Living a life completely clear of Mudd

Fannie Mae

Fannie Mae, as you might know, has been heavily involved in the financial crisis of 2008. Along with Freddy Mac, Fannie Mae is a quasi-government mortgage-lender. It was a gigantic cash cow and, perhaps, one would call it a cash cow. They were however contributing to the housing bubble by trading relatively large number of subprime mortgages, most of which were not reported in financial reports, which partially led to collapse of the company and further federal takeover of Fannie Mae.

CEO of Fannie Mae at that moment was Daniel Mudd. One would think, that Mudd, who stayed away from everything “dirty”, should not have gotten in big trouble after seemingly large problems he, as an executive, led Fannie Mae into. Indeed, Daniel has quietly stepped down as a CEO and continued to pursue his dream and attempted to rebuild his career basically from scratch. After leaving he took the helm of a hedge-fund, Fortress Investment Group. He began a completely new life – a Fannie Mae story of his life seemed to end with a not-so-happy ending and Mudd started an entirely new novel. He even put his huge mansion on sale, which clearly indicates that Danny is leaving all the mud behind.


To me it sounded like a perfect ending of a story. I even felt that I started reading a new book – the one that only remotely reminds me of the previous unhappy romance I read. The only similarity seemed to be main character’s name. However, one of the things Mudd forgot to do is clear his name and reputation of mud. “Don’t judge a book by its cover” – one would say. In this case, however, the cover is just simply way too conspicuous and the implied protagonist becomes a clear antagonist in public’s eyes. Mudd couldn’t even start to enjoy his new life, when SEC filed a law suit against poor guy, which led to his resignation as a CEO of Fortress. He was accused of fraudulent actions as a CEO of Fannie Mae. Although he was not the only one who SEC brought law suits on, Mudd was in fact the most prominent one. In fact, company’s board gave Mudd an option: “settle the case quickly and you can stay”. Mudd did not think it was an option; he stepped down and devoted his time to clearing his name. He is Raskolnikov, looking for redemption, and economy is an old grumpy lady, who just had to die at some point (Crime and Punishment by Dostoevsky).


“The charges are baseless and political, and I have no intentions of settling anything,” said Mr. Mudd. So, let us wish Daniel Mudd luck, because it seems to me that fortune is his biggest hope at the moment.


Fannie Mae’s Former Chief, Mudd, Sells in Washington
Fortress Chief Daniel Mudd Resigns
US charges ex-Fannie, Freddie CEOs with fraud
Fannie Mae’s Former Chief Fights to Clear His Name


We DON’T make homes possible

It is clear that Freddie Mac (the Federal Home Loan Mortgage Corporation) has not learned it’s lesson from the millions they lost during the housing crash in 2008.  They have continued to act unethically and take advantage of both the government and American homeowners who wish to buy mortgages.  They have tested the government’s generosity long enough – the company is now facing many lawsuits and is facing extinction because of their mistreatment of homeowners and taxpayers money. 

For those who don’t know, Freddie Mac is a taxpayer-owned mortgage giant that was created by the government to make loans more accessible.  However, during the housing bubble they took advantage of their position by backing loans they knew were terrible.  The top executives at Freddie Mac also are being charged by the SEC for failing to disclose billions of dollars in risky subprime mortgages.  The company lost more than $30 billion and as a result the taxpayers had to pick up the pieces.  In order to bolster the economy, the Obama administration had asked Freddie Mac (and their competitor Fannie Mae) to ease conditions for people looking for mortgages and offering incentives to forgive some homeowner debt.  The company has refused.   

Regardless of one’s opinion about the company’s policies, one cannot deny the unethical behavior that was exposed earlier this year.  Apparently, the company has been betting against homeowners’ ability refinance their loans while they make it more difficult for them to do so.  Furthermore, they have bought several billion dollars of inverse floater securities (which made up of the interest from the mortgages) and saved it for themselves while selling the far less risky principal.  This is the opposite of what they should be doing, which is decrease the size of their investment portfolios.  These securities would enable the company to make more money with higher interest rates, which is why the benefit.  Of course, this entire concept completely contradicts the sole purpose of the company: to help homeowners find cheaper mortgages.  The company has taken no incentives to right the wrongs they committed during the housing bubble, and instead of making strives to boost the economy they have been digging in their heals.