If you happened to be a conspiracy theorist, you’d almost have to be salivating at a story like this. Freddie Mac, which has been at the center of attention in regards to the nationwide housing crisis, had their Chief Financial Officer die in an apparent suicide. The company currently owns or guarantees about 13 million mortgages, so David Kellermann’s death has had a significant impact both in the company and the broader economy.
Certainly the pressures of turning around such a massive company had to come with a fair amount of stress. I know I wouldn’t want to be anywhere near the firm in terms of employment, and apparently Kallermann had his hands full. He was often heading to the company’s executive suite at night to speak with his boss, David Moffett, where they would clash as to how to best serve the future of the firm.
Regardless of the reasoning, it seems likely that Kellermann’s unfortunate departure will cause further stress to the company itself. Kellermann was an experienced veteran, having 16 years under his belt, and without him the company has lost it’s direction. High level execs leaving the firm (under different circumstances of course) are nothing new, as both Freddie and Fannie have lost the CEOs that the government had put in last fall. Other high-level executives have headed for the exits as well. One analyst, Paul Miller from FBR Capital Markets, said that the departures are due in part to the belief that the agencies would be spun off in due time, likely within a year.
The question now becomes whether Freddie Mac and Fannie Mae will be able to handle their new expansive roles under the Obama administration’s housing rescue efforts. Both agencies have said that they may need additional lifelines from the government (Freddie reported a fourth-quarter loss of $23.9 billion) even after Uncle Sam has pledged $200 billion and bought up about $60 billion in preferred shares. James Lockhart, who is the director of the Federal Housing Finance Agency, which regulates both Freddie and Fannie alike, said that the search is underway for a new CEO and CFO, but ultimately Kellermann’s unfortunate passing is a blow to the firm that has already had to withstand much.
So far Spain, Ireland and the UK are already seeing it and Japan is teetering on the brink.
All of this as the IMF predicts the global economy will shrink for the first time since 1949. The US will provide a fascinating case study on possible causes and effects of deflation. No one really knows what will happen now that we’ve flooded our economy with faux dollars. The standard behavior of more dollars chasing fewer goods is, of course, inflation. A best case scenario for us then is a collision of inflation and deflation — resulting in the ever-dreaded stagflation. I said it was a best case. I didn’t say it was a good case.
My own observation sees more things coming down (housing, clothes, consumer electronics, automobiles) than are going up (food seems to be increasing slightly).
Even more scary news from the UK: “University students could earn, rather than have to pay, interest on their student loans from September now Britain has gone into deflation.” Yes, they will pay you to borrow money. Ouch.
Constantine von Hoffman is a veteran business journalist and social media consultant. He write the blog CollateralDamage, a satirical look at marketing and business.