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On the Brink: Fannie Shakes Up Top Brass

The government-sponsored mortgage giant replaced its executives in charge of finance, business and risk, but CEO Daniel Mudd remains.

Fannie Mae


outlined a sweeping plan to replace three top managers on Wednesday, in an effort to stem losses from a tough credit market and better manage its precious capital.

CEO Daniel Mudd, who will remain in his position, said three top executives -- of finance, business and risk -- will leave the government-supported mortgage giant to be replaced with internal choices.

The announcement comes after weeks of volatile trading due to concerns that the Treasury Department would be forced to rescue Fannie and its counterpart

Freddie Mac


, a move that would likely wipe out shareholders. In August alone, Fannie shares have ranged from a low of $3.53 last week from a high of $13.60 earlier this month, with the price surging and plunging amid speculative reports about the future of the firms.

CFO Stephen Swad is leaving Fannie after a little more than a year on the job, to be replaced by Controller David Hisey. Chief Business Officer Robert Levin is also retiring after more than 27 years, to be replaced by Peter Niculescu, who had overseen Fannie's capital-markets business. Levin will leave the firm in early 2009. During the transition period, both Swad and Levin will remain with the company as senior advisors with their current compensation.

Chief Risk Officer Enrico Dallavecchia will be replaced by Michael Shaw. The move will place Shaw in charge of all credit, market, counterparty and operational risk, an expansion of his previous role as senior vice president of credit-risk oversight.

David Benson has also been promoted to executive vice president of capital markets and treasury, from his role as senior vice president and treasurer.

Fannie said that compensation terms and severance packages for Hisey and Niculescu had not yet been determined and did not identify any such terms for Shaw or Benson.

Mudd said the reorganization is part of a broader capital and credit plan that Fannie

outlined earlier this month

, as it reported a substantial second-quarter loss.

"As we move through the bottom of this cycle, maintaining capital, managing credit and driving revenues are the priorities," Mudd said in a statement, "and we have to organize and staff accordingly."

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Niculescu, 48, a former managing director at

Goldman Sachs

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has a history in fixed-income. He will work with Hisey to ensure that Fannie "remains in a solid capital position," the company said.

Hisey, 48, has 25 years experience in the capital markets, mortgages and other types of lending, and was once a managing director of


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Mudd noted that Hisey, who joined the firm in 2005, has "signed off on 26 quarters of our financial results." Those presumably include restatements related to the accounting scandals at Fannie, and its counterpart

Freddie Mac


, which came to light in 2003.

Shaw joined the firm in 2006 from

JPMorgan Chase

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and has also held risk management roles at

General Electric

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On Tuesday, Fannie also said that affordable-housing expert and former investment banker Bart Harvey, 59, would fill the remaining spot on its board. He will be compensated with $100,000 per year as a retainer and received 4,014 shares of restricted stock.

The company said that Swad will be pursuing a private equity career, while Dallavecchia will be seeking out another job in finance and risk management. Mudd commended all three departing executives' contributions to the company in a statement and noted that their replacements have been selected internally from the "teams they built." Swad, Levin and Dallavecchia have also offered to advise the firm as it goes through its restructuring process, Mudd said.


reported that Fannie shares were halted as the announcement was made, allowing the market to fully digest the news before making bets.

Fannie and Freddie -- the country's two largest mortgage buyers -- have weaved in and out of the rumor mills since a


article two weekends ago indicated that a

government bailout was imminent

. Since then, investors have

become more confident

in the fate of the firms, as analysts called the hype overblown and the companies reported solid demand for bill auctions.