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So somehow Dick Syron
should have been able to foresee
the housing crackup because his chief risk officer wrote him a memo in 2004? A few thoughts:
1. The memo was written in 2004. By virtually all accounts, subprime lending standards didn’t start to become imprudent until late 2005 at the earliest. So, literally, the dire events Andrukonis warned of never came to pass. Why should he take a victory lap now?
2. Too many blind sources! The Times says it spoke with “more than two dozen current and former high-ranking executives and others”—virtually all of whom insisted on anonymity. Helpful! If Syron’s judgments were as manifestly awful as the Times implies, some of those people would likely have been willing to speak on the record.
3. More than most companies, the GSEs have to deal with key constituencies, particularly the federal government, that carry a lot of weight and whose interest can occasionally be at odds with shareholders’. The Times’s Charles Duhigg implicitly slams Freddie for putting shareholders at risk by taking on too much leverage and growing too fast. But it wasn’t too long ago, recall, that the government lifted capital restrictions on the company so it could grow even faster. It’s easy to fault Syron in retrospect. It wasn’t so easy at the time he was making the decisions he made.
4. In his and Syron’s defense, Daniel Mudd makes an obvious point: “You’ve got the worst housing crisis in U.S. recorded history, and we’re the largest housing finance company in the country, so when one goes down, the other goes with it.” Duh!
5. As Tanta points out at CalculatedRisk, Syron’s resume is a lot longer and more relevant to the job than Duhigg discloses.
6. I did like this bit of candor from Syron himself, though: “If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place.” I can only imagine.
Bonus tidbit: Freddie is really considering Alan Schwartz as Syron’s replacement?
More: It turns out the reason Andrukonis left Freddie to teach school is that he was canned, Freddie says in its response. Also, no one seeme to have a copy of the memo he says he wrote.
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