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.
The Obama Federal Housing Finance Agency has “full legal custody and control over all of the records of Fannie Mae and Freddie Mac”; Fannie and Freddie Records Subject to FOIA
Press Office 202-646-5172, ext 305
“…the boards of both Fannie Mae and Freddie Mac accepted conservatorship by the FHFA with the full knowledge that the FHFA would obtain all rights, titles, powers, and privileges of the enterprises, including legal title to their books and records. Since that time, the FHFA, a federal agency subject to FOIA, has had full legal custody and control over all of the records of Fannie Mae and Freddie Mac.“Because the FHFA obtained these records and has exercised full legal control over them since it placed Fannie Mae and Freddie Mac into conservatorship, the requested records became subject to FOIA just like any other agency records.”
Judicial Watch filed its original FOIA request on May 29, 2009. The FHFA acknowledged receipt of Judicial Watch’s FOIA request July 1, 2009. The agency claimed that while Fannie Mae and Freddie Mac might possess the requested documents, the FHFA was not obligated to release them under FOIA because the agency does not “control” them.As noted in an Obama administration court filing: “…Any records created by or held in the custody of the Enterprises [Fannie Mae and Freddie Mac] reflecting their political campaign contributions or policies, stipulations and requirements concerning campaign contributions necessarily are private corporate documents. They are not ‘agency records’ subject to disclosure under FOIA.”However, according to Judicial Watch’s appeal, Congress was clear in its intent and the agency had full control of the records at the time of Judicial Watch’s request: “In every meaningful way, the FHFA is lawfully in control of these records. There is nothing contingent, hypothetical, indefinite, or limiting about this plain statutory language vesting the FHFA with both legal custody and lawful control over the records.”The District Court, while agreeing in large part with Judicial Watch’s legal argument, ruled that the FHFA did not ultimately control the records and therefore denied the American people access to the records.
Overall, members of Congress have received more than $4.8 million in political contributions from Fannie Mae and Freddie Mac over the last ten years. According to OpenSecrets.org, from 1998 through 2008, the top ten recipients of Fannie Mae and Freddie Mac’s political largess, are as follows: Senator Dodd (D-CT), then-Senator Obama (D-IL), Senator Kerry (D-MA), Senator Bennett (R-UT), Rep. Bachus (R-AL), Rep. Blunt (R-MO), Rep. Kanjorski (D-PA), Senator Bond (R-MO), Senator Shelby (R-AL), Senator Reed (D-RI). Senator Dodd, the top recipient of Fannie Mae and Freddie Mac campaign contributions, was Chairman of the Senate Banking Committee responsible for regulating the mortgage industry. Notably, President Obama was a top recipient of campaign monies despite being in the Senate for only three years.“The Obama administration has taken over the mortgage market through Fannie and Freddie. And not one document from these two monstrosities is subject to disclosure under our open records law? We hope the appellate court puts a stop to the Obama administration’s unprecedented secrecy,” said Judicial Watch President Tom Fitton. “Fannie and Freddie used political contributions to protect themselves from being held accountable as the housing market was set up for collapse. Now, as a result, taxpayers are on the hook to Fannie and Freddie for at least $400 billion — and $5 trillion in mortgage liabilities. The American people deserve to know the full truth about the partnership between Fannie and Freddie and their allies on Capitol Hill.”
Obama Administration Refuses to Release Key Documents on Bailout
Contact Information:Press Office 202-646-5172, ext 305
[FHFA] improperly claims that [the documents] may be withheld in their entirety pursuant to the attorney work product doