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Fannie Mae's Repairman
Rep. Richard H. Baker (R-La.), shown asking questions during a February hearing on accounting irregularities at Fannie Mae, was persuaded by the company's chief executive Daniel H. Mudd to speak at a dinner for its national advisory council.
(By Ken Cedeno -- Bloomberg Ews)
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"He seems earnest and well intentioned. He's trying hard to do all the right things and turn the company around. But the jury is still out on whether he will be successful, and it's still not clear whether he played a role in the misdeeds," said former OFHEO director Armando Falcon Jr.
Mudd would not comment directly on issues likely to be discussed in the Paul Weiss report except to say, "This has been historically a very siloed organization where everyone has a set of roles and responsibilities in their area and more or less stays in their area."
It was a structure that Mudd said frustrated him at the time but may insulate him from the fallout of the company's accounting problems.
As chief operating officer, Mudd oversaw systems technology, back-office operations and customer relations, while as chief financial officer, J. Timothy Howard oversaw accounting and finance. Raines was more focused on dealing with Congress, the White House and federal agencies.
Raines recruited Mudd from General Electric Co., where he had risen quickly from a line management job to chief executive of GE Capital in Japan. Though GE was vastly more complex than Fannie Mae, with hundreds of businesses in dozens of countries, Mudd found it easier at GE to move quickly and invest in new businesses and ideas.
"I found it very frustrating to get things done at Fannie Mae because I think that [its] approach to being deliberative in some cases translated itself into being bureaucratic and slow-moving," he said.
When Mudd was appointed chief executive on an interim basis, investigators had not uncovered any evidence he was involved in the accounting trouble, Fannie Mae board Chairman Stephen B. Ashley said.
In his role as chief operating officer, Mudd was "very much focused on the business units, not on the finance side, not on the controller's side," Ashley said. Though it is still months away from an accurate accounting of its business for the past three to four years, the company has an adequate amount of capital on hand to cover potential losses, according to OFHEO.
The board certainly seems confident of Mudd's performance so far and granted him a 12 percent raise this week, making his annual pay $950,000.
Ashley said those who question Mudd's ability to clean house need only look at the amount of turnover: One-third of Fannie Mae's senior executives and 8 percent of its total workforce have left this year. Mudd also recently landed as chief financial officer Robert T. Blakely, who is credited with fixing the accounting at MCI Inc., formerly WorldCom Inc.
But his strongest contribution may have less to do with accounting and more to do with his political skills and temperament -- and the contrast he poses to Raines, who was forced to leave the company.
Raines, while charismatic and inspiring, also had a tendency to lecture his peers in the housing industry and even federal regulators and members of Congress. In what turned out to be his last appearance before a congressional committee, Raines refused to acknowledge Fannie Mae had violated accounting rules. Mudd, in his first appearance before Congress as chief executive of Fannie Mae, apologized.
