First Bank of America. Then Freddie Mac. Who’s next? The federal regulators seem intent on keeping material information out of the reach of the shareholders of publicly traded companies. Last week, we learned that the feds pressured Bank of American CEO to hide critical information on Merrill Lynch. He buckled. Freddie Mac pushed back when regulators tried to get it to hide how the Obama plan to help distressed mortgage holders would hurt the company’s bottom line. The Washington Post reports:
But when Freddie Mac’s executives concluded a few weeks ago that they had to disclose that the government’s management of the McLean company was undermining its profitability and would cost it tens of billions of dollars, the firm’s regulator urged it not to do so, according to several sources familiar with the matter.
Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator’s request was out of line. The company’s regulator backed down, the sources said.
The article goes on to explain that Freddie Mac expected it could incur costs as high as $30 billion to help keep homeowners out of foreclosure, part of the Obama’s Homeowner Affordability and Stability plan. The Federal Finance Housing Agency had urged silence on this point but backed down. The fact was included in its 10-k filing with the SEC last month.
What else don’t the Feds think we can handle? As I wrote Friday, government can’t afford a credibility gap with the public if it expects to implement its ambitious agenda, not only in banking but in health and the environment and education.
And there may be another serious consequence to the dispute with the feds: Acting Freddie CFO David Kellerman apparently took his own life last week. The Washington Post reported that job stresses were taking a big toll on the executive and that he had wanted to resign. Instead, human resources had urged him to take time off. It’s something for everyone to contemplate.