Goldman Sachs thinks the US economy is “nearly” recession-proof

For most of 2019, economists at Goldman Sachs generally kept revising their US economy outlooks brighter and brighter. And now, their latest report is the brightest yet, with the investment bank’s research team declaring recession risk to the US economy to be nearly nonexistent, according to CNBC.

It’s an opinion that’s out on a limb, according to CNBC reporter Jeff Cox. “Goldman’s relatively rosy view now is better than the Wall Street consensus,” he writes. 

This is directly from the CNBC coverage:

“Overall, the changes underlying the Great Moderation appear intact, and we see the economy as structurally less recession-prone today,” Goldman economists Jan Hatzius and David Mericle wrote. “While new risks could emerge, none of the main sources of recent recessions — oil shocks, inflationary overheating, and financial imbalances — seem too concerning for now. As a result, the prospects for a soft landing look better than widely thought.”

Of course, only time will tell how the economy will really pan out, but this is a great start and we hope the economy can hold steady for quite some time.

Next week: Housing power lunch with Calabria

Mark your calendars. Here’s your chance to eat lunch with perhaps the most powerful person in housing finance. On January 8th, the Women in Housing Finance will host its WHF Public Policy Luncheon with Federal Housing Finance Agency Director Dr. Mark Calabria.

Director Calabria will address WHF members to talk about FHFA’s regulatory priorities for Fannie Mae and Freddie Mac (“the GSEs”) and for the 11 Federal Home Loan Banks, according to the invitation.

Director Calabria will also talk about his objectives and plans for the GSEs to exit conservatorship, consistent with the Housing Finance Reform Plan outlined by the U.S. Departments of Treasury.

Not a member? Not a problem, go here to register anyway, it’s open to the public. That’s a thing for the WHF, which supports a non-partisan approach to programs to ensure an unbiased forum for discussion and consideration of ideas, proposals, and views. Hopefully, the food being served at the lunch will be as good as what we serve at our NEXT events, which honestly is always pretty tasty, but THAT ONE is out of our hands.

GSEs exit conservatorship? Then what?

At the lunch, Calabria will go into some detail on the plan to release the GSEs from conservatorship, and there are a few rumors around that move. At last November’s #NEXTDC19, a keynote speaker and former Treasury official who helped craft the exit mentioned he did not believe an IPO was a good option to recapitalized the GSEs. Instead, a private placement would work — smaller investor base, true, but more experienced than stock market investors. Calabria has not ruled out an IPO on the stock market for Fannie and Freddie. Oh, the drama.

At any rate, there continue to be instances of the private bond market for mortgages showing more and more life. We’re just into the New Year and Kroll Bond Rating Agency just assigned preliminary ratings to fifty-four classes of mortgage pass-through certificates from Sequoia Mortgage Trust 2020-1, a prime RMBS transaction. This is a way to privately fund prime mortgages through the secondary markets. Translation: More of these are good news for getting more options for originations to home buyers. 

The home owners are all high credit quality borrowers with plenty of equity in the properties they own which are being securitized. The pool is characterized by substantial borrower equity in each mortgaged property, as evidenced by the WA original LTV of 70.9% and WA original CLTV of 71.3%. The weighted average original credit score is 772, which is within the prime mortgage range.

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