Sitting by a roaring fire in his Washington office late last month, Franklin Delano Raines, chairman and chief executive of Fannie Mae, was the essence of courteous calm and good cheer in talking about his stewardship of the giant mortgage marketer.

Though he has had to defend Fannie Mae against an unprecedented attack by business and government interests throughout his two years at the helm, Mr. Raines spoke with equanimity about his opponents, who were bent on controlling and restricting the growth of government-sponsored enterprises. He even said he thought they had raised some legitimate issues.

Yet the 52-year-old Seattle native was not quite ready to let down his defenses in a time of national transition. In the same smooth, confident voice he told how he deals with critics. "Under attack, I advance," he said. "I don't withdraw."

Mr. Raines, the first African-American to head a Fortune 100 corporation, had good reason to issue the warning. The forces that waged the assault against publicly traded Fannie, which has assets of $675 billion, are assembling again, revitalized and reinforced. At stake are the support Fannie Mae and Freddie Mac, its junior GSE rival, have had from the government throughout their history and the opportunity for Mr. Raines to continue to expand Fannie Mae aggressively.

Leading the pack is Rep. Richard Baker, Mr. Raines' nemesis. The Louisiana Republican gained more leverage over the GSEs last week when he was appointed chairman of the influential House Financial Services Committee's subcommittee on capital markets, insurance, and government-sponsored enterprises - an expanded version of the banking subcommittee he headed last year.

Rep. Baker plans to follow up on the bill he introduced last year that would have reduced subsidies to and increased regulation of the GSEs. He said the bill was a response to fears that the growth of GSEs posed a systemic risk to the economy.

The bill did not go far, but Rep. Baker won concessions from Mr. Raines to install some structural safeguards in Fannie Mae that serve as a stepping-stone for his new legislation. In that bill he is expected to push for a single powerful regulator to replace the two weak oversight agencies monitoring the GSEs now.

Aside from having more power and a running start, the election of a Republican President and the appointment of a conservative Housing and Urban Development secretary give Rep. Baker a more favorable environment.

An early sign was the promise this month by Sen. Phil Gramm, R-Tex., generally a supporter of Mr. Raines and Fannie Mae, to take a critical look at the strategies of government-sponsored enterprises.

Another sign was the testimony at a Senate Budget Committtee hearing last week by Federal Reserve chairman Alan Greenspan. Mr. Greenspan displayed distinctly a pro-Republican tilt in his testimony on tax cuts and he could raise more critical questions about the subsidies for GSE's, as he did last year.

Washington lobbying groups are also lining up. Among the most powerful is FMWatch, which was formed by big banks and mortgage insurance companies two years ago and is trying to restrain Mr. Raines' initiatives - mission creep, as opponents call it - into home equity financing and subprime mortgage lending.

"The new safeguards are classic Washington blue smoke and mirrors," says Mike House, executive director of FMWatch.

Leslie Paige, vice president of conservative group Citizens Against Government Waste, says: "We have no intention of backing off. Our ultimate goal is for them to be privatized."

Mr. Raines is riding a growth machine, however, and he has no intention of reining it in. "Our view is that we should do more," he says.

So far, Fannie Mae has achieved that. Earnings have increased for 14 straight years and the company has grown tenfold. Mr. Raines is approaching the halfway mark of an ambitious goal to double earnings by 2003.

He is part of the reason Fannie Mae is doing so well he has been in the vanguard that has pushed the use of technology in the mortgage industry to reduce risks and costs and expand rapidly. Even his toughest critics say - at least in public - that they admire his talents.

"He's a hard-driving and smart executive," said Rep. Baker through a spokesman - the only comment he would release.

But perhaps Mr. Raines has done too well. Fannie has grown faster than its historical market, prime residential real estate mortgages, and Mr. Raines has taken it deep into the subprime category - partly to keep up the 15% growth rate that investors have come to expect from the company.

Alarmed competitors are fighting to keep the GSEs out of the profitable business. They argue that the GSEs should be barred from doing subprime business because they have an unfair advantage, including $2.25 billion each in emergency lines of credit from the government, as well as state and local tax exemptions.

Similarly, conservative political interest groups have taken aim, saying taxpayers funds should not support a giant growing like Topsy that has money of its own to invest.

