Attached article in the WSJ today reflects previous concerns on FreddieMae and FreddieMac. Wonder if this is another disaster waiting to happen....
Selva
online.wsj.com
Bush to Name Mark Brickell
To Replace Ofheo's Falcon
By PATRICK BARTA and JEANNE CUMMINGS
Staff Reporters of THE WALL STREET JOURNAL
The White House is replacing the top federal regulator of Fannie Mae and Freddie Mac, possibly opening the door to closer scrutiny of the two government-sponsored mortgage companies.
A White House official confirmed that the Bush administration had asked Armando Falcon, the director of the Office of Federal Housing Enterprise Oversight, to leave the agency a year before his tenure is up to enable President Bush to appoint his own director of the agency. Mr. Falcon, who became director of Ofheo in 1999, was appointed by President Clinton.
Mr. Falcon will be succeeded by Mark Brickell, a former managing director for J.P. Morgan Chase & Co., the White House official said. Mr. Brickell is currently the chief executive of Blackbird Holdings Inc., an electronic trading system for derivatives contracts. Mr. Brickell, who wasn't available to comment, spent 25 years at J.P. Morgan and also served as chairman of the International Swaps and Derivatives Association from 1988 to 1992.
Mr. Falcon couldn't be reached to comment.
Mr. Brickell could be viewed as a credible regulator of Fannie Mae and Freddie Mac because of his background in derivatives, which Fannie Mae and Freddie Mac have turned to with increasing frequency to hedge the enormous risk on their balance sheets. According to Ofheo, the notional amount of the derivatives outstanding at Fannie Mae and Freddie Mac swelled to $1.7 trillion at the end of 2001 from $72 billion at the end of 1993.
Mr. Falcon, by contrast, served for eight years on the legal staff of the Committee on Banking and Financial Services of the U.S. House before being named the head of Ofheo. Prior to his work on the House committee, he was an attorney in private practice.
Mr. Falcon's agency has long been the subject of criticism, especially from Richard Baker, a Louisiana Republican and chairman of the House subcommittee that oversees Fannie Mae and Freddie Mac. Among other things, Mr. Baker has criticized the agency for taking nearly a decade to develop a risk-based capital standard for the companies. Although the standard was recently implemented, the agency has continued to tweak the model, generating renewed criticism about the complexity of the rule.
Some industry observers questioned the timing of the move. That's because also Tuesday, Mr. Falcon's agency released a long-awaited study examining the potential risks to the economy and financial system posed by Fannie Mae and Freddie Mac as they grow.
In the report, Ofheo said that the possibility of either company failing or contributing to a financial crisis is "remote." However it added that in the event that the companies were to fail, it could disrupt the U.S. housing market and broader financial system. Speaking to the Bond Market Association in New York Tuesday, Mr. Falcon added, "it is also clear that the potential disruption from a systemic event involving Fannie Mae and Freddie Mac is much greater than it was a decade or two ago."
Fannie Mae said it couldn't comment on the departure of Mr. Falcon until his departure was formally announced. Sharon McHale, a spokeswoman for Freddie Mac, said "We think that the new director, whoever it is, should be someone that has extensive knowledge about the capital markets" and derivatives. |
