Freddie Suicide: Tragic Trend

AP Photo The death of CFO David Kellermann underscores again the tragic personal cost of the financial meltdown. Charlie Gasparino on what we can learn.

The mortgage crisis appears to have claimed yet another victim: David Kellermann, the acting CFO of the trouble mortgage giant Freddie Mac, was found dead this morning in his suburban Washington, D.C. home, the victim of an apparent suicide, according to police.

Not much is known about Kellermann; he wasn’t a household name on Wall Street, and he barely made the press. But based on previous reports, here are some interesting pieces of information.

In March, Kellermann was one of a handful of senior Freddie Mac people to have received a bonus, in his case $850,000, which prompted criticism and outrage.

Kellermann served in a number of finance-related positions at Freddie Mac, which, along with its sister agency, Fannie Mae, is widely regarded as one of the catalysts of the mortgage bubble that is at the heart of the nation’s financial crisis. Fannie and Freddie were created by Congress to promote homeownership. In recent years, however, the agencies spurred the mortgage bubble by guaranteeing billions of dollars in risky mortgage debt issued to “subprime” borrowers.

He became interim CFO of Freddie after the agency was bailed out and taken over by the federal government because of losses directly tied to its exposure to risky mortgages.

In March, Kellermann was one of a handful of senior Freddie Mac people to have received a bonus, in his case $850,000, which prompted criticism and outrage.

As The Daily Beast previously reported (and reproduced below), the mortgage crisis has come at tremendous personal costs: loss of wealth, jobs disappearing, and suicides. Back in December we reported about three such cases: Rene-Thierry Magon de la Villehuchet, a money manager who lost more than $1 billion of clients' money in the Madoff rip-off; Barry Fox, an analyst at Bear Stearns who threw himself off his balcony after losing his job when the firm imploded; and Eric Von der Porten, a money manager who suffocated himself to death after his fund lost money.

In the piece, we made several observations, chief among them: Losing money is never the only reason why someone takes his or her own life; Von der Porten, and Fox, for instance, periodically suffered from depression. But also that given the importance we as a society place on the accumulation of wealth, what happened to them would happen again and again as the markets continue and the inevitable publicity against those in the financial business grows.

We were right, but it was one prediction we wished we got wrong.

The following is Charlie Gasparino’s original post from December 31, 2008:

Suicides on Wall Street

We may never know how much money was lost (or stolen) this year, but the human toll is starting to add up.

The latest tragedy to come out of the Madoff scandal involves a man named Rene-Thierry Magon de la Villehuchet, a money manager who lost more than $1 billion of clients' money, including much, if not all, of his own family’s fortune. Just days after learning of the massive losses, he sat in his office in Midtown Manhattan and methodically slit both of his wrists with a box cutter, and bled to death.

De la Villehuchet's suicide adds yet another gruesome chapter to the Bernie Madoff Ponzi scheme. For the past two weeks, I’ve reported about the red flags that were missed by inept regulators who could have uncovered the massive fraud sooner, and saved money for countless victims, as well as evidence that Madoff couldn’t have stolen $50 billion all by himself. Then there is the human side of the story—the charities that lost millions; the wealthy and not so wealthy people who lost everything after they handed Madoff their life savings, because like any good scam artist he spent years earning their trust with lies that he could be trusted. And now a suicide from someone who lost everything.

Since the beginning of the year, the Dow Jones Industrial Average has fallen to roughly the same level it was 10 years ago. In other words, Americans are no richer now than they were in 1998.

There will be countless stories, profiles, and books written about the Madoff scandal. It will be billed as the financial crime of the century, which, based on everything I know, is probably true. But it’s also part of a bigger story that broke almost the moment 2008 began, when the financial world as we knew it started to fall apart, and the human devastation that followed. In a span of 12 months, two major securities firms employing tens of thousands of people—Bear Stearns and Lehman Brothers—were wiped off the map. Big banks like Citigroup, Morgan Stanley, and Goldman Sachs have survived, but just barely, and not without government handouts. Job losses are everywhere on Wall Street, and most people I speak to predict things will get worse.