Friday, June 1, 2007
Preston Martin, former No. 2 officer at the Federal Reserve and one of the leading financial figures of his generation, died Wednesday at his home in San Francisco of heart disease. He was 83.
Mr. Martin, who served as vice chairman of the Federal Reserve Board from 1982 to 1986, was the first central bank governor appointed by President Ronald Reagan. He was previously chairman of the Federal Home Loan Bank Board, a government agency providing financing to savings and loans, and was California’s top savings and loan regulator when Reagan was the state’s governor.
Mr. Martin was a leading figure in home finance at a time when the mortgage industry was developing a range of new products to make buying homes easier. As a federal official in the early 1970s, he was instrumental in setting up Freddie Mac, a government-sponsored agency that bought mortgages and packaged them for sale to investors. After leaving government in 1972, he founded the PMI Mortgage Insurance Co.
According to his Web site, he was one of the principal designers of the adjustable-rate mortgage during his tenure as California savings and loan commissioner.
A native of the Los Angeles area, Mr. Martin received a doctorate in economics from Indiana University. He later was a professor of finance and economics at the University of Southern California. After he left the Fed, Mr. Martin adopted San Francisco as his home, moving to the city to manage investments in the savings and loan industry for financier William Simon.
"My husband loved this place," his wife, Genevieve, said. "He was a native San Franciscan from Los Angeles."
A commitment to social justice ran throughout Mr. Martin’s careers in public service and business. He was one of the first federal financial regulators to make fair lending a top priority. As chief of the Federal Home Loan Bank, he took a tough stand against redlining, the policy of steering credit away from poor and minority communities.
He was a member of the board of trustees of Neighborhood Housing Services of America when the nonprofit community development group was founded in 1974. And he was a founding director of Operation Hope, an inner city economic development organization.
"For the first five years, it was hard for us to get credibility," Operation Hope Chief Executive Officer John Bryant said. "He used his credibility for us. He flew around the country to meet with the media and CEOs."
During his years at the Fed, Mr. Martin was known as a Reagan loyalist who challenged Chairman Paul Volcker’s tough anti-inflation policies.
Mr. Martin’s tenure as Fed governor and policymaker coincided with a period of very high interest rates, a strategy Volcker pushed to squeeze the high inflation of the 1970s out of the economy. Volcker’s high-interest-rate policies frequently clashed with the Reagan administration’s agenda of pumping up economic growth.
"Martin pushed up against Volcker, who was formidable and didn’t take criticism in a polite way," said William Greider, author of a book about the Fed during the Volcker years.
According to multiple accounts, the conflict came to a head in February 1986, when Mr. Martin led a group of four Reagan-appointed Fed governors who voted to cut a key interest rate against Volcker’s wishes. The vote was reversed when Volcker threatened to quit and the White House intervened.
Mr. Martin had been regarded as a possible successor to Volcker as Fed chairman. But Volcker was a Wall Street favorite, and the financial world might not have accepted a figure who had opposed him so vigorously. Instead, Reagan appointed economist Alan Greenspan to replace Volcker in 1987.
"That collision probably made it impossible to name Martin," Greider said.
After leaving the Fed, Mr. Martin held a variety of senior financial positions in the private sector. Most recently, he was chairman of Martin Associates, a San Francisco financial services firm. He appeared frequently as a radio and television commentator on business and economics and was author of "The Complete Idiot’s Guide to the Federal Reserve."
In addition to his wife, Mr. Martin is survived by a son, Pier Martin of Las Vegas; two granddaughters; three stepdaughters; and five step-grandchildren.