Dick Syron, the new chief executive of Freddie Mac, brings a breath of fresh air to the stale, ideologically charged debate over what to do about the beleaguered mortgage finance company, along with its larger cross-town cousin, Fannie Mae.
Rather than continuing with Fannie and Freddie's tradition of dodging and fudging the answer to the crucial question of how to regulate a private, profit-maximizing company with a public mission and government subsidies, Syron the economist is willing to address it head-on, with disarming candor and intellectual honesty.
And as a former Federal Reserve official, he brings enough political savvy to understand that the environment has changed, and that Fan and Fred can no longer rely on their political muscle to stiff-arm those who raise questions about their role, size and profitability.
Syron makes just the right claims for Fan and Fred, without the usual hyperbole:
That without them, there simply would be no 30-year, fixed-rate mortgage with no penalty for prepayment or refinancing.
That the secondary mortgage market would be less liquid and more volatile, resulting in slightly higher mortgage rates, particularly at times like this, when a flattening yield curve will prompt banks and hedge funds to dump all those mortgage-backed securities they've loaded into their portfolios.
That the underserved market would surely be even more underserved -- unless, of course, you believe Wells Fargo or JPMorgan would sacrifice even a penny a share in profit to help the working poor.
Syron has the credibility to challenge a Federal Reserve chairman who claims to worry about the "systemic risk" posed by overgrown Fan and Fred, even as he thinks nothing of approving the merger of banks that would pose no less a risk and would be no less likely to require a federal bailout in a crisis.
At the same time, as a onetime bank overseer, he can speak with authority about how much discretion a strong new regulator would need to ensure Fannie and Freddie don't engage in too many heads-I-win, tails-you-lose bets with the taxpayer's money.
All of which makes it that much more disappointing that Fannie and its Democratic allies did not turn to Syron to broker a grand compromise earlier this month when the Senate Banking Committee took up legislation creating a new regulatory structure for the mortgage giants.
Instead, Senate Democrats refused even to discuss key reform issues, viewing even the slightest concession as simply the first step on a slippery slope toward the Bush-Greenspan goal of full privatization.
Meanwhile, Fannie rolled out yet another inflammatory television ad warning that millions of Americans would be denied homeownership if legislation were to pass. And to demonstrate its contempt for criticism that it used its government backing to grow too big and earn outsized profit, Fannie not only reiterated its pledge to Wall Street to deliver double-digit earnings growth, but rewarded Chairman Franklin D. Raines for delivering on it with a $17.1 million pay package.
In the end, however, it appears that Fannie and its Democratic allies have overplayed their hand. While the lack of a bipartisan consensus in the Senate doomed any legislative action, the Bush administration has used the opportunity to launch a series of regulatory assaults that pose even greater threat to Fan and Fred. The uncertainty has already depressed their share prices and raised their borrowing costs. And the moves could well undermine Fran and Fred at precisely the moment when they could use their "unfair" funding advantage to stabilize mortgage markets by serving as buyer of last resort.
This is what happens when governmental institutions designed to produce practical compromises are given over to ideological zealotry, poisonous partisanship and take-no-prisoners corporate lobbying. What we're left with is the least-best solution for homeowners, investors and even the politicians, who once again have succeeded only in reinforcing their own irrelevance.
Steven Pearlstein can be reached at email@example.com.