Mr. Raines' assignment "is tougher than his predecessors'," says Chuck Gabriel, the senior political analyst for Prudential Securities. "When he took over at Fannie Mae things were spring-loaded to explode in his face. Frank has had almost no letup from the day he walked in."

Mr. Raines was able to expand Fannie's business and increase earnings, but from the time he took over, the attacks - plus rises in interest rates - had an effect elsewhere. Its stock fell sharply, the first sustained drop since the recession.

Fannie's CEO has worked diligently to make peace with his critics. Soon after FMWatch was organized he met with the powers financing the group, including Jack Welch, chief executive officer of General Electric; Hank Greenberg, chief executive officer of American International Group; and all the heads of the other big mortgage insurance companies, which claimed that the GSEs were competing against them unfairly.

The talks were just a start, at best.

"It doesn't necessarily mean that we then all join hands and sing 'Kumbaya,' " Mr. Raines says. "But it does mean that we can start working on the real problem."

The low point came last March when the assault from business and the Republican-led Congress was joined by the Clinton administration. The first attack was from HUD, which claimed in a study, as reported on the front page of The Washington Post, that Fannie Mae was effectively discriminating against blacks.

Drafting HUD Secretary Andrew Cuomo for support , Mr. Raines held a press conference at which he defended Fannie's record. He said that the study was flawed, and then wrote an op-ed piece accusing the newspaper of "journalistic malpractice."

He then had to deal with Assistant Treasury Secretary Gary Gensler's testimony before the House Banking subcommittee in support of Rep. Baker's bill, including the removal of the line of credit. Fannie Mae's stock was hammered to a three-year low of $48, a drop of 40% from its price when Mr. Raines became chief executive.

"Because of that testimony, I asked Treasury to sit down and explain - 'What are you trying to say?' " Mr. Raines recalled. Each problem they had, we went away, did some research, and came back and said, 'Here's what the facts are.' "

For example, Treasury had testified that hundreds of banks had more than 10% of their capital invested in Fannie Mae securities, amounting to serious risk. When Fannie looked into the allegation it found that the banks in question were very small, with less than 2% of the assets of the banking system.

"The big banks never held more than 10% of their assets in Fannie Mae securities," Mr. Raines says. "So it was not true that there was systemic risk."

Mr. Raines and other Fannie Mae executives worked amiably at coming to terms with their critics. They held constructive talks with Treasury, including Mr. Gensler, who would not comment, and the Federal Reserve. They agreed that systemic risk was a legitimate concern, and they worked to allay those fears by developing initiatives to increase disclosure and beef up capital.

In the process of working to get Clinton administration approval, Freddie Mac stepped in and shared the ideas with Rep. Baker, who readily accepted them.

"This proposal lays the groundwork for a new high-water mark of corporate responsibility, market transparency, market self-discipline, and proactive protections against systemic risk," Rep. Baker said at the press conference in October.

The death of the Baker bill and the completion of the voluntary accord, which lowered Fannie Mae's political risks, were what its stock needed. Late last year the shares shot past their all-time high of $76, set in 1998, to reach $85.

Mr. Raines was accidentally named for the President who founded Fannie Mae in 1938, because of a hospital mistake on the birth certificate. He was to have been named Frank Delno Raines, after his father, who struggled to support his family of six children. The elder Mr. Raines spent eight years building them a home with materials from one that the state was going to demolish.

In high school the future Fannie Mae chief thrived on pressure. He was football team captain, statewide debating champ, and student body president. And he earned a scholarship to Harvard College - where he showed his predilection for risk-taking by leading a protest against both the radical students and the administration.

He went on to become a Rhodes Scholar at Oxford University and then earn a Harvard Law School degree.

He developed financial expertise as associate director for economics and government in the Office of Management and Budget from 1977 to 1979 and throughout the 1980s at Lazard, Freres & Co., the New York investment banking firm.

He rose to partner in municipal finance. In that job, he installed new financial plumbing in numerous cities. One of his key achievements, says John Tamagni, the Lazard partner who hired and supervised him, "was getting Washington, D.C., into the capital markets in the first place," by preparing its books for a first-ever audit that allowed it to get a rating and to draw up a prospectus.

