BU Now » Freddie Mac

Fannie, Freddie execs ‘splainin’

Dick Taffe — Fri, 09 Apr 2010 17:44:13 +0000

Former executives from Fannie Mae and Freddie Mac, the goverment agencies whose mortage-loans holdings helped sink the economy, testified before the Congressional commission looking into the financial meltdown. Mark Williams, who teaches finance at the BU School of Management and is author of ”Uncontrolled Risk” about the fall of Lehman Brothers, says both agencies may have outlived their usefulness.

“Without the capital spigot these agencies created, less funds would have found their way to dangerously risky mortgage products. The government created Fannie Mae in 1938 and Freddie Mac in 1970, and took them over in 2008. It should consider taking them off life support in 2010.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

Remake Fannie & Freddie?

Dick Taffe — Thu, 06 Aug 2009 16:20:38 +0000

It’s reported that an overhaul of mortgage giants Fannie Mae and Freddie Mac may be in the works. The Obama administration’s plan would be to strip them of billions in troubled loans and build a new structure to support the home-loan market. Robert Bench, a former deputy Controller of the Currency, now a senior fellow at the School of Law’s Morin Center for Banking and Financial Law, thinks a Freddie/Fannie remake is smart.

“For most of their existence, Fannie and Freddie were utilities that served the public well. If they can return to a ‘utility’ culture, deploying conservative lending standards for the benefit of the overall mortgage market, they would accelerate reform and repair of retail mortgage conditions.”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Bonuses for Fannie Mae, Freddie Mac “nauseous”

Dick Taffe — Fri, 03 Apr 2009 19:08:50 +0000

School of Management Professor James Post, an expert on corporate governance and business ethics, says the $210 million in retention bonuses for employees of bailed-out Fannie Mae and Freddie Mac are inappropriate under the economic circumstances.

“The news of retention bonuses at Fannie and Freddie gives me the same nauseous feeling I felt when looking at the newly released unemployment numbers. At a time when another 640,000 lost their jobs in the last month, bonuses ranging from a few hundred dollars to more than a million make no sense.

“Even if we assume the F&F employees are stellar performers, a ‘bonus culture’ should not be subsidized any longer. It is a mistake to turn them into mini-entrepreneurs, playing with public money. F&F employees are – emphatically – working for the citizens of this nation.

“So, two suggestions. First, start retraining the unemployed for those soon-to-be-vacated jobs at F&F. Second, eliminate the bonus culture from any organization receiving federal money. My strong suspicion is that those employees will still look forward to receiving their weekly or monthly paychecks.”

Contact James Post, 617-353-4162, jepost@bu.edu