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Friday, September 25, 2009

Freddie Pays Big for New CFO

Freddie Pays Big for New CFO

Submitted by Bruce Krasting  on zerohedge.com on 09/25/2009 03:32 +0200


Mr. Ross Kari has been appointed as CFO of Freddie Mac. He is getting a big paycheck.



Freddie Mac does not need a CFO. What is Mr. Kari going to do with his time? Freddie is in conservatorship. It is a ward of the state. He is not going to be doing any special transactions that justify this big nut for the taxpayers. Freddie borrows short term from Treasury to fund their portfolio; they sell their MBS and unsecured bonds to the Fed. What’s so complicated about that?

The whisper from D.C. is that something will be on the table for all of the Agencies by next March. Mr. Kari is likely to be out of a job by then. For his sake I hope he has a big parachute. On the flip side, if he does, there will be hell to pay.

Freddie is no longer a public company that has a big stock float or a presence on Wall Street. It has no earnings, only losses. It should be de-listed. This is not a Citi where there is a remote hope of a soft landing. Freddie is toast. There will be no stockholders meetings where Mr. Kari will be called on to report the success and progress at Freddie. It is unlikely that Freddie can even pay the dividend it owes to Treasury. They are losing $2+ billion a month. That number would be higher, but they are burying their losses by providing ReFi loans at 125% LTV. Half of these new loans go into default in less than one-year.

Freddie hired Mr. Kari to bring someone solid on board. That cost them. Freddie has plenty of talented people who can operate this ship for the next six months. This thing is on autopilot. The only reason Freddie did this (with the blessing of FHFA) is that they wanted to try to demonstrate that they had the right “team” to be the survivor Agency. This hire was about optics, not substance.

Mr. Kari is ex CFO of Fifth Third Bank. That makes him a player, but let's not forget that Fifth Third took $3.4 billion in TARP money. This is what he had to say about repaying that loan back in July:

Fifth Third Bancorp's Chief Financial Officer Ross Kari said the Cincinnati bank would wait until the economy improves until it would repay cash from the government.

Freddie needs to be absorbed by HUD. I think they will be. There is not much room for this pay grade at HUD. The President makes $400k, Senators $174k, Bernanke and Geither get $191k.

Who is making these choices? Who is approving them? Is anyone watching the store?

Posted by Bruce Krasting at 6:05
Freddie Pays Big for New CFO

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