Mr. Tamagni says that Mr. Raines enjoyed the methodical work that municipal finance required. "He liked to break problems into smaller problems and address each one at a time," Mr. Tamagni says. But the Wall Street grind took its toll, leaving little time to raise a family, which grew to include three daughters.

In early 1991, Mr. Raines was recruited to join Fannie Mae as vice chairman. Chief executive James Johnson, who recruited him, asked him to develop a long-term strategy.

It did not take long.

On one of his first days at work he looked fruitlessly for somewhere in the building to cash a check. It occurred to him, he says, that "here I was at this giant financial institution and there was no cash."

"What that said to me was: All of the company's billions of dollars are in the computers down in the basement," Mr. Raines says. "From there it struck me that our major competitive tool was technology and mating technology to mortgages. It wasn't going to be marketing or hands-on service, because of the kind of product we have - a high-value product with enormous processing costs."

Technology, once considered a back-office function, would now be a key strategic resource.

"He became the intellectual leader of transforming Fannie Mae into the modern age," says Mr. Johnson, now chairman of the Brookings Institution. "He took a big risk. We were making big-dollar bets, and getting those right was critical." New technology has permeated the organization, from risk management to automated underwriting for lender-customers, cost control, and the Internet.

Little wonder that Mr. Raines has been a passionate advocate for the company - whether in speeches, hearings, or one-on-one talks. Communication is a key element of his management style. He encourages comments from his top officers and uses the company's e-mail to send weekly messages to its 4,000 employees. Last year he invited employees to have breakfast with him in small groups and so far 350 have done so.

In 1996, Mr. Raines agreed to be the Clinton administration's point man in balancing the budget by returning to the OMB as its director, where he honed his skills as a negotiator.

"When you're the OMB director, every day you're dealing with people who want things and conflicts that have to be resolved," says Mr. Raines, who a year after he took over the job successfully balanced the budget - for the first time in a generation. He is proud that "after my time as director at OMB, those on both sides of the aisle found they could trust me."

His financial know-how served him well at OMB. One of his toughest battles was getting Congress to accept OMB's numbers as more accurate than those from the Congressional Budget Office, which depicted a larger deficit.

"People told me: Forget about it," Mr. Raines says. "I launched a major effort to demonstrate that CBO had been totally wrong over a period of time, and that OMB's numbers were more accurate. No amount of questioning my motives, questioning my judgment, being accused of being naïve would stop me from going forward."

Jamie Gorelick, former deputy attorney general and now a Fannie Mae vice president, handled the budget negotiations for her department when Mr. Raines was at OMB. "With most OMB directors, ultimately you'd know more about your own department. Not so with Frank. Knowledge is power, and it made him extremely powerful in budget negotiations."

Ms. Gorelick observes that Mr. Raines has tried to "use business tools to effect societal change."

He believes that Fannie Mae, which he returned to in 1998, achieves its mission when it achieves its business. Indeed, the mission - providing affordable housing - is of special importance to him. Only 45% of blacks and Hispanics own their own homes, compared with 75% rate of whites. He recognizes the need to do better for minorities in a number of ways, which includes the foray into the subprime market.

"I've always had to prove myself more than I think I otherwise would have had to," Mr. Raines says.

Still, there are times when he doesn't recognize how significant a roll he plays in the black community. At a party at Vice President Gore's house last year, Aretha Franklin startled him as she was passing by. "Aren't you Frank Raines?" she said.

Mr. Raines does not see much that could prevent him from meeting his goals for Fannie Mae. If interest rates spike - which does not appear likely - adjustable-rate mortgages will grow more than fixed-rate mortgages, the only ones that Fannie buys.

But he does not think harsh legislation is possible with a divided Congress. And while the lobbyists will continue trying to weaken Fannie Mae in the marketplace, he says he is ready to take them on.

"There is a school of thought that if you harass Fannie Mae, maybe they'll pull their punches, maybe they'll slow down, maybe they'll not be as good a company," he says. "But anybody who knows me knows that would be a very large tactical error. Anyone who thinks that trying to intimidate us would be productive be making a mistake."

Ms. Rosenberg is a freelance writer based in New York.

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