Freddie Mac is in the spotlight of the Republican presidential contest, as Mitt Romney attacks Newt Gingrich for his 2006 work for the mortgage finance firm.
But what the firm did, and the role it and larger rival Fannie Mae played in the housing crisis of the last decade, remain a source of confusion for many Americans.
What do Freddie Mac and Fannie Mae do? The two of them support the housing industry by providing billions in financing to the mortgage market.
They buy mortgage loans from lenders that conformed to their guidelines, typically safer loans with a large down payment, good credit scores for the borrowers and verification of their income.
Because there is an implicit guarantee that the federal government stands behind both firms, which were set up by Congress, they borrow money at the lowest possible rates and get a good return on their investment.
Did the two firms create the housing bubble that caused the financial meltdown? Not really.
The two firms were major players in the mortgage market, and so the rising home values were at least partly funded by their flow of money.
But the bubble really inflated when Wall Street started buying riskier loans made to borrowers who didn’t qualify for a Fannie or Freddie conforming loan. Those loans carried higher interest rates, with relatively little risk for investors while home prices were going up.
Experts say it was the growth of those riskier loans that caused home prices to rise and the bubble to inflate.
"When you bring in 5 million marginal buyers who under normal circumstances would not qualify for a mortgage, that’s what ends up driving home prices," said Barry Ritholtz, CEO of Fusion IQ.
He said the big Wall Street firms that became major players in the mortgage market, such as Citibank (, Fortune 500), Bank of America (, Fortune 500), Goldman Sachs (, Fortune 500), Morgan Stanley (, Fortune 500) and AIG (, Fortune 500), are as or more guilty than Freddie and Fannie.
"If Freddie and Fannie never existed, we would have had the same problem," he said.
What caused problems for Fannie and Freddie? By the middle of the last decade, Freddie and Fannie had lost their dominant position in the home loan market, as the riskier loans became a larger share of the mortgage market.
So they adjusted their underwriting standards in order to participate in the riskier lending as well.
Obama’s housing track record
Even though the riskier loans were a minority of the loans each purchased, because each was so huge, they ended up with a large volume of those loans.
They also were relatively late to the game. That meant they got into riskier loans right before the decline in home prices — which began in 2006 — led to a spike in foreclosures. After that, home buyers started to default on loans that were safer, adding to Freddie and Fannie’s losses.
"What killed Fannie and Freddie is the housing market went to hell and they were 100% exposed to housing," said Jaret Seiberg, analyst with Guggenheim Washington Research Group.
How much money did the collapse cost taxpayers? So far Freddie has received $72.2 billion from Treasury, while Fannie, which is larger, received $111.6 billion. The combined $183.8 billion makes it the most expensive bailout by taxpayers of the financial crisis. But part of that bailout has been repaid to taxpayers in the form of dividends. Freddie has repaid $14.9 billion, while Fannie paid $17.2 billion.
Seiberg said that the bailout might have been avoided, or been relatively minor, if Fannie and Freddie had stayed away from the riskier loans.
"Best-case scenario would have been they were knocked down, but not knocked out," he said.
Why did Freddie and Fannie hire Washington insiders such as Newt Gingrich?Gingrich’s contract with Freddie is short on specifics of the work he performed for $25,000 a month. But even if he did no lobbying, as he says, the contract came at a time when Freddie and Fannie were eager to buy as much Washington influence as possible.
For years, the two firms were among the most powerful companies in terms of Washington muscle, getting free reign from both Congress and their regulator, then known as the Office of Federal Housing Enterprise Oversight (OFHEO).
"Fannie and Freddie had Congress wrapped around their fingers," said Guy Cecala, CEO of Inside Mortgage Finance, which publishes trade publications following the mortgage market. "They were untouchable."
Because of the public-private nature of their charters, the firms wanted to make sure Congress and OFHEO allowed them to operate with few restrictions. But they also wanted to keep government’s implicit backing in place so they could borrow money cheaply.
"They were very aggressive lobbying Congress and OFHEO to stay out of their way," said Ritholtz.
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The European Commission, the EU executive, believes that the joint issuing of eurobonds by the 17 euro nations would be the most effective way to tackle the financial crisis, according to a draft paper seen Monday.
The study by the European Commission, the EU’s executive branch, will be presented Wednesday and could intensify a rift with Germany, which rejects eurobonds as a viable option at the moment because it would expose its taxpayers to weaker countries’ bad debt. Germany already funds the bulk of the existing bailouts.
