You probably know the pride and thrill of playing with OPM—other people’s money.
Chances are, though, you wouldn’t abdicate your responsibility to those people, ignore advice and muse aloud about your own situation while losing all their money.
You wouldn’t do that. It’s the opposite of .
Welcome to the world of Freddie Mac and its former CEO, Richard Syron, who lost his No. 1 spot recently as the government seized control of mortgage giants Freddie Mac and Fannie Mae, taking direct control.
- Starting in mid-2004, Syron’s chief risk officer began warning him the company was buying too many bad home loans.
- That officer and others also warned that underwriting standards were becoming too shoddy.
- Syron said the company couldn’t afford to turn away riskier loans.
- Many former top executives at Freddie Mac, plus other stakeholders, report Syron ignored recommendations that might have averted the crisis. Freddie Mac said there was “little to nothing” it could have done.
- “If I had better foresight, maybe I could have improved things a little bit,” Syron remarked. “But frankly, if I had perfect foresight, I would never have taken this job.”
- Syron commented that shareholders, regulators and Congress wanted different things, and blamed Congress for making him buy bad loans. “Sure, it’s hard to deal with the pressures of Congress,” noted a former colleague. “That’s why executives get paid so much.” Syron’s compensation equaled more than $38 million since 2003.
- His former counterpart at Fannie Mae, Daniel Mudd, said the two mortgage giants were victims of circumstance.
- At a conference this spring, Syron defiantly dismissed advice to raise cash. “This company will bow to no one,” he declared. He then delayed a stock sale as the price of borrowing skyrocketed.
- A like-minded former Freddie Mac official sounded surprised that taxpayers demanded more oversight of their money. He says he expected a government bailout. “But we didn’t expect it would come at the cost of a new regulator who now has the power to burrow into our business forever.”
- The capper comes from Syron himself: “I’ve had four other jobs as CEO and I came out of them all pretty well.”
— Adapted from “At Freddie Mac, Chief Discarded Warning Signs,” Charles Duhigg, The New York Times.
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