Freddie Mac 2008 Annual Report Download - page 23

Topic Before Conservatorship During Conservatorship
Authority of Board of
Directors,
Management and
Stockholders
• Board of Directors with right to determine the general
policies governing the operations of the company and exercise
all power and authority of the company except as vested in
stockholders or as the Board of Directors chooses to delegate
to management
• Board of Directors delegated significant authority to
management
• Stockholders with specified voting rights
• FHFA, as Conservator, has all of the power and authority of
the Board of Directors, management and the stockholders
• The Conservator has delegated certain authority to the Board
of Directors to oversee, and management to conduct, day-to-
day operations. The Conservator retains overall management
authority, including the authority to withdraw its delegations
of authority at any time
• Stockholders have no voting rights because the voting rights
are vested in the Conservator
Regulatory
Supervision
• Regulated by FHFA, our new regulator created by the Reform
Act
• Reform Act gave regulator significant additional safety and
soundness supervisory powers
• Regulated by FHFA, with powers as provided by Reform Act
• Additional management authority by FHFA, which is serving
as our Conservator
Structure of Board of
Directors
• 13 directors: 11 independent, plus Chairman and Chief
Executive Officer, and one vacancy; independent, non-
management lead director
• Five standing Board committees, including Audit Committee
in which one of the five independent members was an “audit
committee financial expert”
• 11 directors, with delegation by the Conservator of specified
roles and responsibilities: nine independent, including
Chairman of the Board and three directors who were also
directors of Freddie Mac immediately prior to
conservatorship; and two non-independent, including the
Chief Executive Officer. Two additional board members may
be added to the Board of Directors, subject to approval of the
Conservator.
• Mr. Moffett has resigned from the Board of Directors,
effective no later than March 13, 2009. Effective upon
Mr. Moffett’s resignation and pending the appointment of a
new Chief Executive Officer, John A. Koskinen, who has
been serving as non-executive Chairman of the Board of
Directors, will assume the role of Interim Chief Executive
Officer, and Robert R. Glauber will assume the role of
interim non-executive Chairman. During the period that
Mr. Koskinen is serving as Interim Chief Executive Officer,
he will not be an independent director and the Board will
have 10 directors, 8 of whom will be independent.
• Four standing Board committees, including Audit Committee
consisting of four independent members, one of which is an
“audit committee financial expert”
Management • Richard F. Syron served as Chairman and Chief Executive
Officer from December 2003 to September 6, 2008
• David M. Moffett began serving as Chief Executive Officer
on September 7, 2008. Mr. Moffett has resigned from his
position as Chief Executive Officer, effective no later than
March 13, 2009. See “Structure of Board of Directors” above.
Capital • Statutory and regulatory capital requirements
• Capital classifications as to adequacy of capital provided by
FHFA on quarterly basis
• Statutory and regulatory capital requirements not binding
• Quarterly capital classifications by FHFA suspended
Net Worth
(1)
• Receivership mandatory if our assets are less than our
obligations for 60 days
• Conservator has directed management to focus on maintaining
positive stockholders’ equity in order to avoid both the need
to request funds under the Purchase Agreement and
mandatory receivership
• Receivership mandatory if FHFA makes a written
determination that our assets are and have been less than our
obligations for 60 days
(2)
Managing for the
Benefit of
Stockholders
• Maximize common stockholder value over the long term
• Fulfill our mission of providing liquidity, stability and
affordability to the mortgage market
• No longer managed with a strategy to maximize common
stockholder returns
• Maintain positive net worth and fulfill our mission of
providing liquidity, stability and affordability to the mortgage
market
• Focus on returning to long-term profitability if it does not
adversely affect our ability to maintain net worth or fulfill our
mission or other initiatives, as directed by our Conservator
(1) Our net worth generally refers to our assets less our liabilities, as reflected on our GAAP balance sheet. If we have a negative net worth (which means
that our liabilities exceed our assets, as reflected on our GAAP balance sheet), then, if requested by the Conservator (or by our Chief Financial Officer,
if we are not under conservatorship), Treasury is required to provide funds to us pursuant to the Purchase Agreement. Net worth is substantially the
same as stockholders’ equity (deficit); however, net worth also includes the minority interests that third parties own in our consolidated subsidiaries
(which was $94 million as of December 31, 2008). At December 31, 2008, we had a negative net worth of $30.6 billion.
(2) Under the Reform Act, FHFA must place us into receivership if FHFA determines in writing that our assets are less than our obligations for a period of
60 days. FHFA has notified us that the measurement period for any mandatory receivership determination with respect to our assets and obligations
would commence no earlier than the SEC public filing deadline for our quarterly or annual financial statements and would continue for 60 calendar
days after that date. FHFA has also advised us that, if, during that 60-day period, we receive funds from Treasury in an amount at least equal to the
deficiency amount under the Purchase Agreement, the Director of FHFA will not make a mandatory receivership determination.
20 Freddie Mac