It's been nine years since Preston Martin held an official position in Washington, but the former Fed vice chairman is still remembered well in this town.
In earlier service as chairman of Federal Home Loan Bank Board, he helped found the Federal Home Loan Mortgage Corp., or Freddie Mac, the big secondary market agency. He also helped found Neighborhood Housing Services, a public-private sector partnership dedicated to increasing homeownership.
Now chairman of HomeVest Financial Group Inc. in San Francisco, his life continues to revolve around the housing and mortgage markets. He says he has a new idea for linking mortgages and insurance that he's shopping to the regulators, but he's not willing to discuss it yet.
Mr. Martin began his public-sector career in California, as then Gov. Reagan's savings and loan commissioner and came to Washington in the Nixon administration to head the Bank Board. He was pressed into service again by President Reagan in 1982 with an appointment to the Fed.
Recently, he took time out to talk about his career and his views on current issues with American Banker.
Q.: How would you handle the problems facing the Savings Association Insurance Fund?
MARTIN: I would combine the two funds, and the two industries, and the Comptroller's office and the Office of Thrift Supervision.
Q.: Do you think the banking industry ought to be willing to go along with that?
MARTIN: Oh, if I were a commercial banker, I wouldn't. But you have to do something. It's either that or tap the taxpayers.
Q.: Has the separate charter for thrifts outlived its usefulness?
MARTIN: I think you ought to give the people in the community the option of what they want to do with it. If a bunch of people with some fairly heavy capital want to get together and form a thrift institution, I think you ought to let them do that, provided they'll do enough in the inner city for affordable housing. But I think you'll see fewer and fewer people doing that because the economics are all for a multipurpose financial institution.
Q.: What's the most important thing Congress can do now for the banking and thrift industries?
MARTIN: Wipe out all these differences in charters, and let them underwrite securities if they want to. Let them do what banks do all over the world.
Q.: You're a Republican who had to deal with a Democratic Congress when you served in Washington. Do you think you might have more trouble today with a Congress of your own party?
MARTIN: Might? I couldn't get Freddie Mac passed or anything like that. Are you kidding?
Q.: Do you worry about this Congress then?
MARTIN: No. Everything is in place now. Freddie and Fannie have more than half the market. Neighborhood Financial Services is all over the country. So no, I don't worry about it.
Q.: Do you think Republicans will do some things that need to be done then?
MARTIN: Yes, I do. But it will be a mixture, like it always is. Like any other Congress they'll make some mistakes.
Q.: Are you still a Republican?
MARTIN: Yes, but I'm a different kind of Republican. I'm a Republican that cares about the inner cities. I'm a Republican that understands that unless we get these communities back together, this society is going to blow right out the smokestack. That's why I've been in affordable housing all my life.
Q.: How did you come to know Gov. Reagan?
MARTIN: As a professor I had been making speeches and writing about what a mess the California savings and loan industry was in and how they wouldn't lend in the inner city. Then I noticed the losses were coming and wrote a few articles. When the guys around Reagan saw them, they called me up and asked if I would be savings and loan commissioner.
Q.: Was Gov. Reagan interested in affordable housing programs?
MARTIN: It was an interest of his, but I think he was more interested in how the state-chartered institutions were doing things that were going to lead to their downfall than (he was in) my affordable housing approach.
Q.: Do you think it would be a mistake for the Republicans to rewrite the Community Reinvestment Act?
MARTIN: I think they ought to leave it alone for a while and give it a chance to work. Give it a year anyway, and see how it works. I would oppose changing it now.
Q.: How about exempting small institutions.
MARTIN: It is awfully hard for those people to do it. It is awfully hard for them to survive in the first place. CRA puts a lot of pressure on them. Yeah, if I were to have the deciding vote in the Senate, I would exempt them, for a while, to see how it works.
Q.: Do you think the industry, by and large, is doing a decent job on fair-lending?
MARTIN: By now, yes, a decent job. But they can do more.
Q.: What prompted the founding of Freddie Mac?
MARTIN: I spent a year trying to sell them on using Fannie Mae and failed. Then I said, wait a minute, let's take $100 million out of the Home Loan banks, so that in effect thrifts will own this enterprise, and then we'll go out and sell it. Same thing with Neighborhood Housing Services of America, which I founded. People said, thrifts don't make any loans in the inner city. I said, wait a minute, let's get a way that they can and will and should. And Neighborhood Housing Services has just gone off very well.
