Two former top executives at Fannie Mae appearing before a congressional panel on Friday, April 9, blamed the giant lender’s failure on the clash of its dual mission and an unprecedented collapse in the housing market.
Daniel Mudd, former chief executive of Fannie Mae, speaking to the Financial Crisis Inquiry Commission (FCIC) on its third and final day of hearings, said, “Maintaining the delicate balance between profitability as a private company and service to a public mission became impossible.”
Mudd pushed more of the blame on the unforeseen housing collapse and its public mission than on Fannie Mae’s efforts at profitability and any failures in foresight he might have had. Mudd said that the lender’s troubles lie in its “business model” and structure as a Government-Sponsored Enterprise (GSE).
Robert Levin, former executive vice president and chief business officer of Fannie Mae, concurred with his former boss, saying Fannie Mae was forced to “promote affordable housing, which included meeting government-mandated housing goals.”
On the second day of hearings on Thursday, April 8, the FCIC heard from two top executives at Citigroup who drove the company to financial ruin. Charles Prince, Citigroup’s former chairman and chief executive, repeatedly apologized to the panel for the billions of dollars in losses. But Robert Rubin, the former Treasury secretary, repeatedly played down his role as chairman of the executive committee of Citigroup’s board, and was met with anger by some on the commission.
The first day of hearings on Wednesday, April 7, focused on the role of subprime mortgages in the housing meltdown. Alan Greenspan, a former Federal Reserve chairman, spent his testimony before the panel vigorously defending the Fed’s role prior to the crisis.
The members of the FCIC, led by Phil Angelides, a former state treasurer of California, said they hope to publish their findings by Dec. 15, 2010, a deadline set by Congress.
Read the full text of Mudd and Levine’s written testimony to the Financial Crisis Inquiry Commission.
Read an advisor’s search for a business partner after the financial crisis from the archives of InvestmentAdvisor.com.