Home > Avid Law Center > The problem with Fannie and Freddie

The problem with Fannie and Freddie

Fannie Mae CEO Michael Williams announced last week that he plans to resign. This follows the news from late last year that Freddie Mac CEO Ed Haldeman was also planning to leave. Former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron have each been charged with fraud by the Securities and Exchange Commission. So what’s with the revolving door?

Since the federal government seized control of the two mortgage agencies, not much has changed in the way they operate, contrary to efforts such as the Dodd-Frank Wall Street Reform Act that became law in 2010.

According to CNN Money, the biggest problem is that the full government control of Fannie and Freddie makes the agencies convenient legislative tools for members on both sides of the aisle. So what’s the solution? CNN Money’s Paul La Monica proposes that they need to be weaned off the government dole. Instead of having FHFA be their master, the free market should take that job. He argues “What incentive is there for a bright, capable CEO to come work for Fannie or Freddie as long as the government is the ultimate boss?”

La Monica states that while the government continues to run Fannie and Freddie, no permanent solution will be created to fix them, contributing to a revolving door for CEOs and other executives at each.

Williams, who took over as president and CEO in 2009, will continue as CEO until Fannie Mae’s board names a successor.

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