Parseghian Gone at Freddie Mac

Updated from 7:51 p.m. EDT

Under pressure from regulators, Freddie Mac's(FRE) board asked Gregory Parseghian to step down as chief executive on Friday, just two months after he took the post at the mortgage finance firm.

The decision followed a special meeting Friday of Freddie's board about how to respond to a demand by regulators that Parseghian be cut loose. The board also decided to replace its longtime general counsel, Maud Mater, who has been out on an extended vacation. Parseghian will stay on as acting chief executive until a new top executive can be found.

Freddie's board was pressed into action because regulators were dissatisfied with its efforts to clean house after a major accounting blowup. Specifically, regulators were upset that Freddie promoted Parseghian even though he took part in many of the accounting games at the government-sponsored company.

"We want to thank Greg Parseghian for his outstanding contributions to this Company, first as Chief Investment Officer and most recently as our CEO," said Board Chairman Shaun O'Malley, in a statement. "But after discussions with our regulator and Greg, we believe it is now in the interest of the company to accede to OFHEO's directive."

Armando Falcon, the director of the Office of Federal Housing Enterprise Oversight, which regulates Freddie Mac, issued a statement Friday in which he said Parseghian and Mauter should be replaced.

While regulators at the OFHEO lack the power to force Freddie to fire anyone, sources said the agency can issue a finding that keeping certain employees on its staff is "unsafe and unsound." Such a finding would no doubt rattle investor confidence in Freddie, especially if the government-sponsored finance firm refused to act on the regulators' recommendations.

In June, Freddie's board tried to limit the damage done by the mortgage outfit's accounting scandal by moving quickly to oust three top executives, including former President David Glenn and Chief Executive Leland Brendsel.

Deck Chairs

Before the board's late Friday decision, analysts already were predicting that Parseghian was a goner.

"I think it would be very difficult for him [Parseghian] to stay in this position after these articles have come out," said Paul Miller, an analyst with Friedman Billings Ramsey. "It's ultimately a big positive for this company because for me you are cleaning the decks out. I feel that all the bad news will then be in the company." (Miller, who currently rates Freddie as an outperform, doesn't own shares of the company and his firm has no investment banking relationship with the company).

Yet even before OFHEO began pressing for changes, some shuffling of the deck is already taking place.

A Freddie spokesman confirmed that the company's former corporate controller, Greg Reynolds, left within the past few weeks. The spokesman declined to comment on whether Reynolds, whose most recent job was senior vice president for business development, had been fired or left voluntarily.

Additionally, Freddie had named an acting general counsel to take the place of Mater, the company's general counsel and executive vice president, who is on an extended vacation.