Three Key Takeaways from Obama's State of the Union
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Compass Point's Isaac Boltansky provided his three top takeaways form President Obama's State of the Union (SOTU) address last night:
(1) GSE reform was mentioned but the landscape for legislation remains unchanged; (2) student loan debt received a spot in the speech but the President did not aggressively call for student loan refinancing legislation; and
(3) the probability of immigration reform becoming law in 2014 is slowly increasing.
He elaborates on each below:
GSE Reform Mentioned Briefly: Response Tepid and Landscape Unchanged:
What Did President Obama Say? "And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations of Americans."
What is Our Take? The inclusion of a topic in the State of the Union address is no small matter but our sense is that President Obama's GSE reform comment will have no impact on the broader housing finance reform conversation in D.C. The statement lacked specificity and appeared to serve more as a rhetorical bridge between the discussion of MyRA and health care than as a policy point of focus. Furthermore, the Congressional response to the president’s statement could only be described as tepid. Notably, there was a period of ~12 seconds of applause following the GSE reform statement but the bulk of those standing were Democrats. We simply do not believe that President Obama’s GSE reform commentary, or the Congressional response, signal a change in the underlying dynamics of the GSE reform debate and we therefore remain pessimistic regarding the potential progress of legislation in this Congress. Observers should be aware that GSE reform efforts will remain a talking point for lawmakers given the political and fundraising benefits of the issue, but we do not believe there is a path to passage for GSE reform in this Congress and instead believe that 2015 or 2017 are far likelier dates for reform efforts to become law. Please see here for a video that will begin in advance of President Obama’s GSE reform comment.
Student Loan Debt Highlighted but Refi Legislation Not Center Stage:
What Did President Obama Say? "We're working to redesign high schools and partner them with colleges and employers that offer the real-world education and hands-on training that can lead directly to a job and career. We're shaking up our system of higher education to give parents more information and colleges more incentives to offer better value, so that no middle-class kid is priced out of a college education. We're offering millions the opportunity to cap their monthly student loan payments to 10 percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt.” (Applause.)
What is Our Take? There was a market perception that President Obama would dedicate a sizeable segment of this speech to the issue of student loan debt which could then provide a platform for consideration of student loan refinancing legislation (e.g. Senator Warren’s impending bill). While it is notable that President Obama expressed his intention to “work with Congress to see how we can help even more Americans who feel trapped by student loan debt” our sense is that the president appears far more focused on the debate surrounding the value proposition of education. Furthermore, we believe that President’s explicit mention of Pay As You Earn (aka the new Income Based Repayment (IBR)) was important as it highlights the functionality of existing efforts to address outstanding student loan debt. Finally, there was a student of DeVry University (DV- Neutral, $34PT, Tarkan) with ~$90,000 in student loan debt sitting in First Lady Michelle Obama’s box as a special guest but she was not highlighted in the speech. Taken on the whole, we were left with the belief that although the student debt burden will remain an issue in the year ahead addressing it through legislation is not a policy priority for the White House. Please see here for a link to the video that will begin in the pertinent student loan section of the speech.
Immigration Reform Optimism Growing:
What Did President Obama Say? "Finally, if we're serious about economic growth, it is time to heed the call of business leaders, labor leaders, faith leaders, law enforcement -- and fix our broken immigration system. (Cheers, applause.) Republicans and Democrats in the Senate have acted, and I know that members of both parties in the House want to do the same. Independent economists say immigration reform will grow our economy and shrink our deficits by almost $1 trillion in the next two decades. And for good reason: When people come here to fulfill their dreams -- to study, invent, contribute to our culture -- they make our country a more attractive place for businesses to locate and create jobs for everybody. So let's get immigration reform done this year. (Cheers, applause.) Let's get it done. It's time.”
What is Our Take? In recent days there has been an undeniable sentiment shift regarding immigration reform legislation. We continue to believe that the politics defining immigration reform increase the likelihood of legislative becoming law in 2014 and the political commentary in recent days has reinforced our view. As the WSJ recently explained: “House leaders hope to bring legislation to the floor as early as April, the people close to the process said, after the deadline has passed in many states for challengers to file paperwork needed to run for Congress. Republican leaders hope that would diminish chances that a lawmaker's support for immigration bills winds up sparking a primary-election fight.” We expect to have more legislative clarity on this issue at the conclusion of the House Republican retreat on January 31. While the path to passage for immigration reform is far from certain, the effort is clearly enjoying a tailwind at the moment and we expect that to increase as the midterm election nears. Please see here for our note on how immigration reform would impact the money remittance space (and here for our most recent money remittance industry update). Please see here for our most recent report on how immigration reform could impact the P&C space.
