B8 Business The Boston Globe WEDNESDAY, SEPTEMBER 11, 2019
By Marcy Gordon
ASSOCIATED PRESS
WASHINGTON — Trump adminis-
tration officials on Tuesday defended
their plan for ending government con-
trol of the mortgage finance giants
Fannie Mae and Freddie Mac, clashing
with Democratic senators over wheth-
er the change would raise home buy-
ers’ borrowing costs and neglect lower-
income homeowners.
The two finance companies nearly
collapsed in the financial crisis 11
years ago and were bailed out with
nearly $190 billion in taxpayer money.
Treasury Secretary Steven Mnuchin
and Housing and Urban Development
Secretary Ben Carson, along with
Mark Calabria, director of the Federal
Housing Finance Agency, testified be-
fore the Senate Banking Committee on
the plan for returning Fannie and
Freddie to private ownership.
The companies are profitable again
and have fully repaid their bailouts.
Under the plan, their profits would no
longer go to the Treasury but would be
used to build up their capital bases as a
cushion against possible future losses.
Fannie and Freddie together guar-
antee roughly half of the $10 trillion
US home loan market. They don’t
make loans. They buy them from
banks and other lenders and bundle
them into securities, guarantee them
against default, and sell them to Wall
Street investors.
Calabria said Fannie and Freddie’s
capital must be bulked up ‘‘to match
their risk profiles’’ and avoid another
bailout. ‘‘In their current financial con-
dition, the [companies] are not
equipped to withstand a downturn in
the housing market,’’ he testified, add-
ing, ‘‘It keeps me up at night.’’
The administration promises to
preserve home buyers’ access to 30-
year, fixed-rate mortgages, which are
the pillar of housing finance.The plan ‘‘would preserve the long-
standing government support of the
30-year, fixed-rate mortgage loan,’’
Mnuchin said. ‘‘That support, howev-
er, should be explicitly defined, tai-
lored, and paid for.’’
Mnuchin acknowledged that for
prices of 30-year mortgages to remain
close to current levels, some level of
government support would be needed.
He said Congress should authorize an
explicit, paid-for guarantee ‘‘backed by
the full faith and credit of the federal
government’’ for qualified mortgages.
The guarantee also should be avail-
able to competitors of Fannie and
Freddie as mortgage financers, he said.
The administration initially looked
to Congress for legislation to overhaulthe housing finance system and return
the companies to private shareholders.
But Congress hasn’t acted, and now of-
ficials say they will take administrative
action for the core change, ending the
Fannie and Freddie conservatorships.
They haven’t given a timeline.
‘‘The Trump plan will make mort-
gages more expensive and harder to
get,’’ said Senator Sherrod Brown of
Ohio, the panel’s senior Democrat.
A flashpoint came over the issue of
affordable housing. Fannie and Fred-
die currently have mandated targets
for helping low-income and minority
borrowers to buy homes. A change
outlined in the plan, which would have
to be approved by Congress, would re-
place Fannie and Freddie’s affordablehousing goals with more ‘‘tailored sup-
port’’ for first-time buyers and low-
and moderate-income borrowers. ‘‘We
want to do it in the most effective way,’’
Mnuchin said.
Those proposals are ‘‘about leveling
the playing field for Wall Street,’’
Brown said.
Senator Mike Crapo, Republican of
Idaho, the panel’s chairman, has previ-
ously proposed legislation to overhaul
the housing finance system. He said at
the hearing that the administration’s
plan is close to his proposal, but ‘‘my
strong preference remains to fix it
through comprehensive legislation.’’
Senator John Kennedy, Republican
of Louisiana, implored the officials to
put a proposal before Congress.Sparks fly over plan for Fannie and Freddie
By Mark Chediak
and Steven Church
BLOOMBERG NEWS
SAN FRANCISCO — California
utility giant PG&E Corp. has issued
its long-awaited plan for emerging
from the largest utility bankruptcy
in US history: Raise debt, offer eq-
uity, and cap wildfire liabilities that
led to its collapse at $18 billion —
less than half of what victims and
insurers want.
The plan has already sparked
opposition.
The proposal is “unacceptable,”
said Cecily Dumas, an attorney rep-
resenting fire victims in the bank-
ruptcy. “If PG&E moves forward
with this plan, we would urge vic-
tims to vote no,” she said.
Wildfires blamed on PG&E’s
equipment destroyed tens of thou-
sands of structures across Northern
California in 2017 and 2018, killed
more than 100 people, and buried
the company in so many legal
claims it was forced to file for Chap-
ter 11 in January.
