SEC sues ex-Fannie, Freddie execs for fraud
WASHINGTON - The Securities and Exchange Commission has brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled the government and taxpayers about risky subprime mortgages the mortgage giants held during the housing bust.
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
Mudd, 53, and Syron, 68, led the mortgage giants when the housing bubble burst in late 2006 and 2007. The four other top executives also worked for the companies during that time.
The case was filed in federal court in New York City.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason — not politics — is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully."
Freddie told investors in 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books. The SEC says its holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.
In a May 2007 speech in New York, he said Freddie had "basically no subprime exposure," according to the suit.
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk."
Fannie and Freddie own or guarantee about half of U.S. mortgages, or nearly 31 million loans. The Bush administration seized control of the mortgage giants in September 2008.
So far, the companies have cost taxpayers almost $150 billion — the largest bailout of the financial crisis. They could cost up to $259 billion, according to its government regulator, the Federal Housing Finance Administration.
The other executives charged were Fannie's Enrico Dallavecchia, 50, a former chief risk officer, and Thomas Lund, 53, a former executive vice president; and Freddie's Patricia Cook, 58, a former executive vice president and chief business officer, and Donald Bisenius, 53, a former senior vice president.
Lund's lawyer, Thomas Levy, said in a statement that Lund "did not mislead anyone." Lawyers for the other defendants declined to comment Friday morning.
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http://www.holidayinsights.com/moreholidays/December/sucklingpigday.htm
Keep all of the three piece suits on Wall Street and your representatives and senators in Washington in your thoughts and curses tomorrow.
This is another one of those "giant sucking sounds" that Ross Perot talked about.
Perhaps the reason we do not see charges against the crimminals who work at the investment banks is the fact that our government is controlled 100% by corporations. If you are a member of the middle class your value is considered by our elected officials and at least 5 members of the Supreme Court to be less than dirt.
All we see these days is tax breaks for the same scoundrels that wrecked our economy and tax increases for the middle class. The hatred for the middle class is clearly evident in comments made on sites like this. You can look high and low but you can't find any comment from the pro-corporation lobby supportive of the U.S. worker.
Wake up people. There is a war being waged against the middle class and it is world-wide. The upper class has never had it so good and they still want more and they want it from the middle class.
For all you Lefties that hated Bush and constantly kept referring to him and Enron... note the differences. Bush had nothing to do with Enron, he just cleaned it up, arrested Ken Lay, and made him do the perp walk. Enron was only worth 1.2billion.
Currently, the DNC is surrounded by hundreds of Enrons, totalling hundreds of billions of dollars. Obama's got former embezzlers on the payroll, and almost had Corzine tapped for TreasurySec. There's even video of Obama saying "we couldn't do it, unless we have Corzine on board."
All this, yet barely a peep from the media. Bias barely begins to cover it anymore.
On December 18, 2006, U.S. regulators filed 101 civil charges against chief executive Franklin Raines; chief financial officer J. Timothy Howard; and the former controller Leanne G. Spencer. The three are accused of manipulating Fannie Mae earnings to maximize their bonuses. The lawsuit sought to recoup more than $115 million in bonus payments, collectively accrued by the trio from 1998-2004, and about $100 million in penalties for their involvement in the accounting scandal.