By Zachary A. Goldfarb
Washington Post Staff Writer
Thursday, March 12, 2009
Freddie Mac reported yesterday that it lost $50.1 billion last year, almost half of it in the final three months of 2008, and would need an additional $30.8 billion in taxpayer assistance to stay solvent.
With turmoil continuing this year, Freddie Mac also announced yesterday it had named its chairman, John A. Koskinen, to serve as an interim chief executive after the government's first choice for the job quit six months into his tenure. Koskinen is a former deputy mayor of the District and former top official in the Clinton administration's Office of Management and Budget.
The announcements showed how the downturn in the nation's economy and the difficulties of having the government run a private company were buffeting the McLean mortgage finance giant and its thousands of local employees.
The federal government, which seized Freddie Mac and its counterpart, Fannie Mae, last fall, has agreed to cover $200 billion in losses at each firm. Freddie Mac has already received $13.8 billion. Fannie Mae has asked for nearly $15 billion.
The investments are slated to continue until the companies start to turn a profit. Depending on the decisions of Congress and the Obama administration, the two may never be restored as private firms.
During the housing boom, Freddie Mac loaded up on mortgage-related investments that have soured over the past year, leading to last year's loss. The loss in the final three months of the year was $23.9 billion, a reflection of the declining home values and rising foreclosure rates.
"We expect the residential mortgage market will continue to deteriorate in 2009," Freddie Mac said in its earnings disclosure.
When the government seized Freddie Mac and Fannie Mae, the companies fell under the control of their regulator, the Federal Housing Finance Agency. The FHFA named David Moffett, a former U.S. Bancorp vice chairman, as chief executive, but he announced his resignation last week, signaling he would return to the financial services sector.
Associates said Moffett, accustomed to working as a top executive at a private bank, grew frustrated with the tight control the government exerted over Freddie. He steps down March 13.
Koskinen, by contrast, has spent many years in the public sector. He also spent many years at the Palmieri Company, which restructured troubled firms and organizations.
Freddie Mac board member Robert F. Glauber, former chief executive of the National Association of Securities Dealers and a visiting professor at Harvard, will serve temporarily as chairman. The FHFA is beginning a search for a new chief executive. Koskinen is planning to return to his role as chairman once a new chief executive is found.
The FHFA has largely been directing the firm's management decisions as well as crucial programs to address the housing crisis, including cutting fees on mortgages, making it easier for people to refinance and restructuring mortgages to make them more affordable for struggling borrowers.
"We have made changes to certain business practices that are designed to provide support for the mortgage market in a manner that serves public policy and other non-financial objectives but that may not contribute to profitability," Freddie Mac said in its earnings disclosure. "Some of these changes have increased our expenses or caused us to forego revenue opportunities."