Apartment Finance Today

editor's letter

Which Way Out?

APARTMENT FINANCE TODAY • May/June 2010

When you lose your sense of direction, your hardest job suddenly becomes fi nding your way back.

BY Shabnam Mogharabi

I’m a bit of a nomad these days, wandering the country, suitcase in hand, ready for any adventure.

Why? Because I recently began the process of transitioning to our San Francisco offi ce. Just don’t ask me where I’m living or how I’m liking it. Because I don’t really know yet. I moved out of my Washington, D.C., apartment and headed West to get settled there about, oh, fi ve months ago. Since then, I have spent fewer than 30 days in the Bay Area because of my hectic travel schedule. Luckily, I have a sister who lives out there and has been kind enough to let me claim a corner of her couch.

The trouble is, it’s a bit like I’m in limbo—living out of boxes, with my things in storage across the country, and feeling unsure about which way to turn. In that, I’m much like Fannie Mae and Freddie Mac, which seem even more clueless about where they will land (and when) than I am. So naturally, I was immediately drawn to reading this month’s feature about the future of the government-sponsored entities (GSEs) with great interest. (See “Stuck in Limbo” by Jerry Ascierto.)

If you ask me, the GSEs seem even more clueless about where they will land (and when) than I am. The number of solutions being tossed about to help Fannie Mae and Freddie Mac survive their conservatorship and emerge on the other side of the Great Recession seem as though they were concocted by a few men smoking cigars in some dark bar in the throws of Capitol Hill who have no insight into the day-to-day operations of these giants. Even though the agencies themselves are relatively stable fi nancially, their futures are murky because none of the plans put forth by Congress have an architecture for guiding these behemoth institutions from point A to point B.

There are those out there who believe that the GSEs should be fully privatized— after all, it was their competing loyalties to the private and public sectors that was partially responsible for precipitating their government takeover. And there are just as many folks who believe a public aff ordable housing focus should be the limit of their reach. Rep. Barney Frank (D-Mass.) recently stirred up even more uncertainty when he proclaimed that Fannie and Freddie in their current forms should be abolished altogether. Not that that’s necessarily the wrong move—after all, having 80 percent of multifamily essentially backed by only two fi nancial institutions (now so closely related) is a little frightening.

It seems to me that no one knows what to do next. Which is why our coverage this month focuses on the few things we do seem to know about the future of the GSEs: that there will be more than two entities and that the future entities must fi nd a way to avoid political infl uence (if that’s even possible). But beyond that, clarity seems to be overrated when it comes to the future of Fannie Mae and Freddie Mac. Outcomes are unknown. The path forward will likely be rocky and diffi cult to navigate and full of unforeseen roadbumps. Hmm … sounds kind of like the hassles of a crosscountry move.