Fannie Mae's Former Chief Fights to Clear His Name

After Daniel Mudd was forced out as chief executive officer of Fannie Mae when the government seized the company in September 2008, he headed for the river. In the weeks following his dismissal, the 6-foot-4 former Marine, a onetime U.S. Olympic rowing prospect, buzzed his receding gray hair into military style and took a boat out on the Potomac—gathering strength to rebuild his career, according to his friends.

Ten months later, Mudd left Washington, taking the helm of a New York-based hedge fund, Fortress Investment Group, and putting his mansion up for sale. Yet Mudd didn’t really leave Fannie Mae behind. In December 2011 the Securities and Exchange Commission sued him for allegedly misleading Fannie Mae investors about the company’s stake in subprime loans. Fortress directors offered to let Mudd stay on if he settled the matter quickly, according to two people with direct knowledge of the board’s thinking. Instead, he left Fortress to fight the charges full-time. His stint at Fannie Mae “cost me two jobs,” says Mudd, 53. “I’ve told my legal team, ‘If you use the word “settle,” I will fire you.’ ”