When I was a kid, I played the board game Risk with my brothers. You may remember the game, in which opponents obliterated each other in the pursuit of world domination. As youngsters, my brothers developed their own approaches and strategies around the game: my older brother was the fast-moving aggressor that put little planning beyond his next move, while my younger brother exercised more patience in his extremely careful approach.
It recently occurred to me that these strategies are analogous to some of the roles and actions played out in and around government and our industry over the past few years – particularly as we move toward a convergence of political, economic and industry events in the fourth quarter of this year and into 2013.
My younger brother, in his attempt to stave off attacks and avoid conflict, would amass forces in the Australian territories as a holdout, until another player dared challenge his formidable army. While this is a simplistic comparison lacking the complexities of law, politics and money, its basic components and intentions shadow similar decision-making trends within government and business. This is decision-making driven by the desire to avoid pain, rather than to take an opportunity to lead and create.Â
It has become standard practice, both inside the Beltway and in business, to shift decision-making to more convenient times, angling for a more strategically supportive environment. The people who opt for this strategy are more comfortable making no decision, so they simply build and retain their position. It's a safe posture, ringing of plausible deniability, but is it leadership?
Consider how Capitol Hill handled the federal budget's continuing resolution: lawmakers made a decision a mere 60 days in advance of the end of the federal fiscal year to delay making the actual decision for another six months because they couldn't make the appropriate decisions during the debt ceiling debacle in 2011. This further delay removed the responsibility of actual decision-making and budget appropriation from the shoulders of current legislators and onto those of the 113th Congress and committee members.
In the end, the circumstances forced a decision – in this case, not to make a decision. Yes, we can dismiss this as Politics 101. But it also holds the most risk to the wider economy.
In the game of Risk, each of my brothers won about the same number of games. But in the real world, neither an overly aggressive nor an overly reticent strategy works well in politics or business.
As we approach the end of this year and look ahead to the first quarter of 2013, there is a definitive convergence of critical events and potential fires facing us. Let's consider some of the most pressing dates that await us:
Nov. 6 – Election Day, which may give us four more years of the Obama administration or the ascendancy of Mitt Romney to the presidency. It is safe to assume the current administration will continue with its approach to housing finance; whatever a Romney administration could offer is difficult to say, since the candidate has been vague regarding specific ideas on the subject.
Dec. 31 – If the budget deal does not pass, the government faces the so-called ‘fiscal cliff’ that mandates large cuts in government spending. Nothing is spared here, including federal housing finance programs.Â
Dec. 31 – The U.S. Department of the Treasury is scheduled to discontinue offering any additional support for the government-sponsored enterprises (GSEs). Of course, the GSEs will be in federal conservatorship for four years – another example of delaying much-needed decisions.
Jan. 4 – The 113th Congress will be sworn in. If the current set-up of Republican control of the House of Representatives and Democratic control of the Senate prevails, it is easy to imagine a continuation of the partisan feuding and legislative stagnation, no matter who sits in the Oval Office.
First quarter of 2013 – The Consumer Financial Protection Bureau (CFPB) is scheduled to issue the final decision on risk retention rules and on the long-awaited definitions of ‘qualified mortgage’ and ‘qualified residential mortgage.’
Of course, there are other factors that can shape the political and economic environment: the effects of the latest round of quantitative easing by the Federal Reserve, the additional impacts of still-unwritten Dodd-Frank Act laws, the CFPB's vigorous efforts to redefine how the mortgage banking industry operates, and challenges to the U.S. economy from the long-percolating problems within the Eurozone nations and in the slowing Chinese economy.
The challenge here is to apply a different type of leadership that looks beyond the short term and considers the interdependencies between key actions and their overall impact on the economy and our industry. This is not to say there have not been any bold decisions made during the past few years. But it is difficult to plan a clear course when the political and economic environments are seen as a work in progress.
As kids, the game of world domination often grew tiresome and we would put it aside, grab our baseball mitts and head to the nearest ball field. As adults, however, it's not quite as easy to walk away from a game that grows more cumbersome as time goes by. Eventually, decisions need to be made and reinforced by a consistent industry approach.