Fannie Mae Shake Up

Too little, too late?

Fannie Mae shook up its senior management in a move it said was designed to "drive" the mortgage company’s efforts to conserve capital and contain a surge in costs stemming from defaults by homeowners.

The company, struggling with losses that have called into question its ability to survive without a government bailout, announced the departures of Robert Levin, a 27-year veteran who was chief business officer, and two executives who joined within the past two years: Stephen Swad, who was chief financial officer; and Enrico Dallavecchia, who was chief risk officer.

Fannie promoted Peter Niculescu to chief business officer with broad responsibilities for the businesses of providing guarantees on mortgage securities and investing in such securities, as well as for raising capital and managing debt needs. Mr. Niculescu, 48 years old, joined Fannie in 1999 after working as a top bond-market analyst and strategist for Goldman Sachs. In recent years, he has been responsible for managing Fannie’s holdings of mortgages and related securities, which currently total about $758 billion.

Fannie also named David Hisey, 48, formerly controller, as chief financial officer. Michael Shaw, 61, formerly a senior vice president, becomes chief risk officer.

Discuss . . .

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Source:
Fannie Names New Officers in Shake-Up
JAMES R. HAGERTY and APARAJITA SAHA-BUBNA
WSJ, August 28, 2008
http://online.wsj.com/article/SB121986910093777325.html

What's been said:

Discussions found on the web:
  1. VJ commented on Aug 27

    So, which month do the feds take ’em over ?

    Has to be after the election, unless the bottom falls out before then.

    If McCain wins, it could be late November/ early December.

    If Obama wins, they could try and put it off until after they leave.
    .

  2. wally commented on Aug 27

    “…and two executives who joined within the past two years”

    Says it all, don’t you think?

  3. Stuart commented on Aug 27

    CFO and top risk guy get the boot shortly after it was publicly announced an examination is going to begin or already has (who knows) to determine the best means to re-structure. Interesting the CEO stayed. One wonders how much $$$$$ they have to blow for the CEO to also get the boot. It’s clear that a centerpiece of any plan is to kick the can down the road as long as possible so it’s the next guys problem. Given that FRE and FNM have $225B of debt maturing before the end of September, it seems obvious that one of the reasons Paulson wanted his “bazooka” was to jump in and pickup any amount not sold. Key question is any bail-out Sr or Jr to existing preferreds…. ‘tat is the question.

  4. Pat G. commented on Aug 27

    Mudd is still there. They promoted Niculescu whose been there a decade and was “responsible for managing Fannie’s holdings of mortgages and related securities” because he did so well. And got rid of two guys that had only been there a couple of years. What impact could they have had? Looks like they’re simply reshuffling the deck. What has fundamentaly changed?

  5. philipat commented on Aug 27

    It’s the Bear Stearns model?

  6. Simon commented on Aug 27

    I’ve said it before and I’ll say it once more. The management of phoney and fraudy and their ultimate demise may well become the defining episode of the great capitalist debarcle of what I call the 10’s… or perhapse it should be 1’s. The 0’s just doesn’t ring right. Although in terms of finance the naughties is about right.

  7. RF commented on Aug 27

    Short squeeze coming. End of the month, new (old) people in FNM, the bottom must surely be in. Long SKF and expecting pain tomorrow. Best to all.

  8. Ironman commented on Aug 27

    So long overdue, yet not enough criminal charges….

  9. KnotRP commented on Aug 27

    Read all the news reports…no one says they were pushed out….words like “exit” and “departure” fall far short of explaining the reason….did these dudes get fired (why? How much damage could the two short timers have done from 2006-2008, when the shit was already in transit to the fan)? Or did they pull the emergency eject before impact, and leave the CEO to go down with the ship?

  10. leftback commented on Aug 27

    Agree with RF. Short squeeze coming. Be careful tomorrow. Banks all buying Fannie and Freddie and each other.

    It’s all so Tokyo, ca. 1990. Our lost decade beckons us.

  11. AGG commented on Aug 28

    What did the “departure” cost? We don’t need more “trust us, we’re working on it” crap.
    Anything mealymouthed isn’t enough. We, the people, want firings, executive assets seized and criminal investigations.
    Crumbs from the table just doesn’t cut it anymore.

