Housing Bubble

Freddie Mac announces new leadership

June 09, 2003

McLean, VA – Freddie Mac (NYSE:FRE) today announced that the Board of Directors has elected Gregory J. Parseghian as Chief Executive Officer and President and Paul T. Peterson, Executive Vice President, as Chief Operating Officer. Martin F. Baumann, Executive Vice President—Finance, has been appointed Chief Financial Officer. The Board of Directors also elected Shaun F. O’Malley as non-executive Chairman of the Board.

Freddie Mac also announced the retirement of Leland C. Brendsel as Chairman and Chief Executive Officer and his resignation from the Board of Directors. Freddie Mac anticipates that Mr. Brendsel, 61, will continue to serve in his role as Chair of the Freddie Mac Foundation.

Parseghian said, “Freddie Mac is a company with an outstanding franchise and vital mission. Our focus going forward will be to provide excellent long-term returns on shareholder capital while maintaining our world-class risk management discipline, our unparalleled financial strength and our absolute commitment to expanding homeownership opportunities.”

“This new management team possesses the capability, vision and energy to lead Freddie Mac in fulfilling our housing mission and building shareholder value,” O’Malley said. “The Board will work closely with the executive leadership team to ensure that Freddie Mac resolves its financial reporting issues in a complete and timely manner.”

Earlier this year, the company announced a restatement of its 2002, 2001 and 2000 financial results. Freddie Mac continues to expect that the likely cumulative effect of the restatements will be to materially increase reported earnings for prior periods and materially increase the corporation’s capital surplus under its regulatory minimum capital requirements as of the end of 2002. The company further expects significant volatility in reported quarterly earnings for those periods. The company also expects that adjustments affecting its income will relate substantially to changes in the timing of income recognition, and, as a result, cumulative increases related to the adjustments will have offsetting effects in future periods. In addition, the company expects increased volatility in future periods.

The company continues to work toward completing the previously announced restatement process and releasing its restated results shortly after the end of the second quarter of 2003. However, the restatement process may not be fully concluded until later in the third quarter. “Job number one is to get our financial statements right,” said Parseghian. “We are committed to providing re-audited financial statements to the market as soon as possible and to taking any and all steps necessary to ensure that our people, processes and controls are of the highest caliber going forward. I am today assigning responsibility for our entire restatement effort to Marty Baumann, our new Chief Financial Officer. Marty’s depth of experience and knowledge make him exactly the right person to get the job done.”

Parseghian, 42, has been Executive Vice President—Chief Investment Officer for Freddie Mac since June 2002. In that position, he was responsible for the firm's $600 billion retained mortgage portfolio, debt and mortgage-backed securities issuance programs and asset/liability risk management strategies. Before his appointment to Executive Vice President, Parseghian was senior vice president and chief investment officer since 1996. Prior to joining Freddie Mac, Parseghian was a managing director of Salomon Brothers, a partner of BlackRock Financial Management, and a managing director of First Boston Corporation.

Peterson, 53, was previously Executive Vice President—Single Family, responsible for overseeing all Single Family division operations, a post to which he was appointed in December 1999. Peterson has been with Freddie Mac for 14 years, and his previous posts include senior vice president of the Servicer division. Prior to joining Freddie Mac, Peterson was president of Market Street Mortgage Corporation and chairman and CEO of CalAmerica Savings and Loan.

Baumann, 55, was appointed Executive Vice President—Finance in March 2003. As EVP•Finance and Chief Financial Officer, Baumann is responsible for accounting, corporate planning, taxation, shareholder relations, and market and operating risk oversight. Prior to joining Freddie Mac, Baumann served as partner, deputy chairman of the World Financial Services Practice, and as global banking leader for PricewaterhouseCoopers.

O’Malley, 67, is the Retired Chairman of Price Waterhouse LLP, where he was Chairman and Senior Partner from 1988 to 1995. He was also President of the Financial Accounting Foundation from 1990 to 1992 and served as a Chair of the Accounting Profession’s Public Oversight Board’s Panel on Audit Effectiveness in 1999-2000. O’Malley has served on Freddie Mac’s Board since 2001 and is Chair of the Board’s committee overseeing the restatement process.

The Board today also announced the resignation of Vaughn Clarke, formerly Executive Vice President—Chief Financial Officer and the termination of David Glenn, formerly President and Chief Operating Officer. Mr. Glenn was terminated because of serious questions as to the timeliness and completeness of his cooperation and candor with the Board’s Audit Committee counsel, retained in January 2003 to review the facts and circumstances surrounding the principal accounting errors identified during the restatement process. The Board’s Audit Committee has directed its counsel to review the facts and circumstances surrounding Mr. Glenn’s termination.

The corporation has informed its regulator OFHEO, the SEC and the NYSE about the matters described in this release. The Board and management are fully cooperating with OFHEO, the SEC and the NYSE and will continue to do so. As OFHEO announced today, it has directed the Board and Freddie Mac to take certain actions to address the issues surrounding the restatement. The Board and management have undertaken to fully and effectively implement these actions and will diligently work with OFHEO’s investigative team.

Source: Freddie Mac®

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