Fannie Mae announces management shakeup

WASHINGTON (Reuters) - Mortgage-finance company Fannie Mae on Wednesday announced a management shake-up in an effort to come to grips with mounting credit losses and a shrinking capital base.

The company's chief financial officer, Stephen Swad, was replaced, and the chief business officer, Peter Niculescu, will take on an expanded role. A new chief risk officer was also named.
Daniel Mudd, the company's chief executive, will remain in place and has the confidence of the board of directors, said board chairman Stephen Ashley.

"The board of directors is firmly committed to Dan Mudd," Ashley said in a statement. "The board will continue to work closely with Dan and his management team to guide the company and support the housing finance system through a very challenging period."

Fannie Mae and Freddie Mac, its sibling agency, have so far this year booked billions of dollars in losses as the national housing market has been hit by a wave of loan defaults and falling home prices.

The companies have also seen more than 90 percent of their market capitalization evaporate since January and last month the U.S. Treasury promised to re-finance Fannie Mae and Freddie Mac if either were facing collapse.

In a statement on Wednesday, Mudd said management changes would help the company better provide support for a U.S. housing market in the worst downturn since the Great Depression.
"This team will be responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets," Mudd said.

Trading in shares of Fannie Mae was briefly suspended for the announcement and prices fell 2.0 percent in extended trade after the news.

"This was probably a necessary step but not one that's going to determine the future of Fannie Mae. Clearly, the fate of Fannie and Freddie is in the hands of policymakers," said Eric Kuby, chief investment officer, North Start Investment Management Corp, Chicago.

Wall Street has been on edge for several weeks on talk that the U.S. Treasury would put the companies through a wrenching restructuring or even nationalize them.

The management shakeup means a greatly expanded role for Niculescu who will run three divisions: single-family mortgage guaranty, capital markets, and housing and community development. He joined Fannie Mae in March 1999 after leaving investment bank Goldman Sachs where he was the managing director and co-head of Fixed-Income Research and Strategy.
Steve Swad, the departing CFO, joined the company only a year ago and the chief risk officer, Enrico Dallavecchia, has also stepped down.