cordray, director of the Consumer Financial Protection Bureau. SEC Chair Jay Clayton recused himself and did not vote.

Mnuchin had a busy weekend, appearing on a Sunday news show to defend the GOP tax plan unveiled last week, saying that while many details are still unknown, the plan is designed to help businesses, and the middle class. From a Washington Post article by Josh Mitchell and William Mauldin:

“The objective of the president is that rich people don’t get tax cuts,” Mr. Mnuchin said on ABC. “As the president has said all along, the changes to the income tax system are meant to create middle-income tax cuts and also make corporate and business tax competitive so we can bring back tons and tons of jobs and capital to this country.”

Mortgage industry leaders have been cautiously supportive of the GOP plan, which protects the mortgage interest rate deduction and charitable giving while eliminating almost every other type of deduction.

Mnuchin fought back against the suggestion that the tax plan would mean a rising deficit, citing $2 trillion in additional economic growth that would result from the tax cuts.

As we have seen all too often over the last month, natural disasters can wreak havoc on the fortunes of residents in affected areas. They can also cause long-term chaos in real estate markets and in the wake of Hurricane Irma, many have wondered about the prognosis of areas in Florida, particularly Miami. Foreign buyers have made Miami real estate white hot since the financial crisis, but what about post-storm?

Alicia Cervera Lamadrid, managing partner of Cervera Real Estate, penned a column in Sunday’s Miami Herald that pointed to the resiliency of the area’s condo buildings as a positive indicator of the area’s infrastructure.

“FirstService Residential, which represents 350 properties in Miami-Dade, Broward and Palm Beach counties, reported that 69% of its properties powered up within four hours of the storm. Furthermore, 93% of its condos reported as powered up within 72 hours after the storm.


Eighty-one percent of its buildings in the Brickell financial district and 100% of its condos in downtown Miami — the same two neighborhoods whose waterlogged streets were telecast to the farthest corners of the globe — did not lose power, according to FirstService.”

This should reassure international investors, Lamadrid stated, since “International real estate buyers often tell us U.S.-based brokers and agents that solid government, law enforcement and infrastructural strength are the primary reasons for their decision to invest in America.”

For investors looking farther inland may find metros with cheaper housing prices but big upside potential. On Sunday, Bloomberg columnist Justin Fox outlined seven cities that beat the national average on four metrics: population with bachelor’s degree or higher, ratio of median home price to median income, three year job growth and 10-year per capita income growth.

All seven areas seem to represent a good chance to buy before property value rise, but Fox especially likes the four in the Midwest. Check out his conclusions here.

Until next week, keep calm and practice writing twice as much on Twitter.



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