Bloomberg News

Freddie Mac CEO Says Financiers’ Fate Will Come Post-Election

October 26, 2011

Oct. 26 (Bloomberg) -- A decision on the fate of mortgage financiers Freddie Mac and Fannie Mae probably won’t come until after the 2012 presidential election, said Charles Haldeman, Freddie Mac’s outgoing chief executive officer.

“It doesn’t seem like we’re in an environment where many decisions are being made,” Haldeman told Boston College’s Chief Executives Club in Boston, minutes before the Federal Housing Finance Agency announced his resignation.

Freddie Mac, based in McLean, Virginia, and its larger rival, Washington-based Fannie Mae, were seized by federal regulators in 2008 amid the mortgage-market collapse. The U.S. Treasury has proposed winding them down within a decade to reduce government’s dominance of mortgage financing. Congress is considering plans to eliminate them in half that time.

The future of the mortgage financiers probably will be decided “after the election,” Haldeman said in a speech that was interrupted by chants from Occupation Boston protesters, who are part of the Occupy Wall Street movement and surrounded the entrance of the building.

“I understand their concerns,” he said.

When asked later about his status at Freddie Mac, he said, “I’m 63, and there will be a time when my tenure will come to an end.”

He will step down “some time in the coming year,” the FHFA said in a statement today.

Haldeman, an alumnus of Harvard Business School and Harvard Law School, became CEO of Freddie Mac in 2009 with no prior housing-industry experience. Formerly, he was chairman of mutual-fund company Putnam Investments in Boston. He joined Putnam in 2002 and became CEO the following year when he succeeded Lawrence Lasser in the midst of a scandal involving allegations of improper trading.

Cost to Taxpayers

Regulators seized Freddie Mac and Fannie Mae three years ago after deciding they were insolvent because their capital wasn’t sufficient to withstand a surge in loan delinquencies. Since then, the companies have survived with a federal lifeline that so far has cost taxpayers more than $170 billion.

Last month, the FHFA inspector general criticized Freddie Mac for a $1.35 billion settlement of repurchase claims with Bank of America Corp. It disagreed with the mortgage company’s decision to let the lender off the hook for future demands that it buy back loans if their quality has been misrepresented.

“I have an obligation to the taxpayers to put back a defective mortgage,” Haldeman said, responding to an audience question. He didn’t mention the Bank of America settlement.

Fannie Mae and Freddie Mac own or guarantee about half of U.S. residential financing debt. They buy mortgages from lenders, freeing up cash for them to make more loans. Their role helped to boost the U.S. homeownership rate to almost 70 percent in 2004 from about 64 percent three decades earlier. Five years into the housing bust, that rate is down to about 66 percent, according to the Census Department.

--With assistance from Lorraine Woellert in Washington. Editors: Christine Maurus, Daniel Taub

Company news: FMCC US <Equity> CN FNMA US <Equity> CN

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus