FEBRUARY 24, 2012
As if it weren’t atrocious enough that U.S. taxpayers are on the hook for the monumental bailout of Fannie Mae and Freddie Mac, they’re also getting squeezed for tens of millions more to cover the legal costs of the corrupt executives who drove the government-run mortgage giants to the ground.
So far the legal tab has run north of $200 million and it will only keep growing, according to the government agency (Federal Housing Finance Agency—FHFA) that oversees Fannie and Freddie. In a report released this week, the FHFA’s inspector general reveals that the unscrupulous officers responsible for Fannie and Freddie’s collapse have mounting legal bills and taxpayers will continue picking up the exorbitant tab.
They are charged with a variety of crimes, including securities and accounting fraud, and the cases are expected to drag on right along with their already-bloated defense funds. In fact, the inspector general suggests the government only work to “limit” (not stop) legal expenses “to the extent possible and reasonable.” Another brilliant suggestion from the FHFA’s watchdog, which supposedly is looking out for taxpayers, is to “control costs of legal expenses.”
It’s like there’s no end to the Freddie and Fannie madness. Political corruption of epic proportions is at the heart of the scandal. The lenders collapsed because those who operated them played fast and loose with accounting, risk assessment and executive compensation issues while Congress looked the other way and protected them from much-needed regulation. For years Freddie and Fannie backed risky mortgages and implemented a policy of lending to high-risk individuals with poor credit.
Lawmakers, including then-Senator Barack Obama, protected Fannie and Freddie from proper oversight because they got political contributions from the mortgage giants. In fact, Judicial Watch uncovered records that show for more than six years members of Congress were aware of the massive problems at Fannie and Freddie yet they did nothing. As a result taxpayers are on the hook for at least $400 billion and $5 trillion in mortgage liabilities.
Not surprisingly, the Obama Administration has worked diligently to keep secret all records related to Freddie and Fannie’s political contributions. In 2009 JW sued to obtain them and the FHFA admitted it might possess the documents but said it’s not obligated to release them to the public. Because Freddie and Fannie are wholly operated by the federal government, JW maintains that the records are subject to the Freedom of Information Act (FOIA). The case is still active in the U.S. Court of Appeals for the District of Columbia Circuit.
Overall, members of Congress have received nearly $5 million in political contributions from Fannie Mae and Freddie Mac in the last decade, according to a reputable nonprofit that tracks money in U.S. politics. Among the top recipients of Fannie and Freddie’s political largess: Former Connecticut Senator Chris Dodd, then-Illinois Senator Obama, Massachusetts Senator John Kerry, former Utah Senator Bob Bennett and Alabama Congressman Spencer Bachus.
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