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Freddie Mac Differs With Regulator on 2007 Results
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Freddie Mac spokeswoman Sharon McHale explained that the company tightened certain lending standards in February 2007, ahead of other businesses. The company has since tightened standards further.
In a December interview, Freddie Mac executives described the company as having deliberately followed the industry into a loosening of lending standards to preserve market share. That loosening went beyond subprime loans to other types of mortgages.
"I think what happened over time is, we found that our own caution was making us less and less relevant, and we weren't sure, quite frankly, that our competitors, you know, on the street were being crazy," said Anthony S. "Buddy" Piszel, the chief financial officer.
"Could we have run for the hills and said we're not going to do any of that?" Piszel asked. "What if things didn't go down? We would basically be just taking our whole future and giving it away."
In yesterday's report, the compensation committee noted that Syron had effectively been doing an extra job since the company's chief operating officer announced in May that he was leaving the company.
OFHEO told Congress that Freddie Mac's board has been slow to replace the former chief operating officer. It also faulted Freddie Mac for failing to separate the positions of chairman and chief executive as it agreed to do in 2003. The chief operating officer who announced a year ago that he was leaving was Syron's heir apparent as chief executive.
Freddie Mac spokeswoman Sharon McHale said Syron's performance-related cash bonus of $2.2 million for 2007 was only 66 percent of his target amount because "Freddie Mac's financial performance in 2007 was not good."
He also received a $1.25 million as the first installment of a "special extension bonus" potentially worth $3.5 million for agreeing to stay at Freddie Mac through 2009.
Freddie Mac board members were advised on executive pay decisions by a compensation consulting firm, Hewitt, that also did consulting work for Freddie Mac management. Hewitt's $280,000 of fees and expenses for advising management exceeded the $230,000 it received for advising the board, according to the report Freddie Mac issued yesterday.
The board approved Hewitt's work for management and believes those activities "do not present a conflict of interest," McHale said.
