Yesterday Freddie Mac posted a most curiously titled press release.[1] It would seem that their number two top executive, COO Gene McQuade, was offered the number one CEO spot, but turned it down in favor of leaving the company in the fall and seeking to head up "a more traditional financial institution." What in the world is going on here? Freddie’s book of business makes it one of the world’s largest financial institutions. Turning away from a challenge like that is not done in these circles. Obviously something else must be going on, the only question is what.

In a response [2] remarkable for its terseness, GSE regulator OFHEO barely nods at McQuade before admonishing CEO Richard Syron on the importance of getting on with succession planning. Veteran banking analyst and stalwart of AEI’s analysis project on the GSEs Bert Ely is quoted in an AP story [3] as asserting that Syron has "been dragging his feet" on giving up the CEO job. Perhaps that’s the best guess for what is the central issue in this story. HousingWire’s P. Jackson seems to have been first off the mark [4] with a response from the blogosphere. Doom is gratified to note that he seems as baffled as we are. A Reuters story [5] carried information from what must have been a surprisingly frank interview with McQuade. He is reported as expressing frustrations with the political process as it applied to GSE regulation. Curiouser and curiouser …

Both the Wall Street Journal [6] and the Washington Post [7] have posted articles, eyesbrows slightly raised.

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Notes and References

[1]: FREDDIE MAC ANNOUNCES THAT PRESIDENT EUGENE MCQUADE DECLINES OPPORTUNITY TO BECOME CHIEF EXECUTIVE OFFICER, news release, Freddie Mac, May 1, 2007. The emphasis in all the quotes is mine.

"I’m proud of the progress we’ve made, and of the value that we’re building for all of Freddie Mac’s stakeholders," said McQuade. "Freddie Mac is a leading financial institution with a critical public mission. But I have concluded that the timing is right now for me to make this decision. We recently released our 2006 financial results, and are on track to return to quarterly financial reporting in 2007. As I reached the point in my employment contract that called for decisions about my future role at the company, it forced me to confront the realization that I would like to return to my roots in guiding a more traditional financial institution, as well as to my home and family in New England. It would not have been fair to Dick and the Board to wait any longer to make this decision. I am thankful to the men and women of this great company. I am confident that Freddie Mac is poised to build on the terrific progress it is making, and will enjoy great success in the years to come."

[2]: "STATEMENT OF OFHEO DIRECTOR JAMES B. LOCKHART REGARDING FREDDIE MAC ANNOUNCEMENT", press release, OFHEO, May 1, 2007. What follows is the entire text of the release. Things don’t get much terser in Washington DC’s bureaucracy-land.

“President and COO Gene McQuade has played a key role over the last three years in leading the financial remediation process at Freddie Mac. As our recently released Report to Congress stated, while there has been significant progress at the Enterprise, much work remains to be done. OFHEO will continue its active oversight of Freddie Mac and expects the Board of Directors and Chairman Syron to address leadership succession with due deliberation and in a timely manner.”

[3]: "Freddie Mac president declines CEO offer", by Christopher S. Rugaber, Associated Press / BusinessWeek, May 1, 2007.

Bert Ely, a banking consultant and critic of Freddie Mac’s, said that Syron has been reluctant to give up the CEO position.

He has "been dragging his feet on this since the beginning," Ely said.

[4]: "Next? Freddie Still Looking for CEO", by P. Jackson, HousingWire blog, May 1, 2007.

No mention on whether or not the growing spectre of GSE reform had McQuade wondering if he’d be able to get any sleep at the helm of the government-sponsored giant. (And, of course, that’s just speculation on my part.) — [looks like a good guess, considering [5] below]

[5]: "Freddie Mac’s President to leave in September: Eugene McQuade has announced that he will leave the mortgage finance company in September to return to his family roots in New England", Reuters / CNN Money, May 1, 2007.

In an interview with Reuters, McQuade said he was offered the CEO job "in the last month or so" but declined in order to return to a more traditional financial services company and his family roots in New England.
..
"When you look at these institutions and all that goes around them – the oversight and the political environment – there is clearly an intensity that is much higher than any normal company," [McQuade] said.

Regrets over reform impasse

McQuade said that he was particularly disappointed that long-debated legislation to reform oversight of Freddie Mac and Fannie Mae has not passed on his watch.

"I am clearly frustrated that when I came in here three years ago, there were political solutions being offered and three years later, there has not been a way to solve those political issues," he said.

[6]: "Freddie Mac President McQuade Announces He Is Stepping Down", Damian Paletta, Wall Street Journal (subscription required), May 1, 2007.

[7]: "Heir Apparent Spurns Freddie Mac Offer", by David S. Hilzenrath, Washington Post, May 2, 2007.

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