Will Mel Watt Give Away Fannie Mae, Freddie Mac Profits

Will Mel Watt Give Away Fannie Mae, Freddie Mac Profits

Fannie Mae

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A major policy shift is underway at Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) with a change in regulatory focus.

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Regulators to focus on consumers

The regulatory focus shift, first noticed in a Wall Street Journal article, is nuanced but significant, as the agency is more focused on the consumer as opposed to institutional financial concerns.

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The article notes the shift in priorities under former North Carolina Congressman Mel Watt.  The colorful Watt was accused by then Green Party presidential candidate Ralph Nader of firing a “racial epithet” at the sensitive consumer advocate.

“You’re just another arrogant white man — telling us what we can do — it’s all about your ego — another fucking arrogant white man,” Nader claimed Watt said.  Nader wrote a letter to the Caucus and to Watt asking for an apology, none was offered.  It is unclear if a “racial epithet” can be delivered to a white person, but Nader was outraged then as he is now with the Fannie Mae and Freddie Mac dispute, where he is a “vocal” activist investor, as previously reported in ValueWalk.

Nader and Watt could face each other again in an interesting twist of fate. On the more bizarre of many circumstances, Watt could be fighting for the “average person” who needs assistance from Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) at the expense of investors. Nader, on the other hand, might be fighting for investor rights and return of capital.

Will Fannie Mae, Freddie Mac profits go to those in need of foreclosure relief?

The interesting question, however, is in the new focus is will Congressman Watt give away the profits of Fannie Mae and Freddie Mac? If the goal is to help consumers – a traditional focus for the politician – is not ensuring lower income Americans have access to affordable interest rates take precedence over buying the toxic assets of banks who don’t clearly disclose the unwanted content of the derivatives?

Is Obama returning to his Grant Park 2008 roots?

These issues weren’t raised as Watt was reported to largely avoid hot-button policy debates in his speech at the Brookings Institution. These were, after all, his first public comments since taking over at the agency. Beating back demands from liberal supporters to provide more-generous foreclosure relief and fulfilling some of the not forgotten promises made by candidate Barack Obama.

Watt is eyeing a different mandate – one to reduce risks shouldered by taxpayers. Although there is not much talk about it at this point, could the changes being proposed by Watt be a larger signal that Barack Obama might focus on his legacy based on what got him elected rather than serving as the big banks and investors master?  Hard to tell at this point, but it will be interesting to watch.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com
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