Freddie Mac: Behind The Bloodbath

By Daniel Kadlec and Adam Zagorin

What does it mean when a company under criminal investigation sweeps out three top executives but only one is fired? That happened last week at Freddie Mac, the giant government-chartered mortgage company whose board grew impatient with management's internal probe of accounting irregularities that surfaced in January. Freddie Mac's president, David Glenn, was terminated, but the former chief financial officer, Vaughn Clarke, merely resigned and the former CEO, Leland Brendsel, retired at 61. The varying nature of their departures has grabbed the attention of Republican Congressman Richard Baker, who chairs a House financial-services subcommittee. Sources tell TIME that Baker has demanded documents in searching for clues that the two execs not fired were given an easy out. (Brendsel stands to collect $24.3 million severance; Clarke's package was not disclosed.) Glenn is the only executive specifically implicated so far. Freddie Mac says he refused to cooperate with the internal probe and at one point ripped pages out of a diary. The Justice Department and the Securities and Exchange Commission are also investigating the company's finances. The stakes couldn't be higher. Freddie Mac holds or insures mortgages totaling $1.3 trillion. Any lasting scandal could drive up its borrowing costs and lead to higher mortgage rates--slowing a housing market that for three years has been the economy's main driver. --By Daniel Kadlec and Adam Zagorin