Leland C. Brendsel is accused of presiding over accounting manipulations and running Freddie Mac in a reckless manner. Buffett, one of the most successful and revered investors, sold a huge stake in the mortgage funding company before the manipulations came to light, and the government wanted him to explain why.
You see, Buffett sniffed out Freddie Mac’s problems as its CEO predicted an earnings growth pattern that was foolish and unattainable.
Buffet said he became troubled when Freddie Mac made an investment unrelated to its mission. He wasn’t clear on the specifics but said he “didn’t think that made any sense at all” and “was concerned about what they might be doing . . . that I didn’t know about.”
Achieving “mid-teens” earnings growth “seemed to become more and more a mantra of the organization,” giving him greater cause for concern, Buffett said.
So now the government is using Buffett to testify in its case against Brendsel.
Downey suggested that Freddie Mac properly tempered its projections, pointing to warnings in an annual report that its earnings could be affected by various adverse developments. Buffett said the cautionary words were merely legal boilerplate.
“I would not be particularly impressed by them,” he said.
Buffett, seeing a cockroach in the kitchen, started liquidating his shares, sensing that cockroaches don’t tend to hang out alone.