The full text of the speech can be accessed here
(1) GSE reform was mentioned but the landscape for legislation remains unchanged; (2) student loan debt received a spot in the speech but the President did not aggressively call for student loan refinancing legislation; and
(3) the probability of immigration reform becoming law in 2014 is slowly increasing.
He elaborates on each below:
GSE Reform Mentioned Briefly: Response Tepid and Landscape Unchanged:
What Did President Obama Say? "And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations of Americans."
What is Our Take? The inclusion of a topic in the State of the Union address is no small matter but our sense is that President Obama's GSE reform comment will have no impact on the broader housing finance reform conversation in D.C. The statement lacked specificity and appeared to serve more as a rhetorical bridge between the discussion of MyRA and health care than as a policy point of focus. Furthermore, the Congressional response to the president’s statement could only be described as tepid. Notably, there was a period of ~12 seconds of applause following the GSE reform statement but the bulk of those standing were Democrats. We simply do not believe that President Obama’s GSE reform commentary, or the Congressional response, signal a change in the underlying dynamics of the GSE reform debate and we therefore remain pessimistic regarding the potential progress of legislation in this Congress. Observers should be aware that GSE reform efforts will remain a talking point for lawmakers given the political and fundraising benefits of the issue, but we do not believe there is a path to passage for GSE reform in this Congress and instead believe that 2015 or 2017 are far likelier dates for reform efforts to become law. Please see here for a video that will begin in advance of President Obama’s GSE reform comment.
Student Loan Debt Highlighted but Refi Legislation Not Center Stage:
What Did President Obama Say? "We're working to redesign high schools and partner them with colleges and employers that offer the real-world education and hands-on training that can lead directly to a job and career. We're shaking up our system of higher education to give parents more information and colleges more incentives to offer better value, so that no middle-class kid is priced out of a college education. We're offering millions the opportunity to cap their monthly student loan payments to 10 percent of their income, and I want to work with Congress to see how we can help even more Americans who feel trapped by student loan debt.” (Applause.)
What is Our Take? There was a market perception that President Obama would dedicate a sizeable segment of this speech to the issue of student loan debt which could then provide a platform for consideration of student loan refinancing legislation (e.g. Senator Warren’s impending bill). While it is notable that President Obama expressed his intention to “work with Congress to see how we can help even more Americans who feel trapped by student loan debt” our sense is that the president appears far more focused on the debate surrounding the value proposition of education. Furthermore, we believe that President’s explicit mention of Pay As You Earn (aka the new Income Based Repayment (IBR)) was important as it highlights the functionality of existing efforts to address outstanding student loan debt. Finally, there was a student of DeVry University (DV- Neutral, $34PT, Tarkan) with ~$90,000 in student loan debt sitting in First Lady Michelle Obama’s box as a special guest but she was not highlighted in the speech. Taken on the whole, we were left with the belief that although the student debt burden will remain an issue in the year ahead addressing it through legislation is not a policy priority for the White House. Please see here for a link to the video that will begin in the pertinent student loan section of the speech.
Immigration Reform Optimism Growing:
What Did President Obama Say? "Finally, if we're serious about economic growth, it is time to heed the call of business leaders, labor leaders, faith leaders, law enforcement -- and fix our broken immigration system. (Cheers, applause.) Republicans and Democrats in the Senate have acted, and I know that members of both parties in the House want to do the same. Independent economists say immigration reform will grow our economy and shrink our deficits by almost $1 trillion in the next two decades. And for good reason: When people come here to fulfill their dreams -- to study, invent, contribute to our culture -- they make our country a more attractive place for businesses to locate and create jobs for everybody. So let's get immigration reform done this year. (Cheers, applause.) Let's get it done. It's time.”
What is Our Take? In recent days there has been an undeniable sentiment shift regarding immigration reform legislation. We continue to believe that the politics defining immigration reform increase the likelihood of legislative becoming law in 2014 and the political commentary in recent days has reinforced our view. As the WSJ recently explained: “House leaders hope to bring legislation to the floor as early as April, the people close to the process said, after the deadline has passed in many states for challengers to file paperwork needed to run for Congress. Republican leaders hope that would diminish chances that a lawmaker's support for immigration bills winds up sparking a primary-election fight.” We expect to have more legislative clarity on this issue at the conclusion of the House Republican retreat on January 31. While the path to passage for immigration reform is far from certain, the effort is clearly enjoying a tailwind at the moment and we expect that to increase as the midterm election nears. Please see here for our note on how immigration reform would impact the money remittance space (and here for our most recent money remittance industry update). Please see here for our most recent report on how immigration reform could impact the P&C space.
The full text of the speech can be accessed here
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