Research

Conflict Of Interests

January 2012

Freddie Mac Has Placed Bets Which Put Them “Squarely Against The Homeowner”

Freddie Mac Has Placed Bets Against American Homeowners. “Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates. Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.” (Jesse Eisinger and Chris Arnold, “Freddie Mac Bets Against American Homeowners,” ProPublica, 1/30/12)

Freddie Could Lose “Substantial Amounts Of Money” If Homeowners Refinance. “In addition to being an instrument of government policy dedicated to making home loans more accessible, Freddie also has giant investment portfolios and could lose substantial amounts of money if too many borrowers refinance.” (Jesse Eisinger and Chris Arnold, “Freddie Mac Bets Against American Homeowners,” ProPublica, 1/30/12)

“It Seemed So Out Of Line With Their Mission.” “‘We were actually shocked they did this,’ says Scott Simon, who as the head of the giant bond fund PIMCO’s mortgage-backed securities team is one of the world’s biggest mortgage bond traders. ‘It seemed so out of line with their mission.’” (Jesse Eisinger and Chris Arnold, “Freddie Mac Bets Against American Homeowners,” ProPublica, 1/30/12)

“The Trades ‘Put Them Squarely Against The Homeowner,’ He Says.” (Jesse Eisinger and Chris Arnold, “Freddie Mac Bets Against American Homeowners,” ProPublica, 1/30/12)

Sen. Bob Casey (D-PA) Expressed His “Outrage” At Freddie’s Practice Which Is “In Direct Opposition To A Policy Recommendation That Is Widely Viewed To Be Essential To Our Recovery.” “I am writing to express my outrage at recent NPR reports about the investment practices of Freddie Mac. It is my understanding that in 2010 and 2011 Freddie Mac, a government-sponsored organization, took an investment position betting against wide-spread refinancing for homeowners. If this is the case, Freddie Mac embraced a position in direct opposition to a policy recommendation that is widely viewed to be essential to our recovery and advocated by your Administration as recently as the State of the Union.’” (Ben White, “M.M. Drill Down: Should Banks Fear The Task Force? - Flash: Euro Banks To Double Emergency Loans - Stock Act Moves Ahead - China Trade Tensions Rise,” Politico’s “Morning Money,” 1/31/12)

Fannie And Freddie Have Received Over $170 Billion In Taxpayer Bailouts, But Continue To Reward Their Executives With Extravagant Bonuses

Fannie And Freddie Have Received $170 Billion In Taxpayer Bailout. “Fannie and Freddie have received about $170 billion in taxpayer support over the past three years and recently requested an additional $14 billion, sums that indicate a comparison with pay in the private sector is misguided, the report charges.” (Josh Boak, “Fannie CFO’s Signing Bonus: $1.7 Million,” Politico, 11/16/11)

The Bailouts Of Fannie And Freddie Are Expected To Cost Taxpayers $259 Billion. “Even last month’s publication of Freddie Mac’s relatively positive Q1 financial report (in the black by $676 million) failed to renew anyone’s hope that the companies might survive — especially when considered alongside Fannie Mae’s $8.7 billion loss in the same three months (and with the government’s estimate that the bailout will run around $259 billion before it’s all said and done).” (Tara-Nicholle Nelson, “Fannie And Freddie Fact Vs. Fiction: Wat Will The Wind-Down Do?” Time Magazine, 6/14/11)

“Even Though Freddie Is A Ward Of The State, Top Executives Are Highly Compensated.” “Even though Freddie is a ward of the state, top executives are highly compensated. Peter Federico, who's in charge of the company’s investment portfolio, made $2.5 million in 2010, and he had target compensation of $2.6 million for last year, when most of these leveraged investments were made.” (Jesse Eisinger and Chris Arnold, “Freddie Mac Bets Against American Homeowners,” ProPublica, 1/30/12)

Fannie And Freddie Executives Awarded Over $12 Million In Bonuses To Ten Executives For Meeting “Modest Performance Targets.” “The Federal Housing Finance Agency, the government regulator for Fannie and Freddie, approved $12.79 million in bonus pay after 10 executives from the two government-sponsored corporations last year met modest performance targets tied to modifying mortgages in jeopardy of foreclosure.” (Josh Boak and Joseph Williams, “Fannie Mae, Freddie Mac Executives Get Big Housing Bonuses,” Politico, 10/31/11)

Obama Has Remained Silent About The Large Bonuses, Even Though He Criticized Them In 2008

“[T]he White House So Far Has Remained Largely Silent About Comparable Bonuses At Fannie Mae And Freddie Mac.” (Josh Boak and Joseph Williams, “Fannie Mae, Freddie Mac Executives Get Big Housing Bonuses,” Politico, 10/31/11)

Even Though Obama Was Troubled By Fannie And Freddie Handing Out “Multimillion-Dollar Severance Packages” To Top Executives, While On The Campaign Trail. OBAMA: “I've always said that any action with respect to Fannie Mae and Freddie Mac needs to put taxpayers first and can't under any circumstances bail out shareholders or senior management of that company -- those companies. As a consequence, I'm troubled by the news reports that the outgoing CEOs of Fannie and Freddie may be in line to receive multimillion-dollar severance packages as part of the Treasury plan.” (Senator Barack Obama, Press Conference, Riverside, OH, 9/9/08)