So I’ve been offline here for a while, distracted by the current financial turbulence. No one really knows what will happen to Freddie Mac (FRE) and Fannie Mae (FNM) in the near term, but everyone would agree that they, or something like them is essential to the system. That said, Wall Street has put out countless “research” reports about the actual financial conditions of the firms, and whether they are solvent or not, or when their liquidity may run out. Other pragmatists have looked at the simple fact that we are close to a substantial election, and as such neither party wants to rock the boat until January 20, 2009. In thinking about less empirical but equally pragmatic viewpoints of what might happen, I stumbled on the thinking about the simplest of rules that drives business, human decision making.
Data helps people to form opinions, but aside from cognitive psychology, confirmation biases and the like, decisions are in the end, made by people like you and me. (We’ll maybe that’s a stretch, but at least they share the same basic DNA.)
That said, I thought of looking at who actually would be making the decisions within Freddie and Fannie, i.e. the executive committee and board, and where their interests and influences might reside. You will find a host of first degree associations of directors who sit on the boards of other companies and organizations.While this thought experiment does not offer any definitive conclusions on the future of the firms, I think speculators and pornographic intellectuals will find that the chart below from They Rule (www.theyrule.net) offers valuable insight into who would actually be driving the process of resolution of the GSE’s, and where those individuals interests lie. (When the window pops up, just click through the first few screens and when you get to the page, simply scroll right to view both 1st degree trees to see which companies and institutions the boards of Freddie and Fannie sit on.)
Enjoy this chart, and if it’s raining I encourage you to enjoy the website, its as fun as it is interesting and insightful. Have a great holiday weekend!