| Business Biographies: David Maxwell |
Retired chairman and chief executive officer, Federal National Mortgage Association (Fannie Mae)
Nationality: American.
Born: May 16, 1930, in Philadelphia, Pennsylvania.
Education: Yale University, BA, 1952; Harvard Law School, JD, 1955.
Family: Son of David Farrow and Emily Ogden Nelson; married Joan Clark Paddock, 1968.
Career: U.S. Navy, 1955–1959, naval officer; Obermayer, Rebmann, Maxwell, and Hippel, 1959–1967, associate, partner; State of Pennsylvania, 1967–1968, insurance commissioner; 1968–1969, secretary of administration; 1969–1970, budget secretary; U.S. Department of Housing and Urban Development, 1970–1973, general counsel; Ticor Mortgage Insurance Company, 1973–1981, president and chief executive officer; National Housing Task Force, 1978–1988, vice chairman; Federal National Mortgage Association (Fannie Mae), 1981–1991, chairman and chief executive officer; Centre Partners, director of business and nonprofit organizations.
Awards: Named one of the 10 Greatest CEOs of All Time by Fortune magazine, 2003; 1993 Housing Person of the Year award, National Housing Conference; the Maxwell Awards of Excellence are given annually in honor of David Maxwell by the Fannie Mae Foundation.
David Maxwell transformed the Federal National Mortgage Association (Fannie Mae), the largest investor in residential mortgages in the United States, from a financially unstable, floundering company into a stable, profitable company that helped low- to middle-income families obtain mortgages. He was described as an innovative and skillful leader whose vision helped motivate employees and management.
The Origins of an Idea
Maxwell began his career as an attorney in Philadelphia after serving one tour of duty in the U.S. Navy. In 1960 his desire to implement innovative ideas led him to run for the U.S. Congress. Although his candidacy was unsuccessful, he found a new outlet for his ideas in 1967 as he moved into state and national government positions. From 1970 to 1973 he served as general counsel for the U.S. Department of Housing and Urban Development (HUD). During that time he learned more about the desire for low-income housing and mortgage loans for higher risk, lower-income families.
Recognition of a Need
After leaving his position at HUD, Maxwell took the position of chairman and chief executive officer at Ticor, a provider of mortgage-guaranty insurance. From this unique vantage point, he could see who obtained mortgages and whether they were able to keep paying on them, which led to his observation that the "division between the housing haves and have-nots in this country [is] getting worse" (Wall Street Journal, May 19, 1989). In fact, from 1978 to 1985 the number of poor households increased 19 percent and the federal sponsorship of low-income housing decreased. Maxwell saw that there was a large pool of individuals—immigrants, single-parent families, and minorities—who wanted homes but would have to pay 50 to 80 percent of their salaries toward a mortgage. Most companies were unable to supply reasonable mortgages and mortgage-guaranty insurance to this high-risk population.
Application of a Vision
When the immense and financially troubled Fannie Mae, which was losing $1 million a day, approached Maxwell in 1981, he was poised and ready for the challenge of turning around the congressionally chartered company. Maxwell first focused on standard financial changes, such as selling $10 billion worth of unprofitable mortgages and increasing Fannie Mae's financial flexibility by separating its stock prices from their close ties to volatile interest rates. Next, he created an overarching goal to revitalize Fannie Mae and dedicate it to helping others. Maxwell's vision was to frame the restructuring of Fannie Mae "around a mission: strengthening America's social fabric by democratizing home ownership" (Fortune, July 21, 2003).
Working for Change
After the initial hard work of turning Fannie Mae into a stable, profitable company, Maxwell further democratized home ownership by serving on the National Housing Task Force in 1987-1988. As part of the task force, he called attention to the trend in which American incomes were not keeping pace with the costs of housing, and he recommended several strategies to refocus federal-housing policy to help low-income individuals afford housing. In 1998 the Fannie Mae Foundation recognized Maxwell's hard work by developing the Maxwell Awards of Excellence program to encourage, recognize, and give financial awards to community-based nonprofit groups that succeed in creating housing to meet the needs of low-income families and individuals.
A Tumultuous Retirement
When Maxwell retired as chairman in 1991, Fannie Mae was earning $4 million a day and had a $1.36 billion annual profit. The company was profitable enough that Maxwell considered separating it from its congressional charter, which provided some tax breaks and exemption from certain securities rules, but he was convinced by other executives at the company to keep the charter. Despite Maxwell's amazing turnaround of the company, controversy in Congress arose over his initial $27-million retirement package because many felt a government-sponsored agency should not pay such a large amount. Maxwell, concerned about the impact of his retirement payment on Fannie Mae, chose to forgo his second $5.5-million payment and requested that it be used to finance low-income housing. Despite this offer, Congress passed legislation in 1992 requiring closer oversight of Fannie Mae. The legislation did not reduce Fannie Mae's profitability, and the company expanded its programs for low-income families and provided $1 trillion in financing for a program to buy loans on apartments for low-income families.
Since his retirement from Fannie Mae, Maxwell has served on the boards of Financial Security Assurance Holdings Limited, the Potomac Electric Power Company, and SunAmerica. He has continued his commitment to public policy problem-solving through his positions as chairman of the board of the Urban Institute and as trustee of the Brookings Institution and several other civic organizations.
Sources for Further Information
Barrett, Amy, "Fannie Mae Has Been Wearing Her Thinking Cap," BusinessWeek, June 6, 1994, p. 104.
Collins, Jim, "The 10 Greatest CEOs of All Time: What These Extraordinary Leaders Can Teach Today's Troubled Executives," Fortune, July 21, 2003, p. 58.
Zipser, Andy, "Gimme Shelter (A Special Report): Extremes—Broken Promises: Low-Cost Housing Stock Shrinks Even as the Need for It Grows," Wall Street Journal, May 19, 1989.
—Dawn Jacob Laney
