CEO of Government-Run Freddie Mac Resigns
March 2, 2009 - 11:25 PMDavid Moffett, CEO of the failed mortgage giant Freddie Mac announced his resignation Monday, telling the board of the now government-controlled company that he wished to return to a position within the nation's embattled private financial sector.
Moffett’s departure comes less than two weeks after President Obama outlined his $75 billion mortgage rescue plan. Freddie Mac--along with its sister “government sponsored enterprise” Fannie Mae--is set to play a major role in Obama’s mortgage efforts, serving as the focal point of the mortgage restructuring plans outlined by Obama on February 18.
Moffett was the company’s first CEO appointed during the company’s government conservatorship, which began in September. Both Fannie and Freddie were placed into conservatorship after suffering catastrophic losses on their investments in mortgage-backed securities. These mortgage-backed securities were made up of mortgages that the government sponsored enterprises purchased from lenders, wrapped up into bonds, and then sold to investors with proviso that the government sponsored enterprise would guarantee the principal and interest on the underlying mortgages.
Recently, President Obama extended another $200 billion each in assistance to Fannie and Freddie, of which Freddie says it is expected to use $30 to $35 billion when it reports its fourth quarter 2008 losses in the coming weeks. Last November, Freddie needed $13.5 billion in bailout funds.
Fannie and Freddie are the giant, government-sponsored enterprises (GSE) which have been at the nucleus of the nation’s financial troubles due to their overwhelming stake in the nation’s mortgage market, owning or guaranteeing approximately $5 trillion worth of home mortgages, nearly half of the approximately $11 trillion U.S. market.
Moffett indicated he wanted to return to the private sector, although he gave no reason for leaving Freddie, saying only that he had enjoyed his time with the ailing company. According to a statement, Freddie does not have a successor to Moffett lined up, indicating the sudden nature of his departure.
“We expect to name an interim CEO before March 13 to assume David's responsibilities once he leaves,” Freddie’s Chairman John Koskinen said. “The board remains fully committed to ensuring the company continues its critical role in supporting the housing finance system during this difficult economic period.”
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