From the Washington Post: "Workers Shaken by Fannie, Freddie Woes".
"'This is my family's financial future,' said Lorrie Rudin, former director of executive compensation for Fannie Mae, who retired last year. 'I worked there for 20 years, and I'm just absolutely devastated and terrified.'"Is anyone else incredulous? Putting all your savings into your employer's basket? After such recent examples as Enron? Worldcom?
8 comments:
Interesting read. I know 1 person who works at Fannie who sold all of her stock the 1st day possible. They had some employee purchase program where she could buy a certain number of shares at a 10% market discount every year. She bought and sold the same day and pocketed the profit. I thought that was pretty typical for the employees to do.
Yeah I have a friend who worked at Nextel who cashed out like you are talking about. Ended up with over 350k in his savings account after 7 yeaars with the company. His wife is a doctor so he semi-retired at that point. He pulls in about 50k a year working part time now, but mainly look after the kids.
I know a lot of his co-workers wished they did that also.
It certainly doesn't surprise me in Fannie's case-- tho' it would in Freddie's. Remember it's been in existence since 1938, a solid, conservative organization with an excellent record as one of the top places to work in the country. These weren't the people smoking the weed and drinking the koolaid either-- they pretty much fell by the wayside in the bubble years precisely because they refused to accept nutty loan standards.
Anyone who thinks these guys are closing up shop any time soon is also smoking some controlled substance by the way. If the government reneges on the implicit guarantee provided by a government chartered agency, who's going to be sure of their explicit guarantees any more? They'd create exactly the kind of financial panic and meltdown that anyone except an End Times fanatic wants to avoid.
And in fact, Freddie, I think it was, has already successfully held the government's feet to the fire by the mere threat of behaving the way conservative banks always do when faced with a bad credit environment -- stop issuing new loans and let the current ones pay down until the situation improves.
sarah- i respectfully disagree (but love your dry wit if you were being sarcastic!).
"...a solid, conservative organization..."
i would not call a pseudo-socialist company "conservative." especially one that's had multiple significant accounting violations over the past decade.
"These weren't the people smoking the weed and drinking the koolaid either-- they pretty much fell by the wayside in the bubble years precisely because they refused to accept nutty loan standards."
on slide 24 (pdf page 28) you can see that 54% of Fannie's $2.5 trillion book was originated 2005-2007. they had no trouble propping up the bubble after the free market utterly crushed the previous market participants (implode-o-meter currently at ~266).
http://tinyurl.com/5p3nga
"If the government reneges on the implicit guarantee..."
high level economists (read: head-in-clouds clueless) started the notion of an implicit guarantee and salesmen quoted them ad nauseum to placate investors' fears = $cha-ching$ commission for the broker.
"...create exactly the kind of financial panic and meltdown..."
their failure would make room for more efficient market practices and increase home affordability which is ironically their charter. i consider "end times" predictions as fear-mongering analogous to Bush's "smoking gun" speech wrt WMDs.
WASHINGTON MUTUAL(NYSE: WM)
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Think WM has a few REOs in CA on their books?
Million, I will defer to Tanta on the subject:
Nonetheless, the immovable objects of the conforming loan limits and the charter limitation of taking only loans with a maximum LTV of 80% unless a well-capitalized mortgage insurer took the first loss position, plus all their other regulatory strictures, managed fairly well against the irresistible force of "innovation." If there has ever been an argument for serious regulation of the mortgage markets, the GSEs are it.
Wow - sorry to sound crass, but how can anyone think that it is okay to hold so much stock in any one company? I worked at Fannie from 1982 - 1988 and would buy the stock through the employee purchase program, and sell it as soon as I could.
When I worked there, there was always the almost perceptible fear that more and more mortgages could end up in foreclosure. Fannie Mae hopes that buyers have strong ethics and will make good on their promise to pay back the mortgage. But our statistics at that time showed that most home owners were only about 3 or 4 paychecks away from foreclosure.
I don't think that there is any government guarantee for Fannie Mae or Freddie Mac. There is an assumption that the gov't will rescue them if it comes to that. But Fannie Mae cut their ties with the gov't long ago, and if they failed, there is no guarantee that they would survive. C'est la vie.
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