La. Gramm heads the Senate Banking Committee, and Baker, a House subcommittee that oversees the two. Friedman claims he does not want Congress to strip the GSEs of their Federal charter, a piece of paper that allows them certain financial benefits, including the ability to raise money in the capital markets more cheaply than banks and MI firms. The third leg of the FM Watch stool, the subprime sector, has been in the tank for years, except its two largest players, Household Finance and Associates First Capital, the latter of which is now owned by Citigroup. In a nut shell, the two factions fear for their futures. This hasn't happened yet, but both firms feel it's only a matter of time.
Commercial banks have slightly different concerns.
Commercial banks have moved into the subprime niche with a vengeance and find this once high-profit margin business receding. Banks also would like to portfolio more residential loans but feel that because the GSEs can borrow more cheaply in the capital markets they cannot compete as portfolio lenders. Some feel that if the GSEs reduce the need for MI, that business could dry up. Fannie Mae chairman Franklin Raines blames the griping on FM Watch's demise. And for the record, both Fannie and Freddie say they have made no such business threats against any FM Watch members.