The Kellermann suicide tragedy

by Rocket Finance


I have been slowly working my way through news accounts relating to the death of  David Kellermann, the Freddie Mac CFO who allegedly took his own life last week. His death is not the only suicide related to our recent financial meltdown, but it was the first one that really commanded my attention. My heart aches for his family and they are in my prayers.

What causes a man to take his own life? There is really no way to know for sure what pushed him over the edge, but I would like to point out a few details of which you should be aware. These are themes that presented themselves over and over in the quotes and statements from the many news articles that I read. It is not my intention to place blame for his untimely death. He made that choice, but it is important for the American people to know the situation in which he found himself in order to educate ourselves as we seek to operate our government for the people and by the people.

Freddie Mac was a financial entity that was originally a public company under the FDR and then later it was technically privatized – although it operated under special rules from Congress. Last fall, Freddie Mac was re-acquired by the federal government last when the whole subprime mess went down. If we had to summarize Freddie Mac’s purpose in one thought, the institution existed to promote home ownership by using it’s resources to purchase mortgages – especially subprime mortgages. Freddie Mac and its sister, Fannie Mae were in the business of making homeownership easier for people who generally could not afford to purchase their own home in the free market. With that as the backdrop, let’s look at some of the puzzle pieces.

From the New York Times:

Mr. Kellermann’s boss and other top executives were ousted when the Treasury secretary seized Freddie Mac and its sibling company, Fannie Mae; others left on their own and were not replaced. Soon President Obama told the companies they were responsible for carrying out some of his programs to revive the economy, in addition to keeping the housing market afloat by buying and selling hundreds of thousands of mortgages a month.

Freddie Mac was being run to benefit the government, not the shareholders. Top execs at the company wanted to tell shareholders the truth, but politicians were afraid that this truth would cause the stock price to plummet. Also from the New York Times:

Mr. Kellermann was also working in a poisonous political atmosphere. In addition to taking criticism over the bonuses, he was recently involved in tense conversations with the company’s federal regulator over its routine financial disclosures, according to people close to those discussions who also spoke on condition of anonymity. Freddie Mac executives wanted to emphasize to investors that they believed the company was being run to benefit the government, rather than shareholders. The company’s regulator, the Federal Housing Finance Authority, had pushed to play down that language. Freddie Mac reported to the Securities and Exchange Commission that changes it had made in practices to help the government “have increased our expenses or caused us to forgo revenue opportunities.”

From the Wall Street Journal:

Mr. Kellermann was involved in recent tense discussions with officials at FHFA over how to disclose the potential financial effects of the Obama administration’s plan to prevent millions of foreclosures by offering easier terms to borrowers, according to a former colleague.

This caused tension for Mr. Kellerman. The politicians, Barney Frank, President Obama and others wanted FM to use its assets to keep people in homes and to keep banks from failing, not turn a profit  – thereby helping politicians present a good economy to the American people. The Securities and Exchange Commission, however, exists to make sure that companies public companies operate in good faith for their shareholders.

From CNN:

According to the March 11 company filing, Freddie Mac was subpoenaed for documents relating to accounting, disclosure and corporate governance matters in September, October, January and February. The filing also says that SEC staff was interviewing company employees.

The stress is summed up by the Associated Press:

Kellermann had near-daily meetings with Moffett, discussions that became a study in conflicting obligations, according to the former Freddie Mac manager. Freddie Mac found itself caught between the policy goals of the government and the company’s duty to its shareholders, who have suffered staggering losses.

I am not presenting a conspiracy theory here and anyone who compares this to the Vince Foster suicide during the Clinton administration is completely off base. There is no moral here, really. This was a senseless tragedy. My only purpose in highlighting these articles and quotes is to point out that it is impossible for government to operate a business ethically and efficiently.

Corporations and small businesses operate for profit. The role of government in a free society is to make sure that corporations do not take advantage of the people in  their pursuit of profit. Politicians crave power and businesses crave profit. When government and business work against each other, life is tolerable. When these two entities work together, they prey on the citizenry. The politician uses business to purchase votes (power) and corporations wants use political power to stamp out competition or to reduce the cost of doing business.

Poor Mr. Kellermann was on the wrong side of the fence from everyone.

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