Fannie Mae's top legal officer is leaving the company to rejoin his former law firm, the latest in a string of executive departures as the Washington mortgage finance company undergoes sweeping changes.
Thomas E. Donilon, Fannie Mae's executive vice president for law and policy, joined Fannie Mae in 1999 as its general counsel during a time of historic growth for the company and when it was at the zenith of its political influence in Washington. One of Donilon's duties was to oversee Fannie Mae's relations with regulators and Congress, where the company had comfortably deflected repeated efforts to increase its regulatory oversight. In 2003, he became a member of the office of the chairman, comprised of four Fannie Mae executives: former chairman and chief executive Franklin D. Raines, former chief financial officer J. Timothy Howard, Daniel H. Mudd and Donilon.
With Donilon's departure, Mudd is the last member of that group. Mudd was named interim chief executive after Raines and Howard were forced to leave in December after sharp criticism from regulators and the Securities and Exchange Commission for accounting irregularities. Not an operating or financial executive, Donilon was not directly involved in the accounting practices that inflated Fannie Mae's earnings by as much as $9 billion from 2001 to 2003.
Donilon, who will leave by the end of the month, declined to comment. Executives at the company said his primary reason for leaving is to spend more time with his two young children after four years of intense, often seven-day work weeks.
Congress is expected to pass legislation this summer creating a new, tougher independent regulatory agency for Fannie Mae and its smaller competitor, Freddie Mac. Both companies, though owned by stockholders, were chartered by Congress to provide a steady source of cash for home mortgages.
Donilon has seen his purview and pay shrink since December. Fannie Mae this year said it would curtail its lobbying and government-relations activities. In March, Fannie Mae's board did away with an incentive compensation system that in past years richly rewarded Fannie Mae executives, including Donilon, for its rapid -- and now invalidated -- profit growth.
From 2000 to 2003, Donilon received more than $7 million in compensation in the form of cash payments and restricted stock awards. Last year, he was paid his salary -- $644,000 -- but no bonus.
Donilon, 49, a well-regarded attorney with longtime policy and legal experience, will be joining O'Melveny & Myers LLP as a partner, a position he left to join Fannie Mae six years ago. From 1993 to 1996, he was assistant secretary of state for public affairs and chief of staff to Secretary of State Warren M. Christopher. In a statement, Mudd said Donilon wanted to resume "the pursuit of his long-held interest in foreign policy."