The draft, published by the Financial Times and confirmed by the Commission, said replacing national bonds with one jointly-backed bond would have to be matched by tight financial and budgetary coordination. It also says discipline woul be needed to make it impossible for profligate nations to live on the back of budget-concious member states.
Since Greece pushed the eurozone into its ever-worsening financial mess last year, many member states have seen their cost of government borrowing rise to record levels. Germany’s borrowing rates, meanwhile, have dropped sharply as investors buy up its bonds as a safe haven. That has created a huge imbalance in debt markets within a zone ruled by one currency.
Germany has long been reluctant to bail out member states like Greece, Ireland and Portugal, insisting it was up to their governments to live by sound economic principles and win investor confidence.
The situation worsened dramatically over the past weeks, when Italy was put under such intense market pressure that Prime Minister Silvio Berlusconi had to resign to make way for a government of experts led by former EU commissioner Mario Monti.
As the EU’s third-largest economy with debt approaching euro1.9 trillion ($2.5 trillion) and 120 percent of its gross domestic product, Italy is seen as too big to bail out. Faced with a breakup in their currency union, the euro nations have been scrambling for new solutions.
The eurozone currently has a bailout fund, the so-called EFSF, but it still lacks the firepower and nimbleness to support Italy’s finances if it were to be frozen out of bond markets.
The European Central Bank for now is limiting bond market pressures by buying up the government bonds of weak countries like Italy guaranteed cash advance. That has helped keep Italy’s key borrowing rates below the crucial 7 percent threshold that has eventually caused Ireland and Portugal to need bailouts.
But the ECB says its bond purchases are limited and temporary. To materially lower eurozone borrowing rates to sustainable levels, the ECB would have to embark on a massive program of bond purchases.
Germany _ and the ECB, which is heavily influenced by Berlin’s policies _ opposes such a massive bond program, saying it is up to governments to get their finances straightened out.
As a result, the EU study is pushing for eurobonds _ or Stability Bonds, as it calls them _ instead of national bonds as the best way to avoid financial disaster.
“In this way, the severe liquidity constraints currently experienced by some member states could be overcome and the recurrence of such constraints would be avoided in the future,” the draft of the study said.
EU Commission officials were due to pore over the study on Monday but no fundamental changes were expected.
The draft said that eurobonds would “provide the global financial system with a second safe-haven market of a size and liquidity comparable with the U.S. Treasury market.”
The political difficulty, however, would be to impose the same fiscal rigor across the 17 euro nations and fundamentally change the balance of power between the European Union and the national capitals.
The draft says that such fundamental changes would “almost certainly require” changes in the treaty underpinning the EU. In the past, any treaty change has proven to be a tough political task.
On Monday, the issue will almost certainly come up when Greece’s new Prime Minister Lucas Papadimos meets with top EU officials to discuss Greece’s financial difficulties.
Italy’s Premier Mario Monti will visit EU headquarters on Tuesday to discuss similar issues. On Thursday, Monti is to join German Chancellor Angela Merkel and French President Nicholas Sarkozy in Strasbourg for what he calls a permanent club of the eurozone’s three largest economies to confront the debt crisis.
The U.S. Justice Department expanded an investigatioin into Puerto Rican shipping Thursday, announcing a $14.2 million fine for a Florida-based company and a criminal charge against its former president.
Sea Star Line LLC agreed to the fine and a guilty plea to one felony count of conspiring to fix prices on cargo moving in and out of the U.S. island territory, the Justice Department said in a statement.
A federal grand jury in San Juan indicted the company’s former president and chief operating officer, Frank Peake, on a charge of conspiring to fix prices on Puerto Rico routes from late 2005 until April 2008. Peake, a New Jersey resident, is now a shipping company executive with a company affiliated with Sea Star.
Sea Star, based in Jacksonville, Florida, issued a statement apologizing to its customers, and noted the agreement provides that the Justice Department will not bring criminal charges against its parent companies, Saltchuk Resources Inc. and American Shipping Group Inc.
Sea Star employees engaged in the price-fixing scheme in violation of company policies, but the company is still responsible for the conduct under antitrust law, said Anthony Chiarello, President of American Shipping Group Inc.
“We extend sincere apologies to all of our loyal customers and the consumers who were affected by this conduct,” Chiarello said in the statement. “It was contrary to everything that Sea Star stands for and will not be tolerated in the future.”
He said by email that he was unable to answer questions because he was traveling.
