Early Briefing: Freddie's Revelations
Half a year after the government seized Freddie Mac, confusion about its role is stoking tensions between the company and its regulator, including a dispute this month over how much the mortgage giant should reveal to private investors about its financial troubles, Zachary Goldfarb reports.
Federal officials who took over Freddie Mac stopped short of nationalizing the company, leaving it partly in private hands. This means Freddie still has to answer to investors and file financial disclosures. But when Freddie Mac's executives concluded a few weeks ago they had to disclose that the government's management of the McLean-based company was undermining its profitability and would cost it tens of billions of dollars, the firm's regulator urged it not to do so, according to several sources familiar with the matter.
Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator's request was out of line. The company's regulator backed down, the sources said.
IBM has told its employees that the company plans to cut about 5,000 jobs this week, according to industry sources with knowledge of the layoffs. But the cuts will largely not affect the 3,400 IBM employees in the Washington region who focus on providing information technology services to the federal government, a growing business for the company.
"My understanding is that it isn't targeting the people who have skills leaning toward federal or local governments," said Ben Pring, who follows the company for market research firm Gartner. "Outsourcing those jobs doesn't fly in the government context."
JER Investors Trust of McLean said the New York Stock Exchange notified it that it is not in compliance with listing standards requiring it to have an average market capitalization of at least $15 million over 30 days. Trading in JER shares on the Big Board will be suspended as of Tuesday and will move to an over-the-counter exchange. Shares closed at $1.28 yesterday.
JER also said it canceled its proposed offering of $150 million in common stock, announced March 3, "due to market conditions." Because of that, it will not buy up outstanding trust preferred securities. Further, it will change its dividend payments to annual from quarterly.
CapitalSource of Chevy Chase said Thomas A. Fink is resigning as chief financial officer and will be replaced by Donald F. Cole, who has worked for the company since 2001. Fink will stay in his post until May 1 and then continue as a consultant through the end of the year. He will be paid $30,333 a month in this role.
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