Troubled Freddie Mac exec was “straight arrow”

James Lockhart, head of the Federal Housing Finance Agency
James Lockhart, head of the Federal Housing Finance Agency

The chief financial officer at Freddie Mac who died in an apparent suicide was a capable executive who had no involvement in any improper accounting, according to Freddie Mac’s federal regulator.

“David (Kellermann) was a very conscientious and hard-working person and took, unfortunately, too much onto himself,” James Lockhart, the director of the Federal Housing Finance Agency, told the Reuters Global Financial Regulation Summit in Washington.

Kellermann was found dead on April 22 in the basement of his Virginia home after having hung himself, local police sources said. Some news reports at the time tied Kellermann’s death to ongoing federal investigations into Freddie Mac’s accounting.

“You know, one of the things I find unfortunate? Some of the speculation about accounting issues at Freddie. They are very rigorous,” Lockhart said. He described Kellermann as a “straight arrow” whose reputation was above reproach and said that the failings at Freddie Mac were widely shared.

Last September, federal regulators took over Fannie Mae and Freddie Mac as the the companies losses on the housing market mounted.

“Yes, we’re seeing significant losses but from my standpoint and my chief accountant’s standpoint, from the two auditing firms that were auditing them, from a loss reserving standpoint, they were following” proper accounting standards, Lockhart said.

Credit card stories? She’s heard ’em all

Democratic lawmaker Carolyn Maloney
Democratic lawmaker Carolyn Maloney
Listen to Rep. Carolyn Maloney tell how she became interested in credit card reform legislation

Tired of your mailbox being jammed with unsolicited credit card offers boasting too-good-to-be-true introductory rates and confusing terms in tiny print?

So is Carolyn Maloney. But as the chairman of Congress’ Joint Economic Committee, Maloney can actually do something about it.

The New York Democrat is the chief sponsor of legislation she is calling the “Credit Cardholders’ Bill of Rights.” It would stop credit card issuers — many of which have received generous taxpayer bailouts — from imposing surprise interest rate hikes and hidden fees.

Speaking at the Reuters Global Financial Regulation Summit, Maloney said she expects the legislation to pass both the House and Senate, and to be signed into law by the end of May. That won’t be a minute too soon for her.

“It’s hard for me to go anywhere without (hearing) a credit card story,” Maloney told the summit.

Constituents in her New York district stop her at the grocery store to complain about credit card issuers, she said. So do colleagues on the floor of the U.S. House of Representatives.

“They even tricked me by changing the due date,” Maloney said, referring to one of the credit cards she uses. “All of a sudden I had a late fee because I had paid within the period I usually paid — they changed it, they changed the terms.”

SEC’s Schapiro says journalist job cuts worrying

Mary Schapiro, America's new top cop for the securities industry, said the current mass culling of journalists' jobs is a concern because it could reduce the number of leads that regulators get as they seek to crack down on nefarious behavior.

"It's an absolute worry for me because I think financial journalists have in many cases been the sources of some really important enforcement cases and really important discovery of practices and products that regulators should be profoundly concerned about," the chairman of the Securities and Exchange Commission told the Reuters Global Financial Regulation Summit in Washington on Tuesday.

"But for journalists having been dogged and determined and really pursuing some of these things, they might not be known to the regulators or they might not be known for a long time," she said.

But Schapiro, who was speaking a day after Conde Nast announced the closure of its glossy business magazine Portfolio only about two years after it launched, held out some hope for the business reporting trade. She said that some journalists should consider applying for jobs at the SEC.

"Investigative journalism actually would be a pretty interesting skill set for us to have. We've talked about financial analysis, we've talked about forensic accounting being skill sets that we really need -- understanding of complex trading, strategies and systems, but it's one of the things the SEC has to do. It has to really broaden its horizons and bring in people who think about things a little differently than it has historically."