The plan it submitted in federal
court Monday kicks off the most
contentious phase yet of a bank-
ruptcy that’s attracted some of the
biggest names in the financial
world, including Pacific Investment
Management Co. and Elliott Man-
agement Corp.
Since the company’s collapse —
what’s been described as climate
change’s largest financial casualty
to date — wildfire victims, state pol-
iticians, activist investors, and rate-
payer advocates have clashed over
the company’s future.
PG&E chief financial officer Ja-
son Wells described the company’s
plan on Monday as a “crucial step
in a multistep process” and said it
may eventually be revised.
Mike Danko, a lawyer represent-
ing wildfire victims, called the plan
“dead on arrival.”
Complicating PG&E’s proposal
is the fact that claims tied to the
blazes are getting tallied in a sepa-
rate court process that’s only be-
gun. While the company has given
estimates, it may be months before
a clear picture of the liabilities
emerges.
Any exit plan hinges on that esti-
mate. The official tally could lead to
an entire rewrite of PG&E’s reorga-
nization. A total that’s higher than
PG&E is capable of paying threat-
ens to wipe out current sharehold-
ers since, under the US Bankruptcy
Code, fire victims would be paid in
full first.
That puts PG&E in a tenuous po-
sition as key creditor groups clamor
to pitch their own restructuring
proposals to US Bankruptcy Judge
Dennis Montali. In August, Montali
said he doesn’t expect PG&E’s plan
to be the final since some details ar-
en’t yet available. But he said the
company must present something
credible or else he may open the
door to rival ones.
The company has until June to
get out of bankruptcy if it wants to
participate in a fund recently estab-
lished by California to help utilities
cover the cost of future fires. The al-
ternative is facing the prospect of
another catastrophic blaze that
could force it into financial ruin
once again.PG&E plan
for liability
cap of $18b
draws ire
Apart from the pricing, we got
an array of predictably
impressive products, especially
that new iPhone Pro with three
cameras on board.
You’ll pay plenty for this
phone — $999 for the base
model, or $1,099 for the larger
Pro Max.
Apart from the cameras, there
are major upgrades in screen
quality, as well as improved
water resistance, a Face ID
upgrade so the phone will unlock
itself faster at the sight of you,
and, above all, a powerful new
set of chips optimized for
artificial intelligence.
Why would a phone need AI?
Take another look at the three
rear cameras: one telephoto, one
mid-range, one wide-angle.
Apple will use the iPhone’s
computers to do remarkable
things with the images from each
of them.
For instance, an upcoming
software enhancement will let
the iPhone shoot nine images
uTECH LAB
Continued from Page B
with each of its three cameras,
every time you take a shot.
The onboard AI will then
figure out which individual pixel
from each image looks the best
and assemble them into a
finished photo. That stunt will
require insane amounts of
computation, but Apple says its
new iPhone chip runs a trillion
operations per second, so never
mind.
Even more impressive is what
the new iPhone Pro can do using
an app called Filmic Pro. This
app will display separate video
streams from all three rear
cameras and the front camera,
all at the same time, and let you
record any two of the video
streams simultaneously. Then
you can edit them together as
you like, right on the phone —
the iPhone’s computer is that
powerful.
I’d never pay $1,000 for a
phone. But there are plenty who
might spring for an iPhone just
to get hold of this camera. Memo
to companies like Canon and
Nikon, already hammered byfalling camera sales: It just got
worse.
Also on tap Tuesday was a
new $399 Apple Watch, mainly
distinguished by a screen that’s
always on. No more having to
flip your wrist to see the time.
That’s nice.
There was a new lower-priced
iPad, too, slightly larger than the
model it replaced and priced at
$329.
And as is its practice, Apple
cut prices on some existing
phones: The base model of the
iPhone XR is now $599, while
the iPhone 8 is reduced to $449.
But the rollout of Apple’s new
online services was the most
important of Tuesday’s
announcements, more so than
even the new iPhone. We all have
phones, and tend to keep them
for years. So Apple needs a new
way to make money, through a
recurring stream of cash from its
loyal fans.
It worked for Microsoft,
which earns billions selling pay-
as-you-go software and
computing services to thousandsof businesses. Apple plans to do
it by collecting monthly
subscription fees from hundreds
of millions of consumers.
