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Bland ambition

27 October 2011 By Richard Beales, Agnes T. Crane

Charles “Ed” Haldeman, the outgoing chief executive of U.S. mortgage finance behemoth Freddie Mac, secured a package worth up to $6 million a year back in 2009. But times are, or at least should be, a lot tougher now. A new CEO needs administrative skills, a thick skin and little to no ambition. Breakingviews suggests a first draft of a help wanted ad.

Position: Chief Executive Officer, Freddie Mac
Location: McLean, VA

The successful candidate will be capable of managing a tarnished organization with a $2.2 trillion mortgage-laden balance sheet, 5,100 employees and – so far – $66.2 billion of government rescue funding. The CEO will operate with limited room for maneuver under the supervision of the Federal Housing Finance Agency, the conservator of Freddie Mac and sister enterprise Fannie Mae since September 2008.

He or she will also require patience as U.S. legislators debate the future, if any, of the company. Any clarity may not be forthcoming until well after the November 2012 presidential and congressional elections. Thereafter, the CEO’s task may well be to wind down Freddie, not to reinvigorate it. Vision, ambition and independence are not priorities.

In the meantime, the financial part of the CEO’s role will be to minimize further losses in a still-fragile housing market at a time when some politicians may want to aid homeowners at the expense of Freddie and Fannie. The related challenge is that Freddie’s debt to U.S. taxpayers is already cripplingly expensive. It now owes $6.6 billion a year to the Treasury in dividend payments. Over its 41-year history, Freddie’s annual earnings only once topped that amount.

The successful candidate will also require a resilient nature. Freddie continues to be a lightning rod in Washington, with conservative lawmakers blaming it for causing the housing bubble and liberals criticizing it for not helping more to help homeowners suffering from the bust. The FHFA has also been admonished by its inspector general over lax policies for executive pay at Freddie and Fannie.

That means the new CEO will also need to exercise restraint over pay and perks. An open FHFA position reporting to Edward DeMarco, the acting director of the watchdog, carries a salary of $180,000 to $255,000. That sounds about right for this vacancy, too.


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