Frank V. Cahouet, the peripatetic California banker who helped turn Crocker National Bank around before it was sold to Wells Fargo last year, will become the new chief executive of Pittsburgh's Mellon Bank, the bank announced Monday.
Mellon also said Monday that it was setting aside $415 million for additional losses on Latin American loans and, as a result, expects to lose $500 million in the second quarter and a substantial amount for the year. Mellon is following many major U.S. banking companies in making huge reserves to cover anticipated Third World loan losses.
Mellon's previous chairman, J. David Barnes, resigned in April after the bank posted a $59.8-million first-quarter loss, the first quarterly deficit in its 118-year history. The bank's losses stemmed chiefly from bad loans to U.S. energy producers and Latin nations.
Mellon is the nation's 12th-largest banking company, with $34 billion in assets.
Cahouet, 55, currently is president and chief operating officer of the Federal National Mortgage Assn., or Fannie Mae, the congressionally chartered, shareholder-owned mortgage bank. He has held the Fannie Mae position for only nine months.
Cahouet said in an interview that the decision to leave Fannie Mae and assume the challenge of stemming Mellon's losses was easy. "It's a very broad-based financial services company. It's in an industry that I've been identified with since 1957. It's one of the leading financial institutions in the world. It's in my blood, I guess."
David O. Maxwell, Fannie Mae chief executive, said the agency would immediately begin a search for Cahouet's replacement.
Cahouet was hired by Crocker in 1984, when the bank was suffering large losses as a result of bad loans in real estate and energy. Because of his success in turning Crocker's 1984 loss of $324 million into a $38-million profit in 1985, he has a reputation as a turnaround specialist.
Before he joined Crocker, Cahouet was vice chairman and chief financial officer at Los Angeles' Security Pacific. In his career there, he helped diversify the bank into venture capital, mortgage banking, pension fund management, consumer and commercial finance, leasing and investment banking.
Separately, it was also announced Monday that Cahouet's predecessor as Fannie Mae president, Mark J. Riedy, would become the president and chief operating officer of the J. E. Robert Cos.. The firm, based in Irving, Tex., helps banks, investors and regulators dispose of troubled real estate.
Riedy was president of Fannie Mae from January, 1985, until July, 1986. Before that, he was executive vice president of the Mortgage Bankers Assn.