Lockhart to Leave Federal Housing Finance Agency
Thursday, August 6, 2009
The head of the federal agency that seized and now controls Fannie Mae and Freddie Mac has decided to step down, as the Obama administration starts to discuss the future of the mortgage finance giants.
James B. Lockhart III, the director of the Federal Housing Finance Agency, said in an interview Wednesday that he is ready to return to the world of finance in New York after nearly eight years in Washington.
Lockhart is leaving to his successor the job of helping devise a future structure for Fannie Mae and Freddie Mac, which help finance or insure more than half the country's home loans.
With then-Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke, he orchestrated the federal takeover of Fannie Mae and Freddie Mac last fall as the financial crisis worsened. "I actually didn't expect to stay as long as I have stayed," he said. "Given what happened a year ago, it meant I had to help work our way through this. Now we're at the point where we're seeing some stabilization."
Lockhart said he plans to wrap up his job by the end of the month. The administration has been interviewing replacements but hasn't named one.
As head of FHFA and its predecessor agency for the past three years, Lockhart has been at the center of prominent financial, legislative, legal and lobbying battles.
He pushed Fannie Mae and Freddie Mac to fix their accounting systems after massive frauds earlier this decade. He fought with the firms' once powerful corps of lobbyists as they tried to block Congress from granting his agency tougher powers. He finally won that battle last summer when Congress beefed up FHFA's regulatory powers and decided to move under his agency's supervision the Federal Home Loan Banks, regional institutions that also play a role in funneling money to the mortgage market.
Lockhart also oversaw a troubling period at Fannie Mae and Freddie Mac as they marched into riskier lines of business, including subprime loans and other risky mortgages, that turned out to be their undoing. Even in the months before the companies were seized, he suggested that they were in sound financial shape. "We could have done more in retrospect, but we didn't have the powers until we got the legislation," he said.
Since they've been seized, Fannie Mae of the District and McLean-based Freddie Mac, once among the most competitive and important financial companies in the world as the buyers and insurers of trillions of dollars in home loans, have become essentially wards of the state.
Lockhart has been directing the companies to carry out important elements of the government's programs to spur housing recovery by modifying home loans held by borrowers facing foreclosure and by funneling money to the mortgage market to keep interest rates low.
Taking over Fannie Mae and Freddie Mac "was a very painful and tough decision, and I really had strong support from Secretary Paulson and Chairman Bernanke," Lockhart said. "If we hadn't done that, the mortgage market would have cratered and the spillover effect to the financial markets would have been much worse."
Lockhart, who has worked for the Social Security Administration and the Pension Benefit Guaranty Corp., was close to the former President George W. Bush, having attended the same prep school, college and graduate school. He has spent most of his career in finance.
Last week he gave what now appears to have been a valedictory address during celebrations marking the one-year anniversary of FHFA.
"I started my government career 40 years ago in the Navy, becoming an officer on the deck of a nuclear ballistic submarine," Lockhart said in the speech last week. "Like the mortgage world, I truly know what it is like being 'underwater' for a long time. The financial markets escaped 'crush depth' last fall. My submarine surfaced every time and so will the mortgage market."