Tag Archives: Cornell University

Cornell Law School Is Hiring a Transactional Clinician

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File:Cornell University Law School, Jane Foster Library addition entrance.jpg - Wikimedia Commons

Cornell is hiring a transactional clinician to be based in Ithaca in the Entrepreneurship Law Clinic and the Blassberg-Rice Center for Entrepreneurship Law.

The appointment will be to the long-term, presumptively renewable, contract track for permanent clinical faculty at Cornell Law School, with voting rights and academic leave rights consistent with the other permanent clinicians.

The full job posting is linked here.

The application deadline is September 30, but candidates are encouraged to apply early.

Mamdani and Affordable Housing Development

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CNN quoted me in Zohran Mamdani Has Big Housing Plans. Here’s What Stands in The Way. It reads, in part,

Mamdani’s rent freeze plan could undermine his goal of building 200,000 publicly subsidized, rent-stabilized, permanently affordable homes over the next decade for low-income households and seniors.

That’s because the private sector may be dissuaded from participating if these buildings don’t include market-rate housing. The private sector has a “very important role” to play in building housing, Mamdani has said.

“A rent freeze will change how a conversion might pay off for the developer,” said David Reiss, a law professor at Cornell University who served on the Rent Guidelines Board under Mayor Bill de Blasio.

And to be permanently affordable for extremely low-income renters, it will require deeper government subsidies than Mamdani has pledged, experts say. Previous New York City mayors have attempted to produce housing for a wide range of incomes to help offset higher subsidies for deeply-affordable units.

“It’s in the right direction to focus on people with the greatest affordability challenges,” said Alex Schwartz, an urban policy professor at The New School and a current member of the Rent Guidelines Board. “It’s important to recognize that the capital dollars won’t go as far in terms of total numbers of units if they only go toward people with extremely low incomes.”

Mamdani wants the city to borrow $70 billion to build affordable housing over the next decade, on top of the roughly $25 billion it already plans to invest.

That’s no easy task – he will need state approval since the plan would exceed the city’s debt limit by around $30 billion, as well as the New York City Council’s approval of zoning reforms that would make it easier to build.

“This would be a significant increase in city capital to produce deeply affordable housing,” said Rachel Fee, the executive director of the New York City Housing Conference, a non-profit affordable housing policy and advocacy organization. “It’s not something he can just implement on his own. It will take a political coalition to make this happen.”

 

Bullying the Fed

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Fed Chair Jerome Powell

Central Banking quoted me in Economists Denounce Trump’s ‘Bullying’ of Fed Chair (sign up required). It opens,

Economists have attacked what they regard as US president Donald Trump’s bullying of Federal Reserve chair Jerome Powell, describing it as dangerous for the central bank’s continued independence.

On June 30, Trump posted on his social media platform a copy of a handwritten letter to Powell showing interest rates around the world. In the letter, Trump had written: “Jerome, you are as usual, too late. You have cost the USA a fortune, and continue to do so. You should lower the rate by a lot. Hundreds of billions of dollars being lost. No inflation.”

Along with the note, Trump posted that “Jerome ‘Too Late’ Powell, and his entire Board, should be ashamed of themselves for allowing this to happen to the United States. They have one of the easiest, yet most prestigious, jobs in America, and they have FAILED — And continue to do so”.

He added: “If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest Cost. The Board just sits there and watches, so they are equally to blame. We should be paying 1% Interest, or better!”

On July 1, Powell said the Fed would probably have lowered rates already had it not been for the tariffs and trade policies introduced by the Trump administration.

Ralf Fendel, professor of economics at WHU – Otto Beisheim School of Management in Germany, says Trump’s note bears all the hallmarks of political interference.

“Handwritten personal correspondence is traditionally reserved for heartfelt gratitude or strategic diplomacy, but not for exerting pressure on an independent central bank,” he tells Central Banking. “In resisting such pressure, Mr Powell is upholding the Fed’s institutional credibility and responding appropriately to a macroeconomic environment clouded by trade policy uncertainty and various economic risks.”

Fendel adds that Fed decisions must be guided by economic data and not the demands of the White House.

