By Dawn Kopecki and Bryan Keogh
Sept. 10 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson is meeting with employees of Fannie Mae and Freddie Mac to ward off a tide of defections after the government seized control of the beleaguered finance companies.
Paulson spoke in a town hall meeting at Freddie's McLean, Virginia, headquarters yesterday and will talk to Fannie workers in Washington today, Treasury spokeswoman Jennifer Zuccarelli said. Shares of the companies have declined more than 97 percent this year and are trading at less than $1.
``Maintaining and keeping that talent base is going to be a challenge for them,'' said Moshe Orenbuch, an analyst at Credit Suisse Group in New York. ``That's something they're going to be wrestling with much sooner rather than later in terms of retaining and attracting talent.''
After replacing the two chief executive officers of Fannie and Freddie, Paulson and the Federal Finance Housing Agency now are turning their attention to the 10,000 people left behind. FHFA, the regulator that assumed control of the companies, hired a consulting firm to work with the human resource teams on a new employee-retention program, FHFA Director James Lockhart said in an interview.
``Employee retention is very important,'' Lockhart said. ``We still need people to run the companies.''
Lockhart ousted Fannie CEO Daniel Mudd and inserted Herb Allison, former CEO of TIAA-CREF, and replaced Freddie's Richard Syron with David Moffett, an executive at the Carlyle Group. Paulson shared the stage with Moffett yesterday and will stand beside Allison today.
`Important Work'
At the meetings, Paulson ``wanted to let them know how important these companies are to our markets and to getting through the housing correction,'' Zuccarelli said. ``He also encouraged them to continue their important work.''
Government-chartered Fannie and Freddie own or guarantee almost half the $12 trillion of U.S. residential mortgages. Fannie dates back to 1938, when it was created as part of Franklin D. Roosevelt's New Deal. Freddie was formed in 1970 to compete with Fannie.
The Treasury and FHFA took control of Fannie and Freddie last weekend after a team of federal examiners found their capital reserves were too thin to weather the worst housing market since the Great Depression.
`Difficult Times'
Paulson and the FHFA eliminated the companies' common and preferred dividends and the Treasury said it would buy as much as $200 billion of preferred stock in the companies to bolster their capital as needed. The decision sent Fannie shares down 90 percent to 73 cents the next day. They rose to 99 cents yesterday. Freddie slumped 82 percent to 88 cents and was little changed yesterday.
The declines have left the stock options and restricted share grants that both companies used to reward employees virtually worthless. FHFA's Lockhart said the agency is seeking new incentives to attract and retain talent.
After seizing the companies, the FHFA sent in a team of about 60 examiners to shadow top executives, including Allison and Moffett.
``These are difficult times,'' Allison, 65, told hundreds of Fannie's 5,000 employees gathered in the company's Great Hall at its colonial-style Washington campus on his first day as CEO Sept. 8, according to employees who attended the meeting and declined to be identified because they weren't authorized to speak.
Allison was CEO of TIAA-CREF until April and before that was President of Merrill Lynch & Co. Moffett, 56 was chief financial officer of U.S. Bancorp in Minneapolis from 2001 until early 2007 before joining Carlyle, the Washington-based private- equity firm.
Seeking Sneakers
A chief concern among Fannie employees on Sept. 8 was whether the company would still sponsor its Help the Homeless Walkathon, an annual event scheduled for Nov. 22 and anticipated to attract 12,000 participants in Washington, according to its Web site.
Allison, who lives in New York and said he has been living out of a suitcase the past few weeks, assured the assembly the event would go ahead as planned, and that he would attend.
``I may have to get someone to send me my sneakers,'' he said.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net.
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Wednesday, September 10, 2008
Paulson Sends Message to Freddie, Fannie Employees: Don't Leave
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