Monday, September 8, 2008

Carlyle Group's Moffett to Take Over Freddie Mac

The new CEO of embattled Freddie Mac is David Moffett, Senior Adviser at The Carlyle Group, a politically connected private equity underwriter (PEU). As part of the recovery, the government plans to buy significant amounts of Fannie Mae and Freddie Mac's mortgage-backed securities on the open market. They begin with the purchase of $5 billion worth this month.

Why should anyone be concerned about Moffett's appointment? One, Carlyle has been lobbying that same federal government for looser restrictions on investing in banks. David works in the PEU's global financial services sector. He worked alongside Randal Quarles, the point man for banking rule relaxation.

Two, Carlyle Capital Corporation held residential mortgage backed securities in their failed fund. The roll up is underway. What impact might Moffett's appointment have on CCC? Might Freddie buy their securities first, even paying a higher price? That's something for an auditor to watch.

Bush has a history of doing right by his friends, as well as looking the other way. Carlyle experienced this in early 2006 with their omission from the White House Lessons Learned report on Hurricane Katrina. LifeCare Hospitals, an affiliate of the Carlyle Group, lost 24 patients in the storm's aftermath. This warranted not one mention in W.'s report. What's missing from the latest news release?