David Oscar Markus, a lawyer for Peake, said his client denies wrongdoing and expressed confidence his client will be cleared of a charge that carries a maximum sentence of 10 years in prison.
“Frank is innocent. He is never going to do a day in jail because he didn’t do the things they said he did,” said Markus, based in Miami. “It’s a real shame that the government is wasting its resources on something like this.”
Peake is accused of meeting with unidentified others in his industry to allocate customers and set prices for freight services for government and commercial clients, according to the indictment.
As part of the agreement, which is subject to court approval, Sea Star admitted conspiring to set prices and rig bids between May 2002 and April 2008, according to court papers.
Last April, the investigation brought a $15 million fine for Horizon Lines LLC of Charlotte, North Carolina. Five former executives of Sea Star and Horizon have received fines and jail sentences stemming from the probe.
Democrats on Congress’ supercommittee secretly presented Republicans with a revised deficit-cutting proposal earlier this week that calls for a blend of $1 trillion in spending cuts and $1 trillion in higher tax revenue over the next decade, officials in both parties said Wednesday night, adding that compromise talks remain alive though troubled.
The previously undisclosed offer scaled back an earlier Democratic demand for $1.3 trillion in higher taxes, a concession to Republicans. At the same time it jettisoned a plan to slow the growth in future cost-of-living increases in Social Security benefits, a provision liberal Democrats oppose.
The one-page proposal was handed to Republicans at a meeting Monday night attended by some but not all members of the supercommittee. At the same session, GOP lawmakers in attendance advanced a revised proposal of their own that signaled for the first time they would be willing to accept higher revenues as part of a plan to cut deficits over the next decade.
Given the unusual secrecy of the meeting and the committee’s Nov. 23 deadline, it appeared that the pace of activity on the panel was accelerating. Less clear was whether there was still time to bridge enormous differences on priorities, or whether each side was laying the groundwork for trying to blame the other in case gridlock triumphs.
The committee, comprising six Republicans and six Democrats, has been working for weeks. Evidence of progress has been scarce, with Republicans demanding large cuts in benefit programs such as Social Security and Medicare, while Democrats pressed for additional tax revenue as a condition for agreeing to make deep spending cuts.
Few details are known of the session Monday night, except that Sen. Pat Toomey, R-Pa., outlined a plan on behalf of the four Republicans in attendance, and Sen. Max Baucus, D-Mont., countered with the revisions in an earlier Democratic proposal.
One official said the meeting lasted several hours.
Any progress that may have been made by the panel has largely been overshadowed in the past two days by a Democratic campaign to dismiss the GOP proposal as a prescription for deep tax cuts for the wealthy at the expense of the middle class.
In a sign of the political struggle unfolding, Democrats circulated a four-page analysis that relied not on a review of what Toomey outlined, but on what they described as a different, similarly drawn proposal.
Republicans countered that for all the rhetoric, both sides had shown flexibility on the issues that long have been at the root of Congress’ inability to compromise on sweeping plans to cut deficits.
“Republicans have put revenues on the table. Democrats have put entitlements on the table,” said Sen. Lamar Alexander, R-Tenn. “They both need to put more of each on the table.”
Alexander said the so-called supercommittee could expect help from a bloc of 45 senators that have signed on to a letter pledging support for a deficit bargain that mixes new revenues with curbs on the growth of government benefits programs payday loan lenders.
Democrats sounded far less upbeat.
“I have yet to see a real, credible plan that raises revenue in a significant way to bring us to a fair, balanced proposal,” said Sen. Patty Murray, D-Wash., the co-chair of the 12-member supercommittee.
In something of a dissent, the No. 2 Senate Democratic leader, Richard Durbin of Illinois, said he considered this week’s GOP offer “an honest effort” and “a breakthrough that can lead to an agreement. That’s what we need.”
Asked why he considered it to be a breakthrough, he told reporters, “The word `revenue.’ It is a breakthrough.”
Durbin said the bipartisan group of 45 senators planned to release a statement later Wednesday urging the supercommittee to keep working toward a target in the $4 trillion range, well above its mandated savings target of $1.2 trillion to $1.5 trillion.
The revised Democratic plan totaled $2.3 trillion in savings over the next decade, including projected savings in interest costs the government would realize from lower deficits.
Spending on Medicare would be restrained by $350 billion over a decade, and on Medicaid, by $50 billion.
Another $200 billion would come from defense, and an identical amount from a broad swath of government programs ranging from the parks to transportation.
