(Bloomberg)—The inspector general of the Federal Housing Finance Agency said the regulator should consider firing Fannie Mae Chief Executive Officer Timothy J. Mayopoulos for not properly disclosing he was dating a senior executive at a bank that does business with the mortgage-finance giant.
The recommendation was outlined in a letter that Representative Jason Chaffetz, the chairman of the House Oversight Committee, sent Wednesday to FHFA Director Mel Watt, who leads Fannie’s regulator. Chaffetz questioned whether Watt planned to discipline Mayopoulos, as was advised by the FHFA’s watchdog, the letter shows.
The inspector general made the recommendation after investigating a romantic relationship between Mayopoulos and the former chief legal officer of Fifth Third Bancorp, according to Chaffetz’s letter. The bank’s top lawyer, who Chaffetz didn’t name, disclosed the relationship to her bosses in July 2016 and was fired shortly thereafter.
Last year, Fifth Third removed Heather Russell as its chief legal officer, with a spokesman saying at the time that the Cincinnati-based bank did so after learning of a personal matter that posed a conflict of interest.
Fannie buys loans from lenders, packages them into securities and guarantees payment in case of default. While Fannie buys Fifth Third mortgages, the purchases represent a relatively small portion of its business.
Inadequate Disclosure
The Chaffetz letter, which the congressman’s office provided to Bloomberg News, lays out a timeline for Mayopoulos’ alleged inadequate disclosure.
The inspector general determined that he should have revealed the relationship in August 2015, when the woman accepted her position at Fifth Third. In November of that year, the Fannie CEO “affirmatively” concealed the relationship by not including it in his response to an annual company questionnaire on conflicts of interest, wrote Chaffetz, a Utah Republican.
Mayopoulos then told Fannie’s chief compliance and ethics officer about the relationship in March 2016. He was advised to seek guidance from the ethics office if a business decision involving Fifth Third was presented to him.
In July 2016, Mayopoulos sponsored a $70,000 pay increase for Fannie’s chief compliance officer, shortly before following through on the officer’s advice to inform Watt about the relationship, the Chaffetz letter said.
‘Absolutely Irresponsible’
“We think it’s absolutely irresponsible that this letter was leaked to the press,” FHFA spokeswoman Megan Moore said.
She declined to comment on whether Mayopoulos could be disciplined in response to the inspector general’s findings. Watt controls Fannie’s board of directors and could specify any punishment the CEO should face.
Fannie spokesman Pete Bakel declined to comment.
Chaffetz asked Watt a number of questions about whether the agency has taken actions in regard to Mayopoulos. The congressman requested a response by May 24.
On Thursday, Watt is scheduled to testify before the Senate Banking Committee on housing finance reform.
To contact the reporters on this story: Joe Light in Washington at [email protected] ;Ben Brody in Washington at [email protected] To contact the editors responsible for this story: Jesse Westbrook at [email protected] Gregory Mott
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