Wednesday, July 23, 2008

Freddie and Fannie

Well paid CEOs, Mudd on left, Syron on right

We are here in Vienna, Austria, reading an article in the International Herald Tribune about the financial troubles in the United States.Especially troubling is the prospect of Fannie Mae and Freddie Mac failing. I sometimes wonder how many average Americans even know what these two institutions are and what they represent.

Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. According to its web site, Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets.

Fannie Mae, according to its web site, has a federal charter and operates in America's secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. In 1968, Fannie Mae was re-chartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

The Chairman and CEO of Freddie Mac is Richard F. Syron. Freddie Mac’s address is 8200 Jones Branch Dr., McLean, VA 22102-3110.

The President and CEO of Fannie Mae is Daniel H. Mudd. Fannie Mae’s address is 3900 Wisconsin Ave., NW, Washington, DC 20016-2892.

Fannie Mae and Freddie Mac stock prices have plummeted on fears about their financial stability in a chaotic housing market where falling home values and rising defaults have contributed to large losses at the two companies. According to congressional budget experts, a federal rescue of Fannie Mae and Freddie Mac could cost taxpayers $25 billion.

Mr. Syron was paid about $18M in 2007. Mr. Mudd was paid only $12M. Their combined salary of $30M apparently reflects their success in guiding these shareholder-owned companies to their remarkable debacle. I'm sure these gentlemen would appreciate a letter from citizens grateful for their sound judgment and management expertise. Please enclose your check or money order.

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