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August 5, 2008
The Facts
Richard Syron, CEO of Freddie Mac, was warned by his staff on numerious occassions that Freddie Mac was going in the wrong direction and heading for a downfall. David Andrukonis, Senior Vice-president and Chief Enterprise Risk Officer of Freddie Mac, sent Syron a memo in 2004 advising him the company was buying bad loans. Other executives also warned Syron of impending problems. But Syron ignored them all and refused to consider the facts presented to him. His excuse was “we can’t afford to say no to anyone”.
My View
Since 2005 Richard Syron has received $38 million in compensation. The vast majority of these compensations came as a result of Freddie Mac’s “growing business and rising stock prices”. What more needs to be said as to why Syron did nothing. But now stock prices have plunged by 60% costing investors $80 billion (it would be interesting to know how much of that $80 billion came from regular working folks’ 401K’s and thrift plans). But why should Syron care. It didn’t cost him anything, he got his “just” reward, and “the taxpayers will pay for the losses”; so what’s the problem? And we can thank Henry Paulson and Congress for doing nothing to prevent the same thing from happening again. All they did was give them a blank check with no rules changes. Isn’t free market great?
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