So Fannie and Freddie were taken over by the government yesterday. You’d think this would be done because the government thought they could run things better than the existing management. It sounded like that because, among other reasons, mistakes had been made:
There were reports that auditors called in by Treasury and FHFA had found accounting irregularities at the two firms and that their capital base was smaller than expected.
At first, Paulson had talked in terms of an equity investment in the two firms. But after the review, a full-scale takeover of the two firms was seen as the only option.
Clearly, this is a very significant regulatory action, and I know many of you will be concerned about how it will affect you and your work at Fannie Mae. I hope the following information will allay those concerns.
First, your jobs are secure. There will be no change in your employment status with Fannie Mae as a result of the conservatorship. Your jobs, compensation, and benefits will continue without interruption.
And second, it is very important to us to do whatever we can to ensure that Fannie Mae’s operations and activities also continue without interruption. To help Fannie Mae return to financial strength, the Conservator will delegate authorities to Fannie Mae’s management to move forward with business operations. Your cooperation with Mr. Allison and the conservatorship team are critical to these efforts.
Some of you will be contacted directly by FHFA staff who will be at Fannie Mae to assist with the transition and answer any questions you may have. Rest assured that they are not there to do your jobs, but rather to facilitate the conservatorship, and ensure business is proceeding.
How fortunate for the employees of Fannie Mae that all of them are outstanding at what they do and all the blame for mistakes lay outside the company. Most organizations looking at a takeover like this would experience a major shakeup in personnel. But then, these organizations aren’t quite like any other, are they?