FREDDIE MAC: Spending as if they had a good year
One of the more interesting things about the inter-tubes is that a great many things manage to find their way to the public than in the old days of public records being buried in musty court house basements .
For example, given the horrific year Freddie Mac (FRE) is having (down 53% YTD as of Friday's close), they probably don't want the world to know about what appears to be a rather not inexpensive soiree at shareholders' expense at the Ritz Carlton, via W:
It's not a news story; it's something I witnessed personally. Freddie Mac lost $2B last quarter and plans to lose another $2B next quarter on $9B in revenue (20% losses).
To celebrate, they threw a decadent holiday party at the Ritz Carlton in exclusive McLean, VA. They had a laser printer that printed pictures on chocolate lollipops for the kids, hors d'oeuvres, entertainment. You'd think it was the Goldman Sachs partners dinner.
Alas, it was a Government Sponsored Enterprise pissing away money right before they're going to need a taxpayer bailout:
Those damn tubes!
Saturday, December 15, 2007 | 01:52 PM | Permalink
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but they're sending the leftovers to the homeless shelter... so it's ok.
Posted by: Bob A | Dec 15, 2007 4:30:03 PM
Barry, I mean Ebenezer--
I take it you're proposing that they follow the lead of the group just above them on the Ritz Carlton schedule? Throw NADA Holiday Luncheon?
Damn.
Posted by: Scott Frew | Dec 15, 2007 4:47:09 PM
Barry,
There might be coming a new wave of accounting scandals like in 2002. I just hope this get over with, so the markets can make a comeback. I think, with a few exceptions, Americans are generally more optimistic about the future of the markets.
Posted by: David | Dec 15, 2007 5:36:59 PM
I presume the idea is to suggest some measure of austerity, but I thought austerity is only for those who actually produce the material wealth that everybody else is consuming (and those excluded from producing by un- or underemployment).
Posted by: cm | Dec 15, 2007 5:55:15 PM
Don't worry about Freedie! They along with Fannie just added hefty surcharges on the mortgages they buy, they will do fine.
Posted by: jeopardy | Dec 15, 2007 6:10:02 PM
I understand that Moody's gave the party its AAA rating, after which the drunks were stripped out and repackaged into a Collateralized Drunken Orgy, or CDO, and this tranche was sold to the Florida Pension Plan, whose party was kind of lame.
Posted by: Winston Munn | Dec 15, 2007 6:15:48 PM
Actually I think Freddie execs asked some NADA execs to hang around and explain how they are able to take trade ins when their customers are upside down on a car loan. How bout we just entice them into a 36 month lease! That was essentially what subprime was all about. Live your dream for 36 months, put the keys in the mailbox. No harm, no foul.
On a more informative note, Pulte is selling their spec new home inventory here in a dallas suburb for $68.5 a sq/ft. A 3600 sq/ft 2 story brick veneer with mediam finish out and 3 car garage for $246,000. The same house last year sold for $320,000. This has to be at hard cost. Realtors are trying to peddle USED homes in the hood for $75 to $85?ft. Ain't gonna happen. Lots up unhappy neighbors round these parts.
Posted by: Ross | Dec 15, 2007 6:18:23 PM
what...the employees who work as hard as anyone else should be punished because a bunch of mba's at citicorp and bearstearns made a bunch of poor choices?
Posted by: BigMary | Dec 15, 2007 6:35:24 PM
BigMary: Scaling down the festivities when the numbers are not spectacular is not quite "punishment". In the "productive" sectors of the economy it happens all the time.
Not to suggest of course that if some get "punished", all have to be.
OTOH one good party for the employees is merely a drop in the bucket for any bigtime company, and any cutbacks on that are just symbolic.
Where I work the extra perks, and all non-essential operations except (ahem) of those categories that are beyond questioning, are cut back every year, regardless of the numbers. But as long as our salaries and bonuses are good that's a secondary consideration. If people are not quite happy that's OK, as long as they don't take flight when the knife gets to the basics.
Posted by: cm | Dec 15, 2007 8:28:26 PM
"...a laser printer that printed pictures on chocolate lollipops for the kids..."
Sounds very decadent. A Gordon Gecko dinner party it was not.
