Freddie Mac CFO 'suicide'

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brjohnson789's picture
brjohnson789
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Joined: Aug 27 2008
Posts: 52
Freddie Mac CFO 'suicide'

Hopefully I'm not the only one who thought there could possibly be a lot more to the story of the Freddie Mac CFO supposedly killing himself today.  And when there's conflicting stories on how, it just makes me more suspicious.

One of these things is not like the other...

"Although [Fairfax County Police Public Information Officer Lucy] Caldwell told AHN that police have not yet released the identity of the person who called them, she did confirm to AHN that there were other people present in the house at the time of the death and that there was a gun and a gunshot wound."

http://www.allheadlinenews.com/articles/7014883629

 

"David Kellermann was found dead of an apparent hanging, a source familiar with the investigation told CNN."

http://www.cnn.com/2009/US/04/22/kellermann.death.freddiemac/index.html

 

 

skyriver's picture
skyriver
Status: Member (Offline)
Joined: Aug 30 2008
Posts: 20
Re: Freddie Mac CFO 'suicide'

 U.S.: A Death at Freddie Mac

April 22, 2009 | 2102 GMT

People and sign at Freddie Mac headquarters
A man walks on the grounds of Freddie Mac headquarters in McLean, Va., on April 22
Summary

The acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also known as “Freddie Mac”), David Kellermann, was found dead in his home April 22. Kellermann’s death — which police are calling an apparent suicide — raises many questions about what Kellermann knew and how his death will affect the future of Freddie Mac.

Analysis

David Kellermann, the acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also called “Freddie Mac”) was found dead on April 22. Police in Vienna, Va., have said the death may be a suicide. According to reports from media quoting unnamed police sources, Kellermann was found hanged in the basement of his home. The details on Kellermann’s death are still forthcoming and until an official autopsy is conducted the exact cause of death, and circumstances surrounding it, will remain unknown.

Kellermann was named a senior vice president and acting chief financial officer at Freddie Mac in the September 2008 government-initiated shake up. Prior to holding those posts he was the principal accounting officer and corporate controller — essentially the main accountant — for the mortgage giant. He was one of the longest-tenured members of the current, and government-revamped, Freddie Mac executive board and had worked for the institution for 16 years.

Freddie Mac is a government-created and state-sponsored institution designed to supplement the secondary market for U.S. mortgages. It buys mortgages from banks that issued them to consumers, often packaging them into blocks and then chopping those blocks into securities that investors buy and resell. The idea behind government-sponsored enterprises like Freddie Mac is to generate demand in a secondary market, and thus to increase the overall pool of money available for U.S. mortgage lending.

However, many of the mortgage tranches that were packaged into securities were precisely the sort of assets at the root of the financial meltdown that became the subprime mortgage crisis. Freddie Mac and its sister institution the Federal National Mortgage Association (also known as “Fannie Mae”) own almost half of the approximately $12.1 trillion U.S. market for residential mortgages and securities. Because of their unwieldy size and growing instability, the government stepped in and took the two institutions under conservatorship in September 2008 to prevent a complete meltdown of the financial system.

Chart - Fannie Mae and Freddie Mac

Part of the government’s plan for Freddie Mac was to take over the institution, replace the leadership and start sifting through the incomprehensible maze of packaged mortgages that were sold to investors as mortgage backed securities. With Kellermann’s death, however, this task — which was already approaching Sisyphean proportions — becomes most likely impossible.

Kellermann was not an outside appointee; he was promoted from within and represents the core institutional memory of Freddie Mac. Most importantly, he represents the accounting institutional memory, which means that he not only most likely knew about all of the bad decisions that were made regarding securitization, but also knew of them as they were being made. Under any circumstances, in any organization, the loss of a person of Kellermann’s stature would be crippling; under the circumstances at Freddie Mac, it is catastrophic.

The death of Freddie Mac’s most important accounting and financial employee now puts the government’s plans for Freddie Mac’s continued existence into question. Assets held by Freddie Mac are still very valuable; only a small percentage of the entire mortgage market is actually non-performing (although defaults are rising due to the effects of the recession) and far from all of that is in foreclosure, so there is a lot of value left in the institution. Without possession of first-hand knowledge to trace back and unwind the process through which securities were created, there would be little point in maintaining Freddie Mac as a single institution. It could get broken up by the government and sold in pieces, letting private investors sift though much smaller chunks of the mess on their own time.

What this would mean for the mortgage market is at present unclear. With total assets of $2.2 trillion, Freddie Mac would be the biggest institution the U.S. government has ever dismantled. But the real kicker is that this would be just the prelude to an even bigger unwinding. Everything that has beset Freddie Mac has also plagued its sister company, Fannie Mae — which has $3.11 trillion in total assets and is also in conservatorship.

stratfor.com

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