Saturday, July 12, 2008

On Maes and Macs

by Tanta on 7/12/2008 03:49:00 PM

My somewhat tenuous attention was captured this morning by this little parenthetical in the NYT story on the IndyMac failure:

The bank, once part of the Countrywide Financial Corporation, is the first major bank to shut its doors since the mortgage crisis erupted more than a year ago. (IndyMac is not related to Fannie Mae and Freddie Mac, the big mortgage finance companies that alarmed the stock market this week.)
Are we worried that the public will think all Maes and Macs are the same? And whose reputation would be more endangered by this, IndyMac's or Freddie Mac's?

The ironies of history. Trivia buffs will know that once upon a time there were three "agencies": the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation. It didn't take all that long for market participants to start coming up with pronunciations for the abbreviations GNMA (Ginnie Mae), FNMA (Fannie Mae), and FHLMC (Freddie Mac, which makes no sense whatsoever except that nobody liked "Filly Mac." I once overheard an old hand in the loan delivery department helpfully explaining to a new recruit how to remember the difference between Mornet (FNMA) and Midanet (FHLMC), the GSEs' pool delivery software systems. "It's easy to remember," she said. "Midanet has a 'd' in it, just like 'FHLMC.'"). Old farts whose favorite childhood treat was a box of Pixies will remember the old-time candy company Fannie May, whose name is said to have inspired the whole thing, probably in the throes of a major sugar rush.

Anyway, the players long ago accepted the nicknames to the extent of actually legally changing their names to Ginnie Mae, Fannie Mae, and Freddie Mac, which was great for those of us who had to type Assignments of Mortgage. At some point the student loan corporation climbed on board and we got Sallie Mae, plus the agricultural loan guarantor known as Farmer Mac. By the mid-80s, if you were a government agency or GSE involved in the secondary loan market, you were almost always a Mae or a Mac of some kind. The Federal Home Loan Bank Board never did accept "Freddie Bob," which some of us thought was unsporting but there it is.

This started a fashion for private companies to put a Mae or Mac in their names, signifying that they were major players in the secondary loan market, too. Independence Mortgage Corporation named itself IndyMac. There was Ginger Mae for dicey home equity loans in the great subprime boom of the 90s. ResMae just declared bankruptcy last year, but Charlie Mac (which pools credit union loans) is still functioning as far as I know.

I don't think any private loan buyer has named itself Mac or Mae since 1998 or thereabouts; in this last boom the new entrants, mostly REITs, gave themselves sparkling fresh names like New Century and Luminent and Novastar as if to maintain a light-year's distance from the old gold standard of the Maes and Macs.

And just when it might have been useful to shed the boom-era designer names and huddle up to a solid, staid, boring old Mae or Mac again, we've got the media worried that we won't be able to keep our failing Macs straight.

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