(Washington, D.C.) – Citizens Against Government Waste (CAGW) reacted strongly to news that Freddie Mac is experiencing a shakeup in top management because of potential employee misconduct.  Since its inception in 1984, CAGW has been advocating for more oversight and disclosure from GSEs such as Freddie Mac and Fannie Mae.  Today’s announcement further illustrates such a need.

“No financial institution is immune to financial volatility.  Americans have had to learn this the hard way time and again over the last two years after seeing the collapse of reputedly well-run companies like Enron and WorldCom.  Freddie Mac, and its sister company Fannie Mae are much larger and their activities are more systematically integrated into our economy,”  CAGW Special Projects Director Leslie K. Paige said.  “However, government sponsored enterprises (GSEs) are still exempt from Securities and Exchange Commission (SEC) registration and disclosure rules and therefore are exempt from the kind of transparency that is crucial to maintaining confidence in our capital markets.  Enron and WorldCom could end up looking like a cakewalk if there is more trouble ahead.”

The shakeup comes after it was revealed that management was not fully cooperating with internal auditors examining earnings statements from 2000 through 2002.  President and chief operating officer David Glenn was fired, while Chairman and CEO Leland Brendsel retired and Chief Financial Officer Vaughn Clarke resigned.

“Fannie Mae and Freddie Mac are just too big to be outside of the standard disclosure regime and maybe these events will galvanize attention to the issue,” Paige continued.  “U.S. Reps.  Chris Shays (R-Conn.) and Ed Markey (D-Mass.) have introduced H.R. 2022, the ‘Leave No Securities Behind Act,’ that would require full GSE disclosure to the SEC.   Every member of Congress who cares about accountability in corporate governance, economic prosperity and minimizing the potential for a bailout of either GSE ought to be getting on board with H.R. 2022.  It is only a first line of defense, but it is still essential for homeowners, taxpayers and shareholders.  The recent internal problems might only be the tip of the iceberg; without full disclosure, we will never know the true state of the GSE’s finances.”

Citizens Against Government Waste is the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.  For more information, please visit www.cagw.org.