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Subcrime Questions As Freddie Mac Handed to
Moffett of Carlyle and US Bancorp
Byline: Matthew Russell Lee of
Inner City Press: News Analysis
NEW YORK,
September 7 -- U.S.
Treasury Secretary Hank Paulson's announcement today that he is
unilaterally
appointing Carlyle Group advisor David Moffett to replace
Richard Syron
as chief executive of Freddie Mac is more than a little ironic, and
troubling.
The Carlyle Group invested in and lost on subprime mortgage, it
admitted
earlier this year. In fact, Carlyle invested in bonds issued by Freddie
Mac, as
well as Fannie Mae.
In March
2008, the Carlyle
Group's mortgage-bond fund, having received more than $400 million
in margin
calls since earlier in the month, said it couldn't reach an agreement
with it
lenders, who would "promptly'' take over all of its remaining assets.
Through March 12, the company had defaulted on over $16.6 billion of
debt. On
the news, the dollar fell to the weakest since 1995 against the yen and
a
record low versus the Euro. How then, sources are asking Inner
City Press, can Moffett be put in charge of
Freddie Mac?
Paulson and Lockhard, Moffett's subprime
links not shown
In
fact, Carlyle
beyond its investments in military contractors has been accused of
other slash
and burn tactics, for example by workers at the nursing home chain
Manor Care.
Its buy-out of Home Depot's contractor supply unit nearly fell apart,
as its
lenders balked.
Moffett
previously
served as chief financial officer of U.S. Bancorp, which beyond its own
subprime lending was a 25% investor in the now-bankrupt subprime
lender New
Century. When Inner
City Press investigated U.S. Bancorp's stake in New
Century, the company argued to the Federal Reserve that despite
having two
seats on the board of directors it did not control the lender. The word
subcrime
began to become applicable. The Fed
demurred, and eventually the stake was sold off. But Moffett's
companies'
involvement in the subprime field is hardly a basis for confidence in
him to lead
at Freddie Mac. In fact, the choice calls into question Paulson's
judgment. To
be continued. Watch this site, and this (UN) debate.
* * *
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Analysis here
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