NEW YORK – Freddie Mac (FRE) on Thursday named Eugene M. McQuade (search), a longtime banking executive, as president and chief operating officer and possible heir apparent at the No. 2 U.S. mortgage finance company.
McQuade's appointment is the latest management change since Richard Syron was made chairman and CEO in January in a bid restore investor faith in Freddie Mac after it became embroiled in a $5 billion accounting scandal last summer.
"Rebuilding confidence in this organization was important, and I think that (means) rebuilding of confidence in the leadership of the organization," Syron said. "It's a cumulating event," he said of the hiring of McQuade.
McQuade takes the place of Paul Peterson, 54, who had been with the company for 15 years. Peterson will remain with Freddie Mac for about a year before retiring to ensure an orderly transition as it addresses the accounting scandal.
McQuade said it will be his job to implement the plan set by Syron to improve strained relations with Freddie Mac's regulators, customers and investors, as well as delivering strong financial results and meeting its mission of broadening home ownership in the United States.
"That will be my primary focus here over the next couple years to make sure we translate the vision and mission, and execute them at the highest level," McQuade said.
Freddie Mac, which restated earnings by $5 billion over 2000-2002 and earlier periods, did not report 2003 financial results until June. It has told investors not to expect 2004 earnings reports until next March.
The company, based in McLean, Va., has said it misapplied accounting rules so that it could smooth earnings to conform more closely to earnings expectations on Wall Street. The restatements showed the company had both understated and overstated profits over the time periods in question.
The company's problems extend to Washington D.C., where Rep. Richard Baker , chairman of the House Financial Services subcommittee on capital markets (search), is questioning how a company that is taking so long to clean its books can be public.
Baker told Reuters earlier this month that he was crafting a letter to the New York Stock Exchange (search) to take issue with Freddie Mac's continued listing on the Big Board.
McQuade, 55, most recently president of Bank of America (BAC), will be second-in-command at Freddie Mac and a leading contender as chief executive if Syron leaves, according to Freddie Mac spokesman David Palombi.
Syron, 60, is in the first year of a five-year contract with Freddie Mac. McQuade signed an initial term of three years, subject to automatic extension for successive one-year periods unless he or Freddie Mac decides to discontinue.
While Syron and McQuade have been in various high-power positions in the financial services industry, the two men "did not know each other personally" prior to McQuade becoming a candidate for Freddie Mac's No. 2 job, said Sharon McHale, a Freddie Mac spokeswoman said.
McHale recounted that after learning of McQuade leaving Bank of America, Syron "immediately called" McQuade. "This is exactly the superstar talent he wanted on broad," she said.
McQuade was president and chief operating officer of FleetBoston Financial Corp., and had a brief stint as president of Bank of America after it acquired Fleet in April.
He was the most senior official from Fleet to leave the combined bank after the merger was completed, and reportedly left with a $25 million severance package.
McQuade has a strong accounting background. He is a certified public accountant and has served as a bank controller.
"It's a nice melding of backgrounds," Palombi said.
Syron, a former head of the American Stock exchange (search) and of the Federal Reserve Bank of Boston (search), has made several other senior management changes, including the addition of an executive vice-president of investments and a new general counsel.
McQuade's appointment is expected to become effective in September, and he is expected to be nominated to the board of directors at the company's annual meeting in November, according to a release.