Posted by: Grodge | Dec 15, 2007 8:46:09 PM
Ah, I spent many a night (work related) in that Tyson's Corner Ritz Carlton. So lovely. Our company had a corporate rate, and then conveniently seemed to be out of those rooms more and more frequently. Finally got an apartment at The Lincoln across the street.
On summer evenings, I would jog past the bucolic campus of Freddie Mac after most of Tyson's workforce was on it's gridlocked way home. (My home was 1.5 hours away).
Though the Ritz Carlton is quite nice, I'm quite sure that they had some well-negotiated rates for their entertainment.
Posted by: Leisa | Dec 15, 2007 11:01:55 PM
I gotta say, laser prints on chocolate and snack food doesn't exactly qualify as "decadent" in my book.
They are going to have their board meetings and holiday parties, and why shouldn't they? Its not like it was a Tyco party.
This report just seems petty.
Posted by: Mysticdog | Dec 15, 2007 11:19:58 PM
Merry Grinchmas
Posted by: NorkaWest | Dec 16, 2007 12:16:57 AM
Dude, where's my linkfest!?!?!?!
If your going to deal in info porn, you gotta have a reliable supply:)
Hope your holidays are fun!
~~~
BR: Sunday version coming soon . . .
Posted by: k2163 | Dec 16, 2007 1:02:13 AM
My company had an afternoon pot luck because it was a bad year and we wanted to be fiscally conservative since so many in the industry are being downsized. That money could have paid for keeping a few subprime owners in their homes
Posted by: george | Dec 16, 2007 9:05:45 AM
and who says we don't need a big down-turn to clean things out? Too much swing of the pendulum to either side distorts reality to the point of idiocy.
Posted by: justino | Dec 16, 2007 9:36:15 AM
I have a growing hatred and disgust for most of corporate America. The greed and corruption is in a death spiral. We are the joke of the world when CEO's receive 400 times the pay of their average employee! It's around 10 times in Europe..... These banking execs leaving with hundreds of millions for leading their companies into possible ruin..... What a joke of a corporate environment we have..... It makes me want to puke up my breakfast...... Crminals! The US will pay a big price eventually.......
Posted by: stckpkr7000 | Dec 16, 2007 10:43:12 AM
Geez Scrooge, I wouldn't want to work for Ritholtz and Co!
Barry, these parties and various outings actually cost the firm very little in relation to actual compensation. I mean at most, what did this party cost - $200 per head? If I can now cut my employees' bonus by $2,000, I make out like a bandit.
They boost employee morale especially in lean years when bonuses are going to be crappy. The firm has to create a value proposition to retain human capital and if it means flex hours, a nice holiday party, and even the occasional free lunch at work, the intangible and tangible benefits go a long way if you can keep the good employees.
Posted by: HedgeFundAnalyst | Dec 16, 2007 10:57:41 AM
I lie somewhere in the middle of this argument. I think it is necessary to boost the morale of the employees so a party is a good idea, but I am sure that some of the expenses could have been avoided to cut some costs.
Posted by: Aaron | Dec 16, 2007 11:07:40 AM
While I agree 100% with BR on this one, I also feel for those poor people who work at Freddie and thus if lollipops help them see a little bit of light in their world, perhaps they should have them.
Posted by: 12th percentile | Dec 16, 2007 12:48:23 PM
Maybe they are spending like it's their last good year for MANY years?
Posted by: Unscripted Thoughts | Dec 16, 2007 1:56:44 PM
A couple of things to remember:
1. Holiday parties are generally planned well in advance.
2. The Ritz is about 150 yards from Freddie's front door.
3. The group you're talking about - Single Family Sourcing - is one group out of a huge company. I can tell you - from the experience of a friend who works in that group - that they have been working their tail's off trying to respond to the market and get their hands around things. Even in tough times you must reward hard work. It's very easy to pile on when you don't have all the info, isn't it. Neither problems nor solutions of this magnitude are created overnight...and frankly, them spending 10K or 15K or 20K on an end of year party is hardly the problem. How about looking at the bonuses paid @ Deutche, Goldman, Bear Stearns, etc., for the guys who CREATED the securities - rather than the one's who purchased them and are trying to solve the problem????
Posted by: RH | Dec 17, 2007 1:54:13 PM
