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» Timothy Mayopoulos was promoted from general counsel to CEO by Fannie Mae's board on June 5. It is also important to acknowledge there is little doubt that this fund—on a cumulative basis—helped leverage more private investment in less affluent neighborhoods and most of the investments were for far less ostentatious developments than the ritzy Florida condos. In short, this review of the enterprises' balance sheets presented a political conundrum. Do we air this "dirty" laundry as the housing market is literally starting to unravel, or do we stand by to see just where the fast-moving market will go? Our decision was to take a wait-and-see approach. By this time the housing downturn was in full gear, and major portions of the U.S. financial industry were beginning their slide toward the abyss. The Downward Spiral Then in September 2008, the day of reckoning came for the GSEs. The industry had long enjoyed the liquidity and pricing benefits of the implicit guarantees provided by Fannie Mae and Freddie Mac. Market participants were privately confident that the two companies' VISIT US ONLINE @ DSNEWS.COM Former E*Trade CEO Donald Layton was named Freddie Mac's new chief executive on May 10. liabilities were backed by the full faith and credit of the U.S. government even if their charters said nothing to this effect. Years of push and pull over the GSEs' dual (and often conflicting) mission of keeping mortgage interest rates low while providing affordable housing opportunities left shareholders pushing for lower capital requirements and the corresponding opportunity for higher returns. In hindsight, the system was unsustainable—and it eventually led to the implosion of the GSEs and required federal regulators, notably FHFA, to step in as their conservator. It seems like today, five years later, the same instructions of "ratcheting down" the GSEs still confound the administration, Congress, and policymakers in Washington. Even Fannie Mae and Freddie Mac struggle with how to resolve their massive volumes and portfolios in addition to the industry's reliance on their securitizations. Both GSEs appointed new leadership this spring after the former CEOs stepped down. New Chiefs, Same Standards In May, Freddie Mac named Donald Layton the new CEO. Layton was formerly acting as CEO of E*Trade Financial Corporation. He replaced Charles Haldeman Jr., who began serving as Freddie Mac's CEO in 2009. Layton is Freddie Mac's third CEO since the GSEs were taken into conservatorship in 2008. And far from Layton's last salary, and from the salaries of former GSE executives working in the heyday of the mortgage boom, FHFA is capping executive compensation at an annual salary of $600,000 in 2013. Fannie Mae followed suit in June, replacing Michael Williams, who also began his tenure as CEO in 2009, with Timothy Mayopoulos. Mayopoulos was formerly Fannie Mae's general counsel and is also subject to the $600,000 salary limit in 2013. It is too early to tell if the new leadership will bring about any significant change for the GSEs. The safe bet is the GSEs will embrace the status quo between now and the end of 2012. For one, 51