Eight trade groups representing private banking, mortgage and insurance firms are teaming up to form an organization to keep tabs on the Federal National Mortgage Association, known as Fannie Mae. The new group, called FM Watch, is intent on blocking Fannie Mae and its smaller rival, Freddie Mac from possibly moving into new lines of consumer-mortgage businesses.

• Created by Congress as part of the New Deal in 1938, Fannie Mae's role has been to help lenders make available low-income mortgages.

• Although it was privatized about 30 years ago, government backing helps it borrow more cheaply than competitors and grants it special tax breaks.

• Today, Fannie Mae and Freddie Mac -- which was created in 1970 -- control nearly 90 percent of the secondary mortgage market.

• Traditional lenders and insurers are reported to be terrified that the two will target consumer businesses -- such as originating mortgages and selling mortgage insurance.

FM Watch plans to publish periodic bulletins to alert the public to activities of the two organizations "which benefit the interests of their investors and their executives at the expense of homebuyers and taxpayers," the group's literature says.

Officials of the group say they aren't interested in rolling back the two organizations' charters or privatization. Rather, they are seeking to contain them and keep them operating according to their original mission.

Fears of expansion were heightened last fall when Freddie Mac reportedly got lawmakers to quietly attach a provision to unrelated appropriations legislation allowing Freddie Mac to offer its own cheap mortgage insurance. Within a day, competing legislation was approved stripping Freddie Mac of that power.

Source: Michael Schroeder, "Critics of Fannie Mae Finally Gain a Powerful Voice," Wall Street Journal, June 17, 1999.