Democrats also called for an overhaul of the tax code that would result in an individual rate of no higher than 35 percent and a scaling back of itemized deductions.
Republicans, too, favor tax reform. In his presentation, Toomey called for a top rate of 28 percent, which appears to require deeper cutbacks in the existing deductions than Democrats favor in order to yield $250 billion in higher revenue.
Aides in both parties requested anonymity to describe the GOP proposal, and they differed on some of the details.
Broadly speaking, however, the GOP plan would raise new revenues of at least $500 billion, both skimmed off the top as Congress completes an overhaul of the tax code and from proposals such as auctioning broadcast spectrum, raising Medicare premiums and increasing aviation security fees.
The plan also would cut spending by about $700 billion, mixing a less generous cost-of-living adjustment for Social Security beneficiaries with further cuts to agency operating budgets and curbs on the booming growth of Medicare and the Medicaid health care program for the poor and disabled.
Lower interest payments on the national debt would provide the remaining savings.
President Barack Obama is targeting vital North Carolina and Virginia this week, as he kicks off a three-day bus tour that is as much about campaigning for his jobs bill as it is shoring up support in two southern states he wrested from Republican control when he won the White House.
Obama’s 2008 victories in North Carolina and Virginia were due in large part to the states’ changing demographics and his campaign’s ability to boost voter turnout among young people and African-Americans. But nearly three years after his historic election, the president’s approval ratings in both states are sagging, in line with the national trend.
A Quinnipiac University poll out earlier this month put Obama’s approval rating in Virginia at 45 percent, with 52 percent disapproving. The same poll showed 83 percent of Virginians were dissatisfied with the direction of the country. In North Carolina, Obama has a 42 percent approval rating, according to an Elon University poll conducted this month. Most national polls put Obama’s approval rating in the mid- to low-forties.
The president’s bus tour comes as the battle in Washington over his jobs plan enters a new phase. While Obama had demanded lawmakers pass the $447 billion measure in its entirety, Senate Republicans have blocked those efforts, leaving the president and his Democratic allies to fight for the bill’s proposals piece by piece.
Since announcing his plan for putting Americans back to work last month, Obama has been traveling the country trying to build public support for his initiatives. The president’s itinerary has focused heavily on swing states, underscoring the degree to which what happens with his job bill is linked to his re-election prospects.
Obama starts his bus tour with a speech in Asheville, N.C., Monday morning and he will speak again later that day at a high school in Millers Creek, N.C. He’ll also speak Tuesday at a community college in Jamestown, N.C., and make stops in the southern Virginia cites of Emporia and Hampton, before wrapping up the bus tour Wednesday at a firehouse in North Chesterfield, Va.
While Obama won handily in Virginia in 2008, he barely squeaked out a victory in North Carolina, winning the state by less than a percentage point. John Davis, a longtime political analyst in North Carolina, said Obama won there in part because his campaign identified the state as a potential battleground early and established a dominant ground game, while the Republican nominee, Sen. John McCain, was focused elsewhere.
But with North Carolina now firmly on the political establishment’s radar, Davis said thinks Obama will have a much harder time holding the state next November.
“This time I think Obama loses the advantage of a surprise like he pulled off in 2008,” he said.
The president faces significant obstacles in Virginia as well. While Democrats had hoped Obama’s victory signaled Virginia’s shift to a blue state, momentum has since strongly turned back in favor of Republicans, most notably with Gov. Bob McDonald’s win in 2009.
That shift has some Virginia Democrats, especially state legislators running in next month’s General Assembly elections, less than thrilled about Obama heading to their state this week. In coal-mining southwestern Virginia, Democratic state Sen. Phil Puckett has flatly renounced the president. With Republicans running television ads and erecting billboards showing Puckett campaigning for Obama in 2008, Puckett said in a television interview he would not support Obama in 2012.
The White House insists the president is focused more on the economy than elections. With the nation’s unemployment rate stuck at 9.1 percent, Obama’s goal this week will be to convince the public that his jobs plan will put out-of-work teachers, police officers and firefighters back on the job, while also repairing crumbling roads and bridges.
By breaking up elements of the plan into individual bills, the White House wants to force Republicans to voice their opposition one by one _ part of the Obama administration’s strategy of hanging blame for any eventual failure of the president’s economic policies on GOP obstructionism.
“Each time we’re going to ask Republicans to support the bill,” Obama said last week. “And if they don’t want to support the bill, they’ve got to answer not just to us, but also the American people as to why they wouldn’t.”
