By David S. Hilzenrath
Washington Post Staff Writer
Wednesday, May 2, 2007

Freddie Mac president and chief operating officer Eugene M. McQuade has turned down the board's offer to make him chief executive this summer, dashing the federally chartered mortgage funding company's long-standing succession plan.

McQuade was part of a leadership team brought in to straighten out the company after a multibillion-dollar accounting scandal.

He joined Freddie Mac in 2004 as the intended successor to chief executive Richard F. Syron. Since then, McQuade has helped preside over Freddie Mac's effort to fix flaws in internal controls and financial reporting systems.

In passing up the chance to head one of the nation's largest financial institutions, McQuade said the government's unresolved push to tighten regulation of Freddie Mac and its rival, Fannie Mae, has made the job less appealing.

"The whole political environment around the GSEs is one that no one would like to deal with," McQuade said in an interview yesterday, using the abbreviation for government-sponsored enterprises. "It is very difficult as an executive to be strategic and provide . . . leadership to the employees when there is this continued uncertainty."

Congress has been engaged for years in an on-again, off-again effort to tighten oversight of Freddie Mac and Fannie Mae, and a bill recently approved by a House committee would empower regulators to exert more control over the companies.

McQuade, 58, said he had not lined up another job. He noted that his family's primary home is in Rhode Island.

"I'm going to take some time now and try and decide what I'm going to do," he said.

Freddie Mac recently issued its first timely annual financial report in five years, and it plans to resume issuing quarterly financial reports on time later this year.

The work to fix Freddie Mac's financial systems has taken more time and money than either the company or its regulators expected, a federal oversight agency said in a recent report. Freddie Mac's efforts "suffered during 2006 from ineffective planning and inconsistent execution," the Office of Federal Housing Enterprise Oversight reported.

However, the agency had no objection to McQuade's becoming chief executive, OFHEO spokeswoman Corinne Russell said yesterday.

Freddie Mac shares rose $1.12 yesterday, to $65.90. In a news release, Syron praised McQuade for such accomplishments as helping to strengthen the company's relationships with customers.

McQuade previously held top posts at Bank of America, FleetBoston Financial and Manufacturers Hanover.

McQuade's 2004 employment contract gave him the potential to receive a substantial payout if anyone else was named to succeed Syron or if he were not offered the job by Sept. 1 of this year. The board recently followed through as planned by offering him the job. Syron, 63, who became chief executive in 2003, would have remained chairman.

The board has formed a committee to work on a new succession plan.