The company’s doing all right
with Apple Music, second only to
Spotify. So why not gaming? For
$4.99 a month, Arcade promises
access to 100 exclusive games
produced by major developers
such as Capcom and Konami.
Up to six family members can
play for this price, using any
Apple device. And the first
month is free.
As for Apple TV Plus, I was
torn about signing up for yet
another streaming service. But
the trailer for one of its
upcoming original shows, “For
All Mankind,” was nearly
irresistible to a space geek like
me.
And at $5 a month, Apple has
made up my mind for me. As
soon as the Apple TV app rolls
out for my Samsung smart TV,
I’m there.Hiawatha Bray can be reached at
[email protected].FromApple,lessthanexpected—theprices,thatis
JOSH EDELSON/AFP/GETTY IMAGESApple chief
executive Tim
Cook (left)
spoke during
Apple’s product
event Tuesday
at company
headquarters
in Cupertino,
Calif., as did
vice presidents
Greg Joswiak
(top right) and
Phil Schiller.ASSOCIATED PRESS
NEW YORK — The founder,
chairman, and chief executive of
Victoria’s Secret parent L Brands
says he is ‘‘embarrassed’’ by his
former ties with the disgraced fi-
nancier Jeffrey Epstein.
Les Wexner delivered the re-
marks during his opening ad-
dress Tuesday at the company’s
annual investor day in Columbus,
Ohio. The remarks came months
after reports of his ties with Ep-
stein surfaced.
Being taken advantage of by
someone ‘‘so sick, so cunning, so
depraved is something that I’m
embarrassed that I was even
close to,’’ Wexner said, according
to a recording of the meeting.
‘‘But that is in the past.’’
Epstein was arrested in July
on federal sex-trafficking charg-
es, drawing new attention to alle-
gations he had sexually exploited
women and girls. He killed him-
self in jail in August while await-
ing trial.
Wexner has said he complete-
ly severed ties with Epstein near-
ly 12 years ago. Epstein started
managing Wexner’s money in the
late 1980s and helped straighten
out the finances for a real estate
development backed by Wexner
in a wealthy Columbus suburb.
It was through Wexner that
Epstein acquired his Manhattan
mansion, a seven-story, 21,000-
square-foot former prep school
less than a block from Central
Park.
Wexner sold his entire interest
through which he owned the
home to an entity owned by Ep-
stein on Nov. 11, 1998. The
home, located across the street
from the Frick Collection and aresidence owned by Bill Cosby,
has been valued at approximately
$77 million. It’s considered one
of the largest single residences in
Manhattan.
Wexner publicly accused Ep-
stein of misappropriating ‘‘vast
sums’’ of his fortune after Epstein
was charged by federal authori-
ties this summer. He didn’t offer
details on the alleged thefts.
The apology comes as Wexner,
along with other L Brands execu-
tives, are under pressure to turn
around its once crown jewel
brand Victoria’s Secret after loyal
fans have fled for other alterna-
tives like Adore Me and Rihan-
na’s Savage X Fenty lingerie col-
lection that offer more comfort-
able fits and a more inclusive
image.
L Brands’ chief marketing offi-
cer, Ed Razek, resigned in August
after making controversial com-
ments last year about why trans-
sexuals shouldn’t be models at itsannual fashion show. Victoria’s
Secret also has said it would pull
its iconic annual fashion show
from network TV.
At Tuesday’s investor meeting,
the company offered videos of a
new ad campaign that offered
fuller figure models. Still, the
plan to turn around the Victoria’s
Secret brand was not packed with
many details.
L Brands’ shares rose nearly 4
percent to close at $18.56 Tues-
day. Shares have been down near-
ly 33 percent since January.Executive ‘embarrassed’ by ties to Epstein
CEOofVictoria’s
Secretowneradds
it’s‘inthepast’
TheTrumpplan‘wouldpreserve
thelongstandinggovernment
supportofthe30-year,fixed-rate
mortgageloan.’
STEVENMNUCHIN,secretaryoftheTreasury‘TheTrumpplanwillmake
mortgagesmoreexpensiveand
hardertoget.’
SHERROD BROWN,Democratic senator from OhioJUSTIN SULLIVAN/GETTY IMAGESJOSH EDELSON/AFP/GETTY IMAGESJAY LAPRETE/ASSOCIATED PRESS/FILE 2014It was through
Les Wexner
(above) that
Jeffrey Epstein
acquired his
Manhattan
mansion, a
seven-story,
21,000-square-
foot former
prep school less
than a block
from Central
Park.