Earlier this week, former president of Freddie Mac Eugene McQuade took over as president and vice chairman of Merrill Lynch’s banking group, which primarily provides loans and mortgages to the firm's clients. McQuade, who resigned from Freddie Mac in September 2007 after turning down an offer to become the firm’s CEO, replaced McIntyre "Mack" Gardner, who stepped down in January 2008 shortly after Merrill’s former CEO Stan O’Neal resigned. McQuade will oversee Merrill Lynch Bank USA and Merrill Lynch Bank & Trust Co., reporting to Robert McCann, president of the firm’s global wealth management unit.
Also this week, McQuade's previous employer Freddie Mac and its sister firm Fannie Mae—the two largest mortgage finance lenders in the U.S.—announced their latest quarterly earnings. Or, rather, their latest losses. For the fourth quarter 2007, Freddie Mac booked a $2.45 billion loss, while Fannie Mae reported $3.56 billion in losses.
There was a bright side to the large negative numbers. Shortly after Fannie Mae filed its latest earnings, the Office of Federal Housing Enterprise Oversight announced that it would be repealing a ceiling for Fannie Mae and Freddie Mac’s investment portfolios as of March 1. The end of the cap, originally introduced in 2006, means that the firms will now have freedom to buy more mortgages.
Head of OFHEO James Lockhart cited the firms’ return to filing on-time and audited financial statements as a reason for the reinstatment. He explained that these steps "constitute an important milestone in remediation of their respective operational and control weaknesses that led to multi-year periods when neither company released timely, audited financial statements."
Today, in its latest move in response to the credit crisis, Merrill Lynch announced plans to shut down its subprime mortgage lending unit First Federal. According to insiders, this could result in as many as 400 to 500 layoffs starting next week. Merrill acquired First Federal from National City Corporation in December 2006 for $1.3 billion. Latest available estimates put total headcount at First Federal at around 2,500.