White House spokesman Josh Earnest said Obama would use his stops this week to challenge Congress to get to work this week passing proposals in the bill, starting with initiatives that the administration says would prevent teacher layoffs. Obama will also call for lawmakers to prioritize his call for $50 billion in infrastructure spending.
Despite the president’s call for urgency, it could be November at the earliest before lawmakers take up the proposals in the bill, due to debate scheduled this week on appropriations bills and a planned vacation at the end of this month.
The president will be ditching Air Force One for much of his trip this week, traveling instead on a $1.1 million bus purchased by the Secret Service. The impenetrable-looking bus is painted all black, with dark tinted windows and flashing red and blue lights. Obama first used the custom-made bus during a similar road trip in August, when he traveled through Minnesota, Iowa and Illinois.
Obama’s time on the road will take him through small towns and rural swaths of both Virginia and North Carolina. In addition to his scheduled speeches, the president is sure to make unannounced visits to local restaurants or stop to greet supporters gathered along the road to watch his motorcade pass.
The effect is a campaign-style trip that allows the president to engage in a little retail politics, while also garnering the national media coverage typically afforded only to a sitting president.
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Canada’s Bank of Nova Scotia said Friday it’s buying a stake in the Bank of Guangzhou for Canadian dollars 719 million ($727 million), its second stake in a Chinese bank.
Scotiabank said it was chosen as the successful bidder for the 20 percent stake, the maximum share that foreign banks are allowed to own under Chinese regulations.
The Chinese bank is the country’s 29th largest and has 84 branches and offices. It’s based in bustling Guangzhou, capital of affluent Guangdong province, which neighbors Hong Kong. The bank is not publicly traded and is mostly government owned.
The purchase still needs regulatory approval and is expected to be completed in December.
The Toronto-based bank, Canada’s third largest, is one of a number of foreign banks that have sought footholds in China’s expanding banking and financial-services sector.
“Asia is a region of strategic importance for Scotiabank and enhancing our investment in China supports our long-term growth strategy,” President Rick Waugh said in a news release.
Scotiabank also owns 14.8 percent of Xi’an City Commercial bank and is waiting for approval to raise its stake to 18.1 percent. It has been in China since 1982 and also operates in nine other countries in the Asia-Pacific area.
Yahoo’s stock rose nearly 5 percent on Wednesday after the company fired its CEO following more than 2 1/2 years of financial lethargy.
Tuesday’s ouster came as investors were convinced that Carol Bartz couldn’t steer the Internet company to a long-promised turnaround.
To fill the void, Yahoo’s board named Tim Morse, its chief financial officer, as interim CEO. Bartz, who became CEO in 2009, lured Morse away from computer chip maker Altera Corp. two years ago to help her cuts costs. Yahoo said it is looking for a permanent replacement.
Yahoo Chairman Roy Bostock, also a target of shareholder frustration, informed Bartz about the move over the phone, according to an e-mail the outgoing CEO sent from her iPad that was obtained by the All Things D technology blog. The blog first reported Bartz’s ouster.
Yahoo didn’t return requests for comment Tuesday and Wednesday.
Bartz’s rude dismissal “made you feel a little bit like you were watching some reality TV show,” Forrester Research analyst Shar VanBoskirk said Wednesday.
Macquarie Securities analyst Ben Schachter said the handling of Bartz’s departure was unseemly and a sign of even more drama to come at Yahoo.
In a research note late Tuesday, Schachter predicted there will be a wide range of conjecture about Yahoo’s future, with the most likely speculation centering on Yahoo as a takeover target during a vulnerable time.
Alternatively, Yahoo could make a bold move itself by trying to buy the online video site Hulu.com, which is already talking to suitors, or trying to sell its 43 percent stake in the Alibaba Group, one of China’s most prized Internet companies. Bartz’s tense relationship with Alibaba CEO Jack Ma had fed investor dissatisfaction about her leadership.
Youssef Squali at Jefferies & Co. said that the Internet company’s challenges, and the fact that Bartz was Yahoo’s third CEO in four years, will make it tough for the board to find an “A player” for the job.
Squali said Yahoo could be sold to a large media company like News Corp. or be bought by some sort of consortium that could feature Microsoft Corp. or AOL Inc.
“In all, we believe that it is more likely that the board reaches an agreement to sell the company or parts of the company before a new CEO is found,” Squali wrote Wednesday.
In a statement Tuesday, Yahoo said it is undergoing a “comprehensive strategic review” in its latest effort to give investors a reason to buy its stock, but the company didn’t offer details.
