Bill Owens: Confounding And Confusing Events 10/14/19

The treasury has announced that Fannie and Freddie will be authorized to retain portions of their earnings in order to rebuild their capital position up to approximately 100 billion dollars as opposed to distributing these sums to the Treasury.  This makes great sense as these two entities are extremely important for all of us who purchase homes, as well as the strengthening of community banks and our economies in general. The process, although somewhat technical, basically has Fannie and Freddie purchasing mortgages from banks, which puts cash back into the hands of the banks, allowing the banks to continue to offer mortgages.  If that did not occur, then banks would only have that portion of their earnings and loan repayments that were not used for expenses or distributed to shareholders to reinvest, thus reducing their ability to continue to make home loans. All of these issues arose out of the 2008 crisis, when the Federal Government had to bail out these organizations after years of mismanagement.

I just finished visiting Scotland during the last two weeks and had the opportunity to speak to a number of important sources about Brexit issues- local cab drivers and shop keepers. These folks were well informed about Brexit, as well as politics in general.  The clear feeling in Scotland is that they are opposed to a No Deal Brexit, although in many cases they support the underlying idea of giving some further control back to individual countries.  A No Deal Brexit, they clearly understand, would create chaos in the marketplace as currency exchange rates would be complicated and there would be disruption to long established supply chains that traverse multiple countries, much as we have under NAFTA.

As Brexit comes closer (October 31st), the battling goes on with Mr. Johnson’s latest proposal being rebuffed by France, Germany and the Irish Republic- note Northern Ireland isn’t pleased either.  Mr. Johnson continues to paint a picture that the outcome is within the control of the British government.  In fact, while the British government has some impact on this process, the reality is that if the EU does not agree to a deal with Britain or to extend the time, then there will be a no deal Brexit.  My guess is that is exactly what Mr. Johnson is hoping to accomplish, to put out proposals that he knows will not be acceptable to the EU and in particular France, Germany and the Republic of Ireland, in the hopes of creating a situation where he can claim that the reason for a no deal Brexit is that the EU failed to agree. 

POTUS’s comments on the Turkish invasion of Syria, which is focused on the Kurds, produced this memorable quote, if Turkey “does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey.”  Who would make such an embarrassing pronouncement?

It is clear that Mr. Trump took great pains to move the actual recording of the telephone conversation with the President of the Ukraine, to a more secure server and it is reasonable to assume that he failed to fully and accurately have transcribed the conversation which was released publicly.  I would also note that polling has moved rather rapidly to a small majority of Americans who are in favor of proceeding with the impeachment inquiry.  All those who second guessed Speaker Pelosi’s actions failed to take into account that, more than likely, she had some polling in hand which presaged the polling results which have came out since the announcement to impeach.

It appears that Secretary of State, Mike Pompeo, has placed himself in an awkward position.  He was one of the leaders of the Benghazi investigation and frequently indicated he would not tolerate “dithering” by an Obama Administration State Department that he called “deeply destructive of getting the American people the facts that they needed”.  This time it’s different?    It is always striking when one is bitten by their own words.  Mr. Pompeo has proved himself not to be worthy of the position of Secretary of State.  Mr. Tillerson shines brightly by comparison.

We also have Republicans indicating that they don’t care what is happening with regard to the whistleblower issues or they are silent.  One whistleblower is on record and two more are in the wings. 

Rudy Giuliani’s “friends” were indicted for illegal campaign contributions.  Is Rudy next?  

It is also important to note, although Republicans are continuing to make it sound as if POTUS must be tried under the “beyond a reasonable doubt” standard, the determination of what’s a high crime and misdemeanor is determined solely by Congress as provided for in the Constitution.

On October 18^th, new tariffs against European goods will go in effect, in the amount of 25%.  We will pay more for Spanish olive oil, Scotch whisky and French cheese.  This is just the latest increase in cost for the US consumer, irrespective of whether or not Mr. Trump asserts that those tariffs will be paid by the Spanish, the Scotch or the French.  It is remarkable to me that Mr. Trump continues this trade policy when it’s been a clear failure with regard to China and he has been unable to close the deal on the USMCA.

Speaking of the USMCA, Mr. Pence continues to meander around the country urging passage of the bill, but is spending his time in places that have no impact on the Speaker.  He needs to do several things if he is going to make this into a fruitful endeavor, the first being the development of proposals from the US trade representative to solve the issues that the Speaker is concerned about, second, he needs to reach out to labor unions and others in order to understand what their concerns are and assist the trade representative in coming up with solutions.  Otherwise, all this activity is simply fake news.   

The ongoing saga of the Ukraine continues with Senator Johnson now becoming embroiled in the process, and attempting to deal with his own admission that diplomats have told him that this was in fact a quid pro-quo.  My suspicion is we are moving close to the Nixon tapes scenario, in which the actual recording will be demanded of the July call.  This is unfortunately deteriorating into a circus, when in fact the Democrats could have controlled this, much like they did during the Nixon impeachment and unfortunately, we don’t have a Peter Rodino in charge to give some dignity and order to the process.  Adam Shift’s parody was wholly inappropriate and I believe shook the confidence of many people who were likely on his side.

POTUS decided recently that he is going to blacklist approximately 25 Chinese firms which would preclude them from investing in the United States.  This comes just days before negotiations were to begin again.  The impact was an immediate drop in the Stock Market as investors determined that the likelihood of a successful outcome of these negotiations is very small and that the trade war would continue.  Then of course the market recovered on the news that the two Presidents would meet.  On Friday, an announcement that progress was being made and was released.  We’ve been here before.   

And finally, the Liberals now lead in the Canadian elections by .5% nationally, in spite of the black face scandal with the NDP securing 14.1% of support and Green’s 9.7%.  A coalition is in the offing.

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