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American Morning

Minding Your Business: Freddie Mac Under Attack

Aired June 12, 2003 - 07:45   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


DARYN KAGAN, CNN ANCHOR: Let's go ahead talk a little bit of business. Freddie Mac is under attack.
Andy Serwer is off. He's off attacking something, but we have Gerri Willis on the case here. She is "Minding Your Business."

Freddie Mac on the hot seat.

GERRI WILLIS, CNN FINANCIAL NEWS: That's right. Good morning.

Freddie Mac is under criminal investigation now. This has been leaking out for several days now, big news yesterday. Freddie Mac is one of the nation's biggest financial institutions. They are involved in one out of six home mortgages. No small story here.

And guess what? They've lost 7 billion in market cap -- that's investor wealth -- this week alone, the stock down dramatically.

Two things to understand here. While most companies were overstating earnings in the '90s, actually Freddie Mac was understating them, and that's why they're in trouble. They were trying to smooth out their earnings so that Wall Street analysts would like their stock even better.

KAGAN: Huh, interesting on that.

Now, it's understandable why people might have gotten fired over this, and some of us have gotten fired before, but never with a $24 million severance package.

WILLIS: Yes.

KAGAN: How do you do that?

WILLIS: How lucky is that? The CEO, Leland Brendsel, is walking away with a $24 million package. He resigned, but the COO of the company, David Glenn, he's not getting so much. As a matter of fact, he's only getting options of 5.3 million, he's forfeiting other options, forfeiting his two-year salary, and that's because he failed to comply with an internal investigation into this entire matter.

Just one more point here you might want to know. Freddie Mac is critical to the home mortgage. You don't want to see this drag out forever. It could hurt rates. It could hurt people in the home market.

KAGAN: All right, we'll keep that in mind. And some day we're going to figure out how do we get fired just even with a $5 million package? We will work on that. Gerri, thank you for that.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.






Aired June 12, 2003 - 07:45   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Let's go ahead talk a little bit of business. Freddie Mac is under attack.
Andy Serwer is off. He's off attacking something, but we have Gerri Willis on the case here. She is "Minding Your Business."

Freddie Mac on the hot seat.

GERRI WILLIS, CNN FINANCIAL NEWS: That's right. Good morning.

Freddie Mac is under criminal investigation now. This has been leaking out for several days now, big news yesterday. Freddie Mac is one of the nation's biggest financial institutions. They are involved in one out of six home mortgages. No small story here.

And guess what? They've lost 7 billion in market cap -- that's investor wealth -- this week alone, the stock down dramatically.

Two things to understand here. While most companies were overstating earnings in the '90s, actually Freddie Mac was understating them, and that's why they're in trouble. They were trying to smooth out their earnings so that Wall Street analysts would like their stock even better.

KAGAN: Huh, interesting on that.

Now, it's understandable why people might have gotten fired over this, and some of us have gotten fired before, but never with a $24 million severance package.

WILLIS: Yes.

KAGAN: How do you do that?

WILLIS: How lucky is that? The CEO, Leland Brendsel, is walking away with a $24 million package. He resigned, but the COO of the company, David Glenn, he's not getting so much. As a matter of fact, he's only getting options of 5.3 million, he's forfeiting other options, forfeiting his two-year salary, and that's because he failed to comply with an internal investigation into this entire matter.

Just one more point here you might want to know. Freddie Mac is critical to the home mortgage. You don't want to see this drag out forever. It could hurt rates. It could hurt people in the home market.

KAGAN: All right, we'll keep that in mind. And some day we're going to figure out how do we get fired just even with a $5 million package? We will work on that. Gerri, thank you for that.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.