Risk Management Watch: Shakeup at Fannie Mae, CROs Hot Commodities
Fannie Mae has announced a major shakeup among the ranks of its senior management. This comes amid rising costs stemming from defaults by homeowners and mounting concerns the government-sponsored enterprise would soon need a government bailout. Fannie Mae President and CEO, Daniel H. Mudd, made a series of senior executive appointments, effective immediately, to oversee and implement the company’s recently announced capital management and credit loss reduction plan. Fannie officials said the moves are designed to put people who have dealt with previous mortgage-industry shakeouts in the most vital jobs at a time when the worst housing slump in decades requires crisis-management skills. The executive appointments include Peter Niculescu, who has assumed the duties of Chief Business Officer, as well as the appointments of David C. Hisey as Chief Financial Officer and Michael Shaw as Chief Risk Officer.
Fannie Mae is not alone in its renewed emphasis on risk. A slew of banks have added a Chief Risk Officer (CRO) to their top ranks to proactively manage risk and strengthen internal controls. Industry veterans recruiting for executive search firm, A.E. Feldman, echo this view, pointing out that Chief Risk Officers who have been tested by previous market cycles are being handed more power. In fact, many now report directly to the CEO. A.E. Feldman also notes that risk management jobs are gaining significance as firms continue to shore up their risk teams and replace or add new Risk Chiefs. A.E. Feldman also notes that senior communications and marketing professionals will also become hot commodities as firms reposition and rebrand themselves.
Mounting U.S. home foreclosures have fueled fears that government-sponsored behemoths, Fannie Mae and Freddie Mac, won’t be able to absorb mortgage-related losses. Investors are worried that a U.S. government rescue of Fannie and Freddie could be costly for scores of investment, banking and insurance companies that hold billions of dollars of their preferred shares, according to BusinessWeek. The report states Fannie and Freddie hold or guarantee half of U.S. mortgage debt and are considered crucial to the mortgage market’s continued operation.
Amid these concerns, Fannie Mae’s President and CEO, Daniel Mudd, announced the departures of three high-level executives and the appointment of a new senior management structure. “This team will be responsible for meeting the dual objectives of conserving capital and controlling credit losses while Fannie Mae continues to provide crucial liquidity to the U.S. housing and mortgage markets. As we move through the bottom of this cycle, maintaining capital, managing credit and driving revenues are the priorities - and we have to organize and staff accordingly,” says Mudd.
Among the new senior management appointments:
- Peter Niculescu was named Executive Vice President and Chief Business Officer. Niculescu will have responsibility for the oversight of the three Fannie Mae business divisions - Single-Family Mortgage Guaranty, Capital Markets and Housing and Community Development. He will also oversee the implementation of the company’s capital management and credit-loss reduction plan. “Peter Niculescu’s wide experience in the mortgage and capital markets, risk management and global and domestic finance make him the right choice to oversee our business, capital and credit strategies through this difficult cycle, and move into a more solid future for housing and Fannie Mae,” according to Mudd.
- David C. Hisey, formerly controller, has also been named Executive Vice President and Chief Financial Officer, reporting to the President and Chief Executive Officer. Hisey is responsible for ensuring the accuracy, integrity, and timeliness of the company’s financial reporting and accounting, and internal controls. In addition to the duties of Chief Financial Officer, Hisey will work with Peter Niculescu in carrying out Fannie Mae’s capital management plan to ensure the company remains in a solid capital position.
- Michael Shaw, formerly a senior vice president, was named Chief Risk Officer, reporting to the President and Chief Executive Officer and the Board of Directors. As CRO, Shaw has overall responsibility for credit, market, counterparty, and operational risk oversight for all business units within Fannie Mae, and oversees the formulation of risk policies as well as the measuring, reporting, and monitoring of Fannie Mae’s risk profile. “Mike has seen cycles and has seen what it takes to manage when credit becomes tough. I’m glad to have him take on this challenge,” says Mudd.
Fannie Mae is just one more addition to the long…and growing…list of companies scrambling to add or replace Chief Risk Officers (CROs) to their top management ranks. That list includes Commonwealth Bank, Merrill Lynch, Citigroup, Lehman Brothers, Morgan Stanley, State Street, Ambac, PrivateBancorp, Bank of Montreal, CIFG Holding.
Most recently, First Financial Bancorp tapped John Sabath as Senior Vice President and Chief Risk Officer, according to the Business Courier of Cincinnati. The report states that as CRO, Sabath will report to President and CEO Claude Davis, and have responsibility for the bank’s risk management function, including commercial and retail credit, compliance, operational, market, strategic and reputation risk. He will also advise First Financial’s board of directors and audit and risk management committee.
To learn more or inquire about job trends in risk management the lines of communication are open. Contact the Mitch Feldman, President of A.E. Feldman, and the firm’s executive recruiting team here.
