Ousters Of Freddie CEO, Result Of An Accounting Investigation. For the second time in less than three months, Freddie Mac is looking for a new chief executive.
The mortgage financing giant announced late Friday that it would comply with an order from its regulator and remove CEO Gregory Parseghian and general counsel Maud Mater. The ousters are the result of an ongoing accounting investigation by the Office of Federal Housing Enterprise Oversight (OFHEO).
Parseghian, who joined Freddie Mac in 1996, was promoted to CEO in June after the board forced CEO Leland Brendsel to retire. At the same time, the company’s president was fired and its chief financial officer resigned. Since then, Freddie Mac has said it understated earnings by as much as $4.5 billion over three years, partly the result of a push to portray steady growth to investors.
Though Freddie Mac says it has yet to begin the search process for a CEO, industry observers are speculating on possible candidates, including former Freddie Mac chief financial officer John Gibbons and James Johnson, who retired as head of rival Fannie Mae at the end of 1998.
Peter Fisher, who has said he plans to step down as Treasury undersecretary, and Lawrence Lindsey, a former Federal Reserve governor and Bush economic adviser, also were cited by National Mortgage News.
While most could not be reached for comment, Lindsey said on Friday that he had not spoken to anyone at Freddie Mac and noted that the job “would be an interesting public policy challenge.”
Experts say that whoever takes the helm needs to be politically astute and knowledgeable about the mortgage industry. “They’ll have to walk the land mines in Washington, D.C.,” says Paul Miller, an analyst at Friedman Billings Ramsey.
Fannie Mae and Freddie Mac have been fending off congressional attempts to tighten their supervision. Last year, Freddie Mac spent $9.7 million on political lobbyists. Its employees made $4.2 million in political contributions.
management of interest rate risk
Though Parseghian didn’t have much experience on Capitol Hill, he got high marks from industry experts for his management of interest rate risk. His future became uncertain, however, after an investigative report ordered by the board of directors said that although he was not responsible for the company’s accounting and disclosure, he had approved and participated in many discredited decisions.
Nonetheless, Freddie Mac’s board stood by Parseghian to the end, praising him for his “outstanding contributions,” in a statement announcing his departure Friday. In meetings with OFHEO over three days last week, board members sought to keep Parseghian at the company, according to a source familiar with the negotiations.
OFHEO director Armando Falcon Jr. said in a letter to the Freddie Mac board chairman on Friday that Parseghian can remain CEO during the search for his replacement.