Nearly two years ago, when Freddie Mac's accounting issues unexpectedly became front-page news, virtually no one in the housing industry wanted to say two words on the topic—unless it was “no comment.” (I know—I called them.) After all, housing appeared to be the economy's only support, and Freddie and Fannie Mae provided then, as they do today, the financial foundation for the housing industry, offering a reliable source of liquidity for the marketplace.

That's why I found the attitudes of apartment executives who participated in this month's Conference Call so unexpected. (You can read the story on page 34.) One by one, they advocated for stronger regulation of Fannie, Freddie, and their counterpart, the Federal Home Loan Bank System, which has generated a few headlines itself. These multifamily leaders want more oversight and more openness for these critically important, government-sponsored enterprises, and they want those changes soon. “For God's sake, let's get this over with fast,” Shekar Narasimhan, managing partner of Beekman Advisors, a real estate strategic advisory firm in Virginia, told me. For Narasimhan and others, even those who initially supported letting the GSEs be, the revelations—and the lack of information that preceded them—have simply become too much.

Alison Rice
Katherine Lambert Alison Rice

“My initial thought was that they should be left alone, but as more details came out, including the massive exit packages for [the departing Fannie executives], it almost sounded like an Enron situation,” said Bob Murray, president of KSI Management, which manages and builds apartments in the Washington area.

Narasimhan, who says he's always supported stronger regulation, agrees. “It was a shockwave” when details of Fannie and Freddie's executive compensation and retirement packages were released, he recalled. “I can find out the pay and economics of any senior executive in a large public corporation in America. How come I did not know [that information] and could not find it out if I owned stock in Fannie Mae or Freddie Mac?”

In the GSEs' defense, they run an incredibly complicated business. Industry leaders as experienced as Doug Crocker, formerly of Equity Residential, acknowledged that Fannie and Freddie executives have the “extraordinarily difficult” task of protecting their balance sheets against the real risk of interest-rate fluctuations. But greater transparency might have helped them as well as they faced the challenging business judgments now being second-guessed on Capitol Hill and elsewhere. “You can't create a culture where just because you control the capital and have a great mission, you actually think you know all the answers,” Narasimhan pointed out.

And the rest of us—whether we belong to the industry or follow it—cannot allow that to happen. Complexity cannot be accepted as an excuse by anyone, including journalists, to avoid explaining how businesses as important as Fannie and Freddie truly operate, because it leads to the messy mix of housing and politics that we find ourselves in today.

It's an unpredictable situation, which worries apartment executives. “Over time, you come to the realization that greater regulation is a lesser evil than the status quo, and that it can create some calming effect in the political environment,” commented Andy Miller, senior vice president for developments at Picerne Real Estate Group, which owns and manages more than 33,000 apartments across the country. “The biggest risk we all face here is that this takes on a life of its own and creates a shock for housing and the economy.”