Little-Known Investment Banker to Take Reins at OFHEO

Investment banker and derivatives expert Mark C. Brickell has been picked by the White House to head the Office of Federal Housing Enterprise Oversight, the overseer of Fannie Mae and Freddie Mac.

OFHEO director Armando Falcon, a holdover from the Clinton administration, resigned early last week with one year left on his term.

Industry executives told Mortgage Servicing News that they know little or nothing about Mr. Brickell, who worked for J.P. Morgan & Co. (now called J.P. Morgan Chase Co.) for 25 years.

"I understand that technically he is very smart," said one mortgage insurance official. "That's good, because it means he can understand complex issues - so even if you somehow disagree with him, you know where he's coming from."

One investment banker said, "He'll understand the risks that come with derivatives," but added, "That doesn't necessarily mean he's a good administrator."

Howard Glaser, who runs Capitol Hill Associates, said the nomination of Mr. Brickell "should guarantee that the agency will be around for a couple more years."

Mr. Glaser, former counsel to Department of Housing and Urban Development secretary Andrew Cuomo (of the Clinton administration), noted that the issue of replacing OFHEO "is now moot" with the Brickell nomination.

There had been talk of putting OFHEO under Treasury or reorganizing it entirely.

Mr. Brickell did not return numerous telephone calls made to his office by MSN.

He is currently CEO of Blackbird Holdings, New York, which operates an electronic trading network for derivatives.

J.P. Morgan Chase, as well as Fannie and Freddie, are major investors in derivatives.

Politically speaking, Mr. Brickell has not been a large donor to politicians. In the last election cycle he gave $1,000 to California Republican Tom Campbell and $250 to Rep. John LaFalce, a Democrat. Neither man is still in office.

Mr. Falcon resigned immediately after speaking at a Bond Market Association conference in New York last week. In his departing speech, Mr. Falcon said that OFHEO should have the authority to close a government sponsored enterprise and appoint a receiver if it judges the GSE's financial situation to be dire.

Speaking at The BMA's Legal and Compliance Conference in New York last Tuesday, Mr. Falcon also told attendees that OFHEO, which currently undergoes a yearly appropriations review, needs a permanent funding source "identical to that of all other federal safety and soundness regulators."

Mr. Falcon characterized the GSEs' potential systemic risk as being the result of their size and central role in the market. In describing the GSEs' size, Mr. Falcon noted, among other things, that Fannie and Freddie "have become the largest end-users of derivatives outstanding." The combined notional amount of derivatives outstanding of the two enterprises was $72 billion at year-end 2001, he said.

While the large size of the GSEs is a potential concern for the market, "the possibility of either enterprise contributing to a financial crisis is remote," Mr. Falcon said.

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