At Freddie Mac, Chief Discarded Warning Signs

[moh malekpour]

http://www.nytimes.com/2008/08/05/business/05freddie.html?_r=1&hp&oref=slogin

The chief executive of the mortgage giant Freddie Mac rejected internal warnings that could have protected the company from some of the financial crises now engulfing it, according to more than two dozen current and former high-ranking executives and others

That chief executive, Richard F. Syron, in 2004 received a memo from Freddie Mac’s chief risk officer warning him that the firm was financing questionable loans that threatened its financial health.

Today, Freddie Mac and the nation’s other major mortgage finance company, Fannie Mae, are in such perilous condition that the federal government has readied a taxpayer-financed bailout that could cost billions. Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Mr. Syron heightened those perils by ignoring repeated recommendations.

In an interview, Freddie Mac’s former chief risk officer, David A. Andrukonis, recalled telling Mr. Syron in mid-2004 that the company was buying bad loans that “would likely pose an enormous financial and reputational risk to the company and the country.”

Mr. Syron received a memo stating that the firm’s underwriting standards were becoming shoddier and that the company was becoming exposed to losses, according to Mr. Andrukonis and two others familiar with the document.

But as they sat in a conference room, Mr. Syron refused to consider possibilities for reducing Freddie Mac’s risks, said Mr. Andrukonis, who left in 2005 to become a teacher.

“He said we couldn’t afford to say no to anyone,” Mr. Andrukonis said. Over the next three years, Freddie Mac continued buying riskier loans.

Mr. Syron contends his options were limited.

 

[ghrousseau]

Freddie Mac CEO in the News

http://www.foxbusiness.com/story/ma...reddie-mac-ignored-warnings-financial-crisis/


Sounds like someone is getting torn a new one. Numerous former employees and managers seem to concur with the opinion that the CEO ignored warnings back in 2004.

I predict we are going to see a major house cleaning at both in the next few months.

 

[George Hatch]

Corporate culture is a function of management, and it all starts at the top.

If as part of their employment contracts, all company officers at the VP (or it's equivalent) level and up at the GSEs and the regulated institutions were informed in writing that any active or passive measures taken to undermine due diligence criteria established by the government would subject them to criminal prosecution, minimum federal prison sentencing guidelines, and disgorgement of bonuses, shares, options and other compensation, I guarantee you that some of these executives would think twice about what they've been doing.

Wayward managers would be turned in for criminal prosecution, wayward supervisors and front line employees would be terminated on the spot and outside auditing companies would think twice before deciding that keeping the account was more important to them than avoiding prison time.

Send the crooks to prison and then bar them for life from working for a lender or it's holding company or any of the subsidiaries of a lender's holding company.

 

[Pamela Crowley (Florida)]

Corporate culture is a function of management, and it all starts at the top.

If as part of their employment contracts, all company officers at the VP (or it's equivalent) level and up at the GSEs and the regulated institutions were informed in writing that any active or passive measures taken to undermine due diligence criteria established by the government would subject them to criminal prosecution, minimum federal prison sentencing guidelines, and disgorgement of bonuses, shares, options and other compensation, I guarantee you that some of these executives would think twice about what they've been doing.

Wayward managers would be turned in for criminal prosecution, wayward supervisors and front line employees would be terminated on the spot and outside auditing companies would think twice before deciding that keeping the account was more important to them than avoiding prison time.

Send the crooks to prison and then bar them for life from working for a lender or it's holding company or any of the subsidiaries of a lender's holding company.

I'm trying so very hard not to give up the hope that this will happen.

Not at all surprised about this article.

 

[Terrel L. Shields]

Corporate culture is a function of management, and it all starts at the top.

too true.

Send the crooks to prison

How about Henry Paulson's actions during the Dot.com bust when he was CEO of Goldman Sachs?.....When the errant are regulated by their buddies, does anyone believe that real change will happen?

 

[Terrel L. Shields]

Tonight on NBR Syron defended his actions. He was only the CEO in 04. They only had less than 1% foreclosure. "I was a bear but not bearish enough" blah blah blah..

They were feeding at the trough like starving hogs and wonder why they got a bellyache.