  12. Steve commented on Aug 28

    Let me get this straight, they got rid of their top crooks and promoted some of their lower-level crooks to take over! Some house cleaning.

  13. Jacky commented on Aug 28

    the question is… does it help?

  14. Greg0658 commented on Aug 28

    Socialize them both under the Coast Guard.
    Work out a return for current investors. Equivalant pay packages.

    1 – 3 star General, 2 – 2 stars, 4 – 1 stars

    10 – full bird Colonels, 20 – Lieutenant Colonels, 40 – Majors, 80 – Captains, 120 – Lieutenants, 240 – Second Lieutenants

    120 – Sergeants, 480 – Specialist, 240 – Privates

    Why no 4 star General? Promotion carrot. Not sure how the game plan messes with Wall Streets ability to play their game?

  15. Greg0658 commented on Aug 28

    Return for investors = 2% yoy interest from arrival date (thru June ’07) … or what the free market dished out
    letter to investors:
    “Thank you for investing in Americas homeland. Thanks for providing homes for the homeless and financing upgrades for others. We wish we could have done better than the 2% return, but times are tough.”

  16. C Kincaid commented on Aug 28

    another round of exits and golden handshakes for the crooks who destroyed the equity of shareholders . . . . wonder what “bonuses” are of the departed?

  17. NSA commented on Aug 28

    They’ve been hired by the Paki PPT.

  18. VennData commented on Aug 28

    The Bush administration will not countenance another couple of nationalizations after the TSA.

    The Paulson plan is meant to show they are ready, willing to funnel money, it’s game theory at its best.

    The last auction went well. AAA pricing in today’s market.

    They will time the upcoming auctions to maximum the possibility of success

    Paulson made too many enemies on the street by wiping out Bear Sterns Equity. Doesn’t want to make enemies weeks before moving on.

    Paulson’s dream of being an uber money man vis-à-vis China post-departure is at risk if their billions and billions of holdings are in anyway written down.

    If you wipe equity and the preferred you wipe billions of Tier One capital from global banks… oh and US banks.

    Who cares if a bunch of guys with political connections to the GOP are saved/ promoted / not sacrificed? Peanuts,

    They’ve got cash. They’ve got technical capital ratios. The government needs them to keep buying mortgages, and the guys who operate them to be incentivized.

    Barney Frank is saying the GSE’s are being unfairly blamed for sub prime, he’s right.

    Buy FNM.

  19. Mike in NOLa commented on Aug 28

    Amazing that so many have posted and no one has mentioned the Titanic’s deck chairs. Full speed ahead. Or at least keep the boilers going until the RMS Paulson arrives.

  20. Philippe commented on Aug 28

    It does not seem to be the Bear Stern model, but much closer to the Goldman Sacks model and no wonder why the treasurer of the USA is running a sovereign risk as an investment bank.The only problem is that international investors have already given to charity.

  21. leftback commented on Aug 28

    Surprise! GDP revised upwards! MBIA resuscitated! Fannie and Freddie clean house!

    Big summer rally low volume short squeeze day coming. Hank Paulson’s bazooka is aimed at the shorts. Going to be some pain.

    I am going to watch this from the sidelines today, there will be more opportunities down the line.

  22. sweeny texas commented on Aug 28

    We should do an over/under bet on the severance packages for the departing executives.

    I propose the number should be 62.8 million.

    And I’ll take the over.

  23. Jeff M. commented on Aug 28

    Ahhh, the old move the names around the org chart trick. This stuff NEVER works unless new blood is injected somewhere in power. Merely delaying the inevitable.

    The capitalists are destroying capitalism.

  24. OkieLawyer commented on Aug 28

    I am a little late, but this is on topic:

    Freddie, Fannie Failure Could Be World `Catastrophe,’ Yu Says

    “If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.”

    “The seriousness of such failures could be beyond the stretch of people’s imagination,” said Yu, a professor at the Institute of World Economics & Politics at the Chinese Academy of Social Sciences in Beijing. He didn’t explain why he held that view.

  25. dwkunkel commented on Aug 28

    If you’re running a whore house and business drops off, you don’t improve the situation by rearranging the beds.

  26. Bud Hovell commented on Aug 28

    Swapping deckchairs won’t right the Titanic.

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