William English – professor of economics at Yale University, and a former director of the Fed’s monetary affairs division and secretary to the Federal Open Market Committee (FOMC) – says that having a president who is so publicly critical makes the Fed’s job more complicated. “But they have their mandate and will do their best to achieve that,” he says. “We’ll see how it goes!”

Francesco Bianchi, professor of economics and department chair at Johns Hopkins University, says the most recent remarks by Trump represent a turn for the worse.

“Such a confrontational stance cannot be good for central bank independence,” he says. “Powell probably feels that he needs to push back against the pressure and that he has a bit more freedom given that his second term is coming to an end.”

Fed historian Robert Hetzel adds that Trump appears to want to return to a time when the central bank was subservient to the US Treasury.

David Reiss, professor of law at Cornell University, says there is an extensive history of presidents “jawboning” the Fed chair to lower rates. However, he says central banks work better when “insulated from the political exigencies of political leaders”.

“Paradoxically, bullying the central bank can lead to interest rates increasing, as markets demand a higher risk premium as trust in the central bank’s decision-making decreases,” he says. He also concurs with Powell’s assessment that tariffs are inflationary through many channels.

Trump’s Plans to Privatize Fannie and Freddie

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from Cato Institute website, https://www.cato.org/people/mark-calabria

Mark Calabria, OMB Associate Director for Treasury, Housing, and Commerce

I was interviewed on  WBUR-FM’s On Point (distributed by American Public Radio), hosted by Meghna Chakrabarti for an episode on How Trump Plans To Get Government out of the Mortgage Business. The link has the recording of the show as well as a transcript.

The transcript of the interview starts,

CHAKRABARTI: Now that President Trump is back in the White House, it seems that he intends to get the job done this time around. Mark Calabria has returned to Trump’s administration, this time working on housing policy at the Office of Management and Budget. Bill Pulte is now director of FHFA, and he just made the highly unusual move of appointing himself chair of both Fannie Mae and Freddie Mac, making the regulator and the regulated basically the same.

Pulte also fired 14 of the 25 sitting board members at Fannie and Freddie. A shakeup many are suspecting is a first step in leading these two companies out of government control and into privatization. We’re talking about a huge part of the U.S. economy that underpins the housing market. So this hour, we want to explore what privatization of Fannie and Freddie actually means, what it should look like, and how it might have an impact on homeowners and the housing market.

So to do that, David Reiss joins us. He’s a clinical professor of law at Cornell Law School and Cornell Tech, an expert in housing finance and policy. Professor Reiss, welcome to On Point.

DAVID REISS: Meghna, thank you so much.

CHAKRABARTI: I have to tell you that I actually can’t believe that it’s been 17 years since the financial crisis of 2008.

Let’s dust off the memory banks professor and go back to before 2008 and start there. Can you just remind us like what Fannie Mae and Freddie Mac were, what their purpose was, who owned them, et cetera?

REISS: I’m gonna go even a little bit further back than Fannie and Freddie’s creation, because I think it’s really gonna help people visualize what’s at stake here.

And if you think back to the 19th century and somebody was trying to buy a house, they didn’t have that many options. A house has always been a very expensive thing to buy, so they need to borrow some money to buy a house. And how could you do that?

Maybe if you’re rich, you could do it, or had a rich uncle, but otherwise you need to go to somebody who has capital and that you could borrow it and give them some interest in return. And pay them back over time, and be able to live in that house while you’re paying back the amount of money that you borrowed. And so if people think of It’s a Wonderful Life where there’s the Bailey Brothers building in loans and where they, people deposit their small savings into the buildings and loan.

And then some people are then able to borrow some money from the buildings and loan for mortgages. And there’s the famous scene where there’s a panic at the bank. And Jimmy Stewart says, Mrs. Kennedy, your money is in Mrs. Smith’s house. And Mrs. Smith, your money is in Ms. Macklin’s house.

And that’s the way it was done in the 19th century and the early 20th century. But there were real limitations to that. Sometimes communities didn’t have a lot of capital to lend people, so maybe in out west or in the Midwest there wasn’t a lot of capital, like there might’ve been back east in Boston or New York.

And so people who could have handled the mortgage just didn’t have access to it. It was like they were living in a dry area, and the fresh flowing credit didn’t reach their dry community. So during the Great Depression and the New Deal the government started to intervene, to spread credit out across the country in a way that kind of provided liquidity to all the communities where people wanted to borrow.

And Fannie Mae was a creature of the New Deal, but really took off in the ’70s along with its sibling Freddie Mac. And effectively, what those two companies were designed by Congress to do was to ensure that capital could go across state borders in a way that banks were typically not allowed to do. And they effectively created at first a national market for mortgage credit, and effectively when they access the global credit markets over time, an international global market for credit. So they’re really intermediaries.

Plunging Minority Homeownership Rates

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Construction Dive quoted me in Why Minority Homeownership Rates Plunged After the Housing Crash — and How to Reverse The Trend. It opens,

The recovery from the 2007 U.S. housing crash is still underway, with the ramifications of foreclosures and subprime mortgages still playing out for many current and potential American homeowners. Northeastern markets are still struggling to clear out crisis-era inventory, largely due to foreclosure laws, and members of Generation X — one of the hardest hit groups during the crash — are just now building up the required financial strength and confidence to claw their way back to homeownership.

While the Census Bureau Housing Vacancy Survey indicated that U.S. homeownership overall was 63.5% in the first quarter of 2016 — down significantly from a 25-year average of 66.2% — the groups encountering the most difficulties snapping back from the housing crisis are the black and Hispanic populations.

The Census Bureau found that 41.5% of black households and 45.3% of Hispanic households are currently homeowners, compared to 72.1% of white households. And last year, while the Urban Institute projected that Hispanic homeownership would rise over the next 15 years, it also predicted that black homeownership would drop to 40%.

The stagnant and declining minority homeownership numbers are clear, but experts have varying views regarding why this situation is occurring and what can be done to reverse the trend.

 *     *     *

In Newark, NJ, for example, entire minority neighborhoods were targeted with home renovation schemes, which ended in high-interest home equity loans for the consumer, according to David Reiss, professor of law and academic program director for urban business entrepreneurship at Brooklyn Law School. “You would see entire streets with home improvement projects through the same company,” he said.

A study by University of Buffalo professor Gregory Sharp and Cornell University professor Matthew Hall found that “race was the leading explanation for why people lost homes they owned and turned back to rentals.” Sharp and Hall said that minorities were “exploited” by the mortgage lending system, which led to blacks being 50% more likely than whites to lose their homes and enter the rental market.

After the housing market crash, there weren’t enough educational resources and financial literacy programs available to minority groups to help them navigate the “new normal” of adjustable-rate mortgages and increases to their monthly payments, according to Franky Bonilla, with Churchill Mortgage in Houston. “Without access to even the most basic information, such as how to save money or properly document income, many borrowers were unequipped to overcome (these problems), and, as a result, many owners walked away from their homes,” he said.

How to boost homeownership among minorities

So with minority homeownership rates lagging — and in some cases sinking — since the housing crisis, what’s the answer to reverse the trend?

Bonilla, who is also a member of the National Association of Hispanic Real Estate Professionals (NAHREP), said approximately 60% of his business comes from minority homeowners and that this group in particular could benefit from borrower education and outreach, such as bilingual employees, as well as workshops and seminars.

“Lenders with more cultural diversity have an advantage because they can relate and communicate more effectively with individuals who might otherwise feel disadvantaged or intimidated by the mortgage process,” Bonilla said. “In turn, this creates an opportunity to establish a relationship at a personal level and determine which mortgage options are the best fit for each borrower’s unique financial situation.”

Another possible solution to increasing minority homeownership rates, along with homeownership among those who don’t meet the credit requirements for prime loans, is an overhaul of lending criteria for mortgages.

Reiss said there has been a move by some housing advocates to have credit for mortgage purposes reflect factors more indicative of future success as a homeowner. One of the critical issues, however, is to try to determine exactly how much credit is the right amount of credit. “You want to make credit available to people without having excessive default rates,” Reiss said. “Clearly the amount of credit we had in the early 2000s was too much credit, and it ended poorly for many people.”

Reiss added that home lending has always involved a careful balance between underwriting and available credit. “I think everyone would agree that the ‘Wild West’ days of lending were not good for American households in general,” he said.