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Subcrime Questions As Freddie Mac Handed to Moffett of Carlyle and US Bancorp

Byline: Matthew Russell Lee of Inner City Press: News Analysis

NEW YORK, September 7 -- U.S. Treasury Secretary Hank Paulson's announcement today that he is unilaterally appointing Carlyle Group advisor David Moffett to replace Richard Syron as chief executive of Freddie Mac is more than a little ironic, and troubling. The Carlyle Group invested in and lost on subprime mortgage, it admitted earlier this year. In fact, Carlyle invested in bonds issued by Freddie Mac, as well as Fannie Mae.

  In March 2008, the Carlyle Group's mortgage-bond fund, having received more than $400 million in margin calls since earlier in the month, said it couldn't reach an agreement with it lenders, who would "promptly'' take over all of its remaining assets. Through March 12, the company had defaulted on over $16.6 billion of debt. On the news, the dollar fell to the weakest since 1995 against the yen and a record low versus the Euro. How then, sources are asking Inner City Press, can Moffett be put in charge of Freddie Mac?


Paulson and Lockhard, Moffett's subprime links not shown

  In fact, Carlyle beyond its investments in military contractors has been accused of other slash and burn tactics, for example by workers at the nursing home chain Manor Care. Its buy-out of Home Depot's contractor supply unit nearly fell apart, as its lenders balked.

  Moffett previously served as chief financial officer of U.S. Bancorp, which beyond its own subprime lending was a 25% investor in the now-bankrupt subprime lender New Century. When Inner City Press investigated U.S. Bancorp's stake in New Century, the company argued to the Federal Reserve that despite having two seats on the board of directors it did not control the lender. The word subcrime began to become applicable. The Fed demurred, and eventually the stake was sold off. But Moffett's companies' involvement in the subprime field is hardly a basis for confidence in him to lead at Freddie Mac. In fact, the choice calls into question Paulson's judgment. To be continued. Watch this site, and this (UN) debate.


   

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These reports are usually also available through Google News and on Lexis-Nexis.

Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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