Until a few weeks ago, it’s likely that many people weren’t quite sure what (or who) Freddie Mac, a giant player in the secondary mortgage market, was.
But that’s changed, as Freddie Mac and its larger counterpart, Fannie Mae, have been swept up in the ongoing credit and mortgage crisis.
Freddie Mac, shorthand for the Federal Home Loan Mortgage Corporation, announced Wednesday a second quarter loss of $821 million and an 80 percent cut in its dividend.
The news came a day after The New York Times reported that Richard F. Syron, the corporation’s CEO, had ignored warnings in 2004 about the risks associated with some loans.
The story has placed added attention and blame on Syron, the former head of the American Stock Exchange and an assistant to Paul Volcker when Volcker was chairman of the Federal Reserve.
When he joined Freddie Mac in 2003, Syron, 64, brought with him a reputation as someone who knew politics and who knew the financial markets. He also had experience turning around companies with problems.
He inherited and reportedly cleaned up accounting problems at Freddie Mac and revitalized its board of directors.
Syron was paid well for his work, earning $18.3 million last year.
In the Boston Globe Tuesday, Syron argued that he has kept Freddie Mac true to its mission of making housing available to people in need.
“If you’re going to take aid to low-income families seriously, then you’re going to make riskier loans. We have goals to meet,” Syron told the paper.
He spoke in reaction to the Times story.
It reported that in 2004, David A. Andrukronis, then Freddie Mac’s chief financial risk officer, told Syron that the company was purchasing bad loans “that would likely pose an enormous financial and reputation risk to the company and the country.”
The warning proved to be prophetic as Freddie Mac’s holdings, like those of Fannie Mae, lost significant value this year as housing prices continued to drop and more people began to default on mortgages.
When the stock prices of both companies plummeted last month the Treasury Department led by Henry M. Paulson Jr. stepped in with a plan to inject billions of dollars into the company should they need the funds.
Syron has said that he doesn’t believe Freddie Mac will need the government’s help, as the company hopes to raise $5.5 billion from investors.
Syron had planned on leaving Freddie Mac last year, but he has agreed to stay on through 2009 while the organization hunts for his successor.
“I’ve had four other jobs as CEO, and I came out of them pretty well,” Syron told the Times. “What I’m working for right now is to save my reputation.”
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