Daniel Mudd

As the financial markets unraveled in the fall of 2008, politicians and media pundits scrambled to find someone to blame for the panic engulfing global economies, and 1986 Harvard Kennedy School graduate Daniel H. Mudd found himself among the many thrust into the spotlight.

Mudd served as the CEO of Fannie Mae—an originally government-sponsored enterprise which expanded the secondary mortgage market by creating mortgage-backed securities—from 2005 to 2008.

“I was the CEO of the company and I accept responsibility for everything that happened on my watch,” Mudd said before a congressional investigative panel in April 2010.

But Mudd’s path from Harvard’s doors to the top of the corporate ladder was in many ways an unexpected one—and he maintains that despite the calamities that marked his tenure at Fannie Mae, he always sought to be a responsible steward of the organization.

FROM SERVICE TO SCHOOL

Mudd’s life in the early years following his graduation from the University of Virginia were marked by his interest in public service.

Mudd joined the military after college, and became a decorated officer in the U.S. Marine Corps.

“He found himself leading a platoon into a bunker in Beirut, and I’m sure he would not have wanted his path to have been something other than serving his country,” says Gordon Runté, who worked with Mudd at Fannie Mae and now works at Fortress Investment Group, LLC, where Mudd is the current CEO.

After his time in the Marine Corps, Mudd decided to return to school to pursue his interest in public administration.

Mudd says he chose Harvard in part because he wanted to take advantage of the opportunities not only at the Kennedy School, but at the other Harvard graduate schools as well.

“Boston and Cambridge are terrific places to go to school. I had a number of good friends in the graduate and law schools—all those things made it the perfect time and place for me to learn and study there,” Mudd says.

Speaking of his two years at the Kennedy School, Mudd cites, among others, a leadership course taught by Marty Linsky and Ron Heifetz as one of his most memorable classes.

According to those who have worked with him, Mudd’s management style reflects the commitment to leadership he nurtured at HKS.

“When people read the myth of Dan the Marine, it’s really true—the integrity, the intellect, the toughness. He has all the basics in spades,” says Runté. “He exemplifies leadership in full—a real life composite of the types of people he probably studied at the Kennedy School, but whom you rarely encounter in real life.”

LANDING AT FANNIE MAE

With a Masters in Public Administration in hand and experience working in the Pentagon, Mudd’s long-term goal after graduate school, as he recalls, was to pursue a career in government.

Working in business was to be a stepping-stone to public policy, Mudd says.

“It became clear to me that an important aspect of policy was understanding how the business side of the economy works—where you made payroll and business decisions,” Mudd says. “I thought I would go and do that for a few years and probably return to government.”

But after taking a job at General Electric Capital, Mudd’s experience in the world of finance took him through “increasing positions of responsibility” until he finally arrived at Fannie Mae in February 2000, having previously served as President of GE Capital Asia-Pacific from 1996 to 1999.

For Mudd, the job at Fannie Mae was a partial realization of his early desire to work in government.

Furthermore, Mudd says he found his education at the Kennedy School to be particularly useful during his employment in this form of “quasi-government service.”

“My background in political management of multiple departments, the federal rule-making process, and the way the government works in general turned out helpful,” says Mudd about his tenure at the company.

THE HOUSING CRISIS

Mudd’s path at Fannie Mae took an unexpected turn in 2004 when the chairman of Fannie Mae, Franklin D. Raines ’71, as well as the chief financial officer, J. Timothy Howard, stepped down following an investigation of Fannie by the Securities and Exchange Commission.

Mudd was subsequently named interim CEO of Fannie, and later assumed the position of President and CEO in June 2005.

Speaking retrospectively about Fannie’s move towards riskier mortgage lending under his leadership, Mudd says he feels that he did the best he could with the situation that was thrust upon him after his predecessors’ sudden departure.

“I had to take a company that was in crisis when I took over and get it out of that crisis,” Mudd says.

But not long afterward, the full destructive potential of mass defaults on subprime mortgages gradually dawned on the financial world.

And when the federal government stepped in to become Fannie’s conservator in 2008, the company—much like many of the nation’s investment banks—found itself at the center of national attention.

Mudd was forced to step down in the process.

While some argue that Fannie Mae played a significant role in developing an unstable housing market, F.M. Scherer, HKS professor emeritus of public policy and corporate management, says he believes that Fannie Mae is not one of the institutions primarily responsible for the financial crisis.

“My impression is that Fannie Mae was a laggard, not a leader, in moving to the crisis,” Scherer says. “The key factor is that they joined the collateral debt obligations parade relatively late, and in joining, they contributed to it, but they were not the leaders.”

Despite many public critiques of his leadership at Fannie Mae, Mudd staunchly defends his actions.

“I feel that I did the best I could, that it wasn’t perfect, and I always dealt with that in a straightforward and honorable way.”

—Staff writer Kevin J. Wu can be reached at kwu@college.harvard.edu. —Staff writer Kevin Sun can be reached at ksun@college.harvard.edu.