But what would having Mr/Ms Investigative Journalist working there do for the SEC's tarnished media image? And how would a hard-nosed investigative journalist respond to all those agreements to let some of the bad guys off with a rap over the knuckles and a small fine (those infamous "did not admit or deny" settlements)?

SEC’s Schapiro shows little interest in Cox’s pet projects

When he was chairman of the Securities and Exchange Commission, Christopher Cox got slammed by many for failing to protect investors during the worst financial crisis since the Great Depression, including missing Bernie Madoff's massive Ponzi scheme. Now, to add insult to injury, his successor is showing little interest in his pet projects concerning corporate disclosure and accounting standards, and questioning whether at least one of them is even appropriate.

Cox's interest in forcing listed companies to file financial reports using technology that makes it easier for investors to read and analyze the data became almost an obsession during his time at the SEC from August 2005 until this past January. Indeed, the SEC voted through a rule to require 500 of the largest public companies to begin filing their reports with the technology known as XBRL, or extensible business reporting language, by the middle of this year, with the rest instructed to comply over the following two years.

It is just about the last costly requirement companies want to hear about as they fight for their survival through these doom-laden times. Indeed, in the results of a national survey of CFOs and senior comptrollers conducted by accountants Grant Thornton LLP, that was issued last week, 64 percent of public companies said they had no plans to use XBRL despite the SEC mandate.

Now, they may be getting some relief from new SEC head Mary Schapiro. She made it abundantly clear that XBRL was very low down her priority list when she spoke at the Reuters Global Financial Regulation Summit on Tuesday, and she hinted that the SEC might allow for delays in compliance, though she didn't know if that would be necessary. "I don't mean to be dismissive of it in any way -- it's just not one of my highest priorities," she said.

Even worse, unlike Cox she has little interest in promoting the initiative, though she does acknowledge it could become a useful tool. "I've only given I think three speeches and I don't think those letters (XBRL) have slipped into into any of them," she said.

Another Cox initiative was the decision to allow companies to use their websites and blogs to release market-sensitive information, and in some cases avoid normal distribution channels, such as BusinessWire, which is part of Warren Buffett's Berkshire Hathaway Inc, and PRNewswire, a division of United Business Media Plc.

Schapiro said she had "a little bit of a visceral reaction" to the idea that investors might have to go and look for the information rather than getting it through a broader distribution, though said she would need to study the question more. She also noted that even now some investors don't have easy access to the Web.

Just to rub it in, Schapiro also said that the SEC would be seeing whether Cox's original roadmap for a possible move to international accounting standards in the U.S., possibly by 2014, still made sense given the cost of conversion and the current state of the economy.

It looks like Cox's list of achievements in his time at the SEC may be about to get shorter.

Barney Frank says “no right answer” to Merrill sale problem

Barney Frank indicated he isn't as disturbed as some other lawmakers by revelations about the pressure that was brought to bear on Bank of America CEO Kenneth Lewis to complete the takeover of Merrill Lynch in the face of indications that Merrill's financial position had deteriorated dramatically. Frank told the Reuters Global Financial Regulation Summit in Washington that "there was no right answer" over whether the government should have intervened to make sure the deal was done.

Last week, senior Republican Senator Richard Shelby joined House Democrats in seeking more details after New York's attorney general said Lewis had testified he was pressured by former Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to do the merger, or lose his job. Shelby even brought up the question of possible securities fraud over the controversy.

Frank, who is the powerful chairman of the U.S. House of Representatives Financial Services Committee, said that while there may be some disclosure problems over Bank of America's failure to keep investors informed he didn't believe it was as simple as saying that Paulson and Bernanke shouldn't have intervened. If they had allowed Merrill to fail it could have led to disaster, said Frank, who had a less combative and brusque manner than he is sometimes known for in today's 50-minute Q&A with the Reuters news team.

Frank's way to avoid such problems in the future is to create an authority that can seize and unwind large institutions that are failing and creating systemic risk for the entire financial system.