At Freddie Mac, Chief Discarded Warning Signs, Charles Duhigg, NYT

The chief executive of the mortgage giant Freddie Mac rejected internal warnings that could have protected the company from some of the financial crises now engulfing it, according to more than two dozen current and former high-ranking executives and others.

That chief executive, Richard F. Syron, in 2004 received a memo from Freddie Mac’s chief risk officer warning him that the firm was financing questionable loans that threatened its financial health.

Today, Freddie Mac and the nation’s other major mortgage finance company, Fannie Mae, are in such perilous condition that the federal government has readied a taxpayer-financed bailout that could cost billions. Though the current housing crisis would have undoubtedly caused problems at both companies, Freddie Mac insiders say Mr. Syron heightened those perils by ignoring repeated recommendations.

In an interview, Freddie Mac’s former chief risk officer, David A. Andrukonis, recalled telling Mr. Syron in mid-2004 that the company was buying bad loans that “would likely pose an enormous financial and reputational risk to the company and the country.”

Mr. Syron received a memo stating that the firm’s underwriting standards were becoming shoddier and that the company was becoming exposed to losses, according to Mr. Andrukonis and two others familiar with the document.

But as they sat in a conference room, Mr. Syron refused to consider possibilities for reducing Freddie Mac’s risks, said Mr. Andrukonis, who left in 2005 to become a teacher.

“He said we couldn’t afford to say no to anyone,” Mr. Andrukonis said. Over the next three years, Freddie Mac continued buying riskier loans.

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NYT Hit Job on Freddie Mac, Tanta, Calculated Risk

This has to be read to be believed.

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Actually, all but two of the "more than two dozen" were given anonymity to damage Richard Syron's career while protecting their own, by my reading of this. One former Freddie Mac executive and one industry consultant are named. Nobody else is. And we are given no idea how many of the "more than two dozen" are shareholders. (Who need to protect their careers?) Or how many of them were found on Yahoo! message boards. (Hey! We don't know that they weren't!)

The Times reporter, Charles Duhigg, can't even bring himself to include Syron's full bio:

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I have to wonder why the Times leaves off the part about how Syron is a former deputy assistant Treasury Secretary, asssistant to Federal Reserve chairman Paul Volker, and president of the Federal Reserve Bank of Boston in the late 80s and 90s, which included being a member of the Open Market Committee. None of that makes him perfect or infallible or anything else, of course. But why does the Times leave it out? If Syron is as clueless as the Times wants us to believe, isn't it relevant that Syron had a very influential role in restructuring failed banks and the FSLIC during the last major banking crisis? I remember all that being quite relevant when Freddie hired him in 2003 after the accounting scandal.

No, but a former employee wrote a memo in 2004 that apparently didn't impress Syron all that much. A lot of us wrote memos in 2004 that didn't impress a lot of people all that much. I can relate to the urge to say "I tolja so." I'm not sure I can relate to the claim that if this one memo had been taken seriously, all this "crisis" could have been averted.

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