BofA reject wins Fannie Mae booby prize
By Daniel Indiviglio and Agnes T. Crane
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
No good deed goes unpunished. Fannie Mae has chosen Timothy Mayopoulos, its general counsel, as its new chief executive. His promotion won’t improve already tense relations with Bank of America – the mega-bank fired him in 2008 after he questioned mounting losses. But his integrity and background make him a decent fit for the job.
As the top lawyer at BofA during the crisis, he counseled executives they didn’t need to disclose Merrill’s mortgage-related losses if they didn’t creep too high. But as Greg Farrell points out in his book “Crash of the Titans,” new estimates just days after shareholders had approved taking over the Thundering Herd “had busted through the outer limit of what Mayopoulos had been using as his guideline.” A day after trying to raise it with BofA’s finance chief, he was fired.
Running the mortgage zombie could make for some awkward conversations with his old firm. While Fannie’s general counsel, Mayopoulos recused himself from dealing with a long-running spat over who should take the hit on faulty mortgages BofA had sold to the agency. But as chief he may now have to deal directly with Brian Moynihan, who briefly replaced him before being put in charge of the investment bank and, ultimately, all of BofA.
He’s also taking a $2 million pay cut to move to Fannie’s corner office. That’s a rare and humble step in the world of finance and a welcome attribute in an organization like Fannie Mae better known for accounting shenanigans, eye-popping CEO pay and now a $116 billion bailout tab.
A hard-nosed, principled lawyer is just the kind of leader Fannie needs. Mayopoulos’s in-depth knowledge of corporate and contract law should serve the agency well, as clawing back money from lenders who sold it dodgy mortgages will remain a priority. That surely beats having a more traditional business leader – Fannie’s role in financing mortgages is, after all, slated to diminish.
It’s a good fit for Mayopoulos, too. With New York Attorney General Andrew Cuomo immortalizing him by claiming BofA bumped him as “the man who knew too much,” getting another job on Wall Street might be hard. Running the Fannie briar patch looks a good fit for both of them.