The taxpayers are being bilked by the government who has refused to regulate these two GSEs. Not only are the taxpayers covering their losses, they’re also covering the legal fees for these crooks.
If only the President, who raised Freddie and Fannie’s debt ceiling, would have appointed an Inspector General, the taxpayer would have been saved billions.
The Washington Post reports:
The Securities and Exchange Commission is moving toward charging former and current Fannie Mae and Freddie Mac executives with violations related to the financial crisis, setting up a clash with the housing regulator that oversees the companies, according to sources familiar with the matter.
The SEC, responsible for enforcing securities laws, is alleging that at least four senior executives failed to provide necessary information to investors about the companies’ mortgage holdings as the U.S. housing market collapsed.
But the agency that most closely regulates Fannie and Freddie, the Federal Housing Finance Agency, disagrees with that assessment, according to sources familiar with the matter.
FHFA officials think Fannie and Freddie’s financial disclosures, which agency staff members had reviewed before the documents were released to the public, were sufficient, the sources said. One source added that FHFA has sent a letter to the SEC opposing the filing of charges.
An FHFA spokesman declined to comment.
Over the past eight weeks, the SEC sent notices to the executives saying they may face civil charges. The SEC has not yet formally filed such charges and ultimately may choose not to.
The agency alleged that executives at both companies misled investors about their exposure to dangerous mortgage products, such as subprime loans, sources familiar with the matter said.
The executives include former Fannie chief executive Daniel Mudd, former Freddie chief executive Richard Syron, former Freddie chief financial officer Anthony “Buddy” Piszel and current Freddie executive Donald Bisenius, who recently announced that he would leave the company after he received his notice.
The allegations are slightly different for both the companies. One of the chief allegations against Fannie executives is that it characterized mortgage loans as “prime” — meaning high-quality — when they should have been classified in a more risky category of loans.
Meanwhile, Freddie executives are accused of not fully warning investors about the risks associated with subprime loans.
Fannie and Freddie, on the verge of collapse as the financial markets imploded in the fall of 2008, were seized by the federal government. The companies, now owned by taxpayers, have needed $150 billion in aid to stay afloat.
Democrats raised the debt ceiling to $400 billion, sticking more debt to the taxpayers.
The SEC case may also add to a brouhaha on Capitol Hill over federal expenditures by Fannie and Freddie for former executives. The companies are spending tens of millions of dollars to cover the legal costs of a different set of former executives who face private class-action lawsuits. FHFA officials say the former executives are legally entitled to that coverage.
The SEC case will add to those taxpayer bills because the executives facing allegations are also indemnified.
In other words, the taxpayers are getting fleeced twice.
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