Freddie Mac turns to a turnaround whiz

Syron has connections

he headed the Amex, revived Thermo Electron

December 09, 2003|By BLOOMBERG NEWS

Freddie Mac, the second-largest source of U.S. mortgage financing, which understated earnings by $5 billion for the past three years, has chosen as its next chief executive officer a man who brings political connections and skills in turning companies around.

Richard F. Syron, 60, who was named CEO of Freddie Mac on Sunday, is a former head of the American Stock Exchange and deputy assistant Treasury secretary in the Carter administration.

He was most recently executive chairman of Thermo Electron Corp., a Waltham, Mass., maker of analytical instruments for medical laboratories.

Freddie Mac investors, whose shares have fallen 15 percent from their intraday high of $64.78 Jan. 21, are hoping he can do the same for them as he did for Thermo Electron shareholders.

After Syron's arrival at Thermo Electron on June 1, 1999, that company's shares have risen 45 percent while the Standard & Poor's 500 Index has fallen 19 percent.

"Syron went in to Thermo Electron to fix them up and really streamlined the operation," said Michael A. Mullaney, who oversees $10 billion at Fiduciary Trust Co. in Boston, including Freddie Mac stocks and bonds.

Finding a new head for Freddie Mac, a government-chartered company, is critical to restoring investor confidence. The company's shares have fallen amid concern that its financial problems, including its $787 billion in debt, could have a ripple effect on housing and the financial system.

Shares of Freddie Mac fell 20 cents to $55.15 yesterday on the New York Stock Exchange.

"Freddie Mac needs someone who is not tainted by accounting or other scandal," said Igor Krutov, an analyst at Vontobel USA Inc., which added Freddie Mac shares in June.

"His reputation as a corporate leader is very important."

The company is being investigated by the federal Office of Federal Housing Enterprise Oversight and by the Justice Department and the Securities and Exchange Commission.

Syron will succeed Gregory J. Parseghian as chief executive at the end of the month, said Sharon McHale, a Freddie Mac spokeswoman.

Parseghian was told in August he would be leaving after an internal investigation found that he was involved in trades that caused earnings to be understated. Parseghian replaced 18-year veteran Leland Brendsel, who was ousted in June as the extent of the restatement become known.

Syron "is just what Freddie needs, to not only deal with the mistakes they made and some of the cuteness that was going on, but at the same time he is a guy who is motivated to carry out the housing mission," said Rep. Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee, which oversees the company.

Syron, a native of Watertown, Mass., took the Thermo Electron position as the company came under pressure from investors to simplify.

George N. Hatsopoulos, then chief executive officer, and his brother, John, the chief financial officer, typically took the company's inventions, such as hair-removal lasers, turned them into separate units and "spun out" minority stakes to the public. There were 28 publicly traded units at the strategy's height.

"The board wanted to increase shareholder value, and we all felt [Syron] was ideal because he knew the company, the people and he's a terrific economist," John Hatsopoulos said in an interview. "Freddie Mac couldn't have chosen a better man."

When Syron left the American Stock Exchange for the job, Thermo Electron had 23 publicly traded units and its stock had dipped 63 percent in the previous year. Syron sold, spun off or took private units unrelated to instruments. Thermo Electron is now the biggest maker of analytical instruments for medical laboratories, its main and only public business.

Syron, a Boston Red Sox fan, is a 1966 graduate of Boston College and holds a doctorate from Tufts University in economics. He was president of the Federal Reserve Bank of Boston from 1989 to 1994 and president of the Federal Home Loan Bank of Boston from 1986 to 1988. Syron didn't respond to a telephone call requesting comment.

Freddie Mac and the larger Fannie Mae own or guarantee 42 percent of the $7 trillion mortgage market. The companies make money on the difference between the cost of the debt they issue and the return on the mortgages they buy from lenders, and from their investments in mortgage securities.

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