UPDATE: FHFA's Lockhart Says He Is Stepping Down
August 05 2009 - 5:09PM
Dow Jones News
James B. Lockhart, the regulator for Fannie Mae (FNM) and
Freddie Mac (FRE), is stepping down, providing an opportunity for
the Obama administration to put its own stamp on the future of the
troubled firms.
Lockhart, who headed the Federal Housing Finance Agency during
the government's dramatic seizure of Fannie and Freddie last fall,
said he had chosen to leave now, at the one-year anniversary of the
creation of the new agency. He said he had been speaking with
administration officials over the last four months about an
appropriate succession.
"To be perfectly honest I think they would like me to stay
around a little longer," he said in an interview Wednesday.
It is unclear whom the Obama administration will select to
become the agency's director. That person is poised to play a key
role in deciding the future of the companies, something the
administration has yet to spell out. The White House has said it
will unveil a plan for Fannie and Freddie when it releases its 2011
budget in February.
Proposals include turning Fannie and Freddie into cooperatives
owned by mortgage lenders or remaking the firms as public
utilities, subject to tight regulation and profit limits. Others
wish to recreate them much as they used to be, private
shareholder-owned institutions that serve a public mission ensuring
the broad availability of mortgage credit.
Since they were thrown into the conservatorship of the FHFA in
September, the White House has pushed the companies to help prop up
mortgage markets and assist troubled homeowners. They were seized
after mounting losses at the firms spawned fears they would
collapse, deepening the global financial crisis.
The government has so far pumped $85 billion of capital into the
companies to keep them solvent. That figure is likely to rise in
the coming months, Lockhart told reporters last week, as mortgage
defaults continue to mount at the companies. Both firms have seen
high turnover in senior ranks, and executives have bristled at the
government's involvement with the firms.
A high school friend of former President George W. Bush,
Lockhart was a holdover from the Bush administration, where he also
served in top posts in the Social Security Administration.
Lockhart helped establish FHFA as the new regulator for the
mortgage giants after its predecessor, the Office of Federal
Housing Enterprise Oversight, was phased out by a 2008 housing law
that aimed to tighten oversight of Fannie and Freddie. But several
weeks after the new agency was created, the officials determined
the companies couldn't weather the growing storm in the U.S.
housing market.
Lockhart was with Federal Reserve Chairman Ben Bernanke and
Treasury Secretary Henry Paulson at FHFA's Washington offices to
deliver the news of the conservatorship to former Fannie CEO Daniel
Mudd and Freddie CEO Richard Syron. The decision cost both
executives their jobs.
Just a few weeks after Lockhart took over as the regulator for
Fannie Mae and Freddie Mac, his agency issued a blistering report
on Fannie that cited major financial irregularities. The government
fined the company $400 million.
Lockhart long echoed warnings from the Bush administration that
the oversight of Fannie Mae and Freddie Mac wasn't sufficient. But
Congress struggled to reach a consensus about what supervision of
the companies should look like until last year after urgent
warnings from then-Treasury Secretary Paulson.
While the director of the agency will have a fixed term in the
future, the term for Lockhart, the first director, didn't have a
fixed end date.
Lockhart said he has no job lined up, but that he hopes to
return to work in the financial services industry in New York. He
said he looked forward to "continue to work in a place where I can
help us get out of these financial problems."
-Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com; and Damian Paletta, The Wall Street
Journal; damian.paletta@wsj.com