Freddie Mac, Fannie Mae sink into managerial turmoil

— -- David Kellermann, who became Freddie's CFO when the government took over Freddie and Fannie in September, was found dead Wednesday.

Both institutions have lost the CEOs the government installed last fall and have seen other high-level executive departures.

Paul Miller, analyst at FBR Capital Markets, said a reason for the departures is that those who had taken on high-profile positions after the government takeovers believed the agencies would be spun off in a year.

The federal conservatorships have meant less control, lower salaries and public criticism of executive bonuses. In April, the agencies came under fire for their plans to pay $210 million in retention bonuses to employees.

"A lot of people who had been attracted there had thought it would be a year and they'd be public companies," Miller said. "Instead, it's a political land mine."

The two institutions also face the heavy burden of resuscitating the housing market. Under the Obama rescue plan, both agencies have been directed to modify millions of home loans and provide up to 5 million loan refinancings.

Fannie and Freddie hold or guarantee about half of the mortgages in the USA. They play a critical role in funding the mortgage market by buying mortgages made by banks and bundling them into securities to sell to investors.

But as more mortgages have defaulted, their losses have grown. The government has thrown them some financial lifelines. It has pledged up to $200 billion to each of them and has invested nearly $60 billion in their preferred shares since September.

Both agencies have said they may need more help. In March, Freddie announced a fourth-quarter loss of $23.9 billion. It has received about $45 billion in federal aid.

In addition, the Justice Department and the Securities and Exchange Commission have been investigating accounting, disclosure and corporate governance issues at Freddie since late last year. The SEC issued subpoenas for certain Freddie Mac documents in January and February, the company said in recent securities filings.