Freddie Mac Board Appointed by Federal Regulator
Wednesday, December 24, 2008
Freddie Mac, the McLean mortgage-finance giant, yesterday moved a step closer to restoring normal corporate oversight after being taken over by the government earlier this year, rounding out its board with seven new directors, including former District mayor Anthony A. Williams.
One of the new directors is Eugene B. Shanks Jr., who is a former business partner of James B. Lockhart III, head of the federal agency that appointed the new directors. Lockhart, director of the Federal Housing Finance Agency, founded a risk management firm, NetRisk, with Shanks in 1997. A spokeswoman for Lockhart said NetRisk was sold to Fitch Ratings and that the two have no ongoing financial relationship.
Directors of Freddie's board are paid $160,000 a year, while the chairman of the board, John A. Koskinen, whom Lockhart appointed several months ago, will be paid $290,000. Directors can receive up to $25,000 more for leading committees of the board.
Since being taken over, Freddie and Fannie Mae, its bigger sister in the District, have been operating without functioning boards -- which traditionally oversee management decisions about accounting, compensation, business practices and risks. Fannie may announce its new board in coming days.
Without boards, Fannie and Freddie risked violating the rules they must follow as public companies and as firms listed on the New York Stock Exchange.
When the government took over Freddie, the federal officials sacked the chief executive and chairman of the board, Richard F. Syron, and most other members resigned. Many of the decisions overseen by the board, including Freddie's move into risky mortgage products and Syron's compensation, have come under sharp criticism from policymakers and financial analysts.
In recent months, the FHFA has played the role of a board, signing off on accounting statements and other decisions. The FHFA appointed a new chief executive, David M. Moffett, who will sit on the newly-constituted board, and Koskinen as new chairman. Koskinen and Moffett have spent the past few months working with a corporate headhunter to identify and interview candidates for the board.
FHFA officially appointed the new directors.
The announcement reunites Koskinen and Williams, who served together when Williams was the District's mayor and Koskinen was his deputy. Williams now runs a unit of Arlington-based Friedman, Billings, Ramsey Group that is focused on financial services for governments and nonprofits.
Board members who remain from the previous board include independent consultant Barbara T. Alexander; Robert R. Glauber, former chief executive of the National Association of Securities Dealers; and Harvard housing policy professor Nicolas P. Retsinas.
Other new board members include former J.P. Morgan Chase executive Linda B. Bammann; GlobalTech Financial chief executive Carolyn H. Byrd; private equity specialist Laurence E. Hirsch; and former KPMG executive Christopher S. Lynch.
FHFA director Lockhart has said he wants Fannie and Freddie to return to being companies with normal governance. He has said he wants the FHFA to return to its historic role primarily as the companies' regulator.
But the agency is now guiding what the companies are doing. They are being pushed to take steps to help the mortgage market -- by buying mortgages and reducing foreclosures -- that could cost the firms in the short term, requiring them to get bigger cash infusions from the federal government.
The FHFA will have its staff sit in on some meetings of the board of directors. The Freddie board has been told by the FHFA to consult with it about any substantial moves regarding transactions, contractors, compensation, auditing or other topics.