|Former Oklahoma congressman J.C. Watts, once the fourth-ranking Republican in the House of Representatives, last week was named chairman of FM Watch, a policy/lobbying group that monitors the "mission creep" of Fannie Mae and Freddie Mac, strongly advocating that the government-sponsored enterprises (GSEs) stick to their traditional charter knitting of secondary market activities. At the same time, the group has changed its name to FM Policy Focus to reflect "a more policy intensive focus," according to Mike House, FM Policy Focus executive director.
Watts, who will serve part-time as chairman, brings visibility to an organization which has been perceived on Capitol Hill as losing steam. The group also retained the services of Watts' lobbying firm, J.C. Watts Co. Watts succeeds FM Watch founder Gerald Friedman, a veteran of the mortgage insurance industry. FM Policy Focus is funded by major mortgage market players, including American International Group, GE Capital Mortgage Insurance and Wells Fargo. As for the group's new policy focus, one housing industry player in Washington said, "I don't understand what FM Watch is doing to reconstitute itself. It is thought to be on the fringe in GSE policy debates, but Watts might help give it a higher profile."
But House said, "Up until now we had to tell the story about the GSEs and fight through the common wisdom that Fannie Mae and Freddie Mac were untouchable. The agencies and Congress now know about the problems. Today, we are more about changing the policies that give the GSEs advantages over others in the mortgage market. We've gone to a new phase regarding solutions to these problems. Bringing J.C. Watts on board will help move things forward on the GSE regulatory front."
Bert Ely, a GSE critic and principal of Ely & Co. in Alexandria, Va., said, "I applaud the ongoing efforts of the industry to level the playing field between the GSEs and private players and in containing the GSEs' charter creep. This work has put Fannie Mae and Freddie Mac into play politically and I give FM Watch along with the American Enterprise Institute credit for it. There was a sense around town that FM Watch was about to disappear and obviously they have not."
Watts said that he will bring to the job his passion for affordable home ownership and creating the most efficient models for making this a reality. "While few would argue against the benefits of the government-sponsored enterprises to the secondary mortgage market," he said, "there are a few left who would argue there aren't public policy issues with the current regulatory system and with GSEs inability to stay within their charters. It is my intent to focus this organization and its efforts on implementing effective public policy solutions to these problems, thereby diminishing the risk to the taxpayer."
Naturally Fannie and Freddie have a different take. "We've said all along that FM Watch is principally a group of Washington lobbyists and now they are acknowledging that is true," said Chuck Greener, Fannie senior vice president. "We have no doubt that as lobbyists they will continue to employ any tactic or argument available to protect their member companies' interests and profits." A Freddie spokeswoman added, "FM Policy Focus is as far from policy focus as you can get. They are focused only on protecting the profits of the companies that fund them."
However, FM Policy Focus has weighed in on recent issues regarding GSE charter creep, including Fannie's acquisition of Conseco's mobile home servicing platform. House said that Fannie had no business getting into this off-beat servicing without the U.S. Department of Housing and Urban Development's prior approval.
The group also endorses higher capital requirements for the GSEs beyond the traditional measures for credit and interest-rate risk. It applauded Federal Reserve Chairman Alan Greenspan’s concerns about whether the GSEs hold appropriate amounts of capital relative to their systemic risk to the economy and taxpayers.