Bartz, 63, led an austerity campaign helped boost Yahoo’s earnings, but the company didn’t increase its revenue even as the Internet ad market grew at a rapid clip.
The financial funk, along with recent setbacks in Yahoo’s online search partnership with Microsoft Corp. and the Alibaba investment, proved to be Bartz’s downfall. Her ouster comes with 16 months left on a four-year contract that she signed in January 2009.
That contract entitles her to severance payments that could be two to three times her annual salary and bonus, along with stock incentives she received during her tenure. Bartz received a $2.2 million bonus to supplement her $1 million salary last year.
Yahoo has now replaced three CEOs in a little over four years. During that time, Yahoo has lost ground in the Internet ad race to online search leader Google Inc. and Facebook even though its website remains among the world’s most popular.
Known for her no-nonsense leadership and sometimes gruff language, Bartz arrived at Yahoo as a respected Silicon Valley executive who had won praise for turning around business software maker Autodesk Inc. But she had no previous experience in Internet advertising, the main way Yahoo makes money.
That hole in her resume immediately raised questions whether she was qualified for the job, and those doubts only escalated as Yahoo’s revenue continued to sag.
At first, Bartz blamed bad timing; she started the job during some of the bleakest months of the Great Recession. Later, she would say that she inherited such as mess from her two predecessors, Yahoo co-founder Jerry Yang and former movie studio boss Terry Semel, and that it would take time to get Yahoo back on the right track.
At one point, she even compared her challenge to those that faced Steve Jobs when he returned to Apple Inc. as CEO in 1997.
Unlike Jobs, Bartz never was able to articulate a strategy to win over investors.
“She focused on plugging holes in the ship instead of turning it around,” said Gartner Inc. analyst Ray Valdes.
The disappointing performance was reflected in Yahoo’s stock price, which closed Tuesday at $12.91. That’s 81 cents, or 7 percent, higher than where Yahoo shares stood when Bartz was hired as CEO. During the same period, Google’s stock price has risen by more than $200, or 66 percent, and the technology-driven Nasdaq composite index has climbed by 60 percent. A group of investors led by Goldman Sachs Group concluded privately held Facebook is worth $50 billion in an appraisal done earlier this year. That’s triple Yahoo’s current market value.
Bartz never hit any of the price targets that the board set for her when she was hired. That means none of the 5 million stock options that she received upon signing her contract had vested by the time she was ushered out the door.
Investors seemed happy to see Bartz go. On Wednesday, the Sunnyvale-based company’s stock rose 61 cents, or 4.7 percent, to $13.52.
Although Bartz’s exit as CEO came suddenly, her departure isn’t a shock. The pressure to replace her grew earlier this year after Bartz acknowledged Yahoo’s search partnership with Microsoft wasn’t producing as much revenue as the companies anticipated.
Then, in May, Yahoo stunned investors by disclosing that Alibaba had spun off an online payment service in a move that threatened to diminish the value of Yahoo’s investment in the Chinese company.
Alipay in July agreed to a complex settlement that could eventually be worth more than $1 billion to Yahoo, but there were too many uncertainties in the deal to placate shareholders.
Bostock had steadfastly stood behind Bartz whenever she was attacked by investors or analysts. In a Tuesday statement, Bostock thanked Bartz for “her service to Yahoo during a critical time of transition in the company’s history” without providing an explanation for why the board decided to replace her.
BGC partners analyst Colin Gillis said Yahoo’s board “has got to look in the mirror here.”
“Swapping the CEO without swapping the (board) chair doesn’t solve your problem,” he said. “The person that hired Carol to begin with deserves to share the culpability.”
To help Morse, Yahoo set up an “executive leadership council” that includes some of the executives that Bartz recruited, including the company’s products guru Blake Irving and the head of its North American operations, Ross Levinsohn. While he worked for News Corp., Levinsohn helped put together the Hulu video site and is seen as a possible CEO candidate.
Analysts also have speculated that David Kenny, an Internet veteran who joined Yahoo’s board in April, might be a candidate for Yahoo’s CEO job. Kenny is currently president of Internet networking services provider Akamai Technologies Inc.
With its stock sagging and its management in limbo, Yahoo could be more vulnerable to a takeover attempt by a private equity group or another opportunistic bidder attracted to what remains one of the Internet’s best-known brands. Microsoft offered to buy Yahoo for $47.5 billion, or $33 per share, in 2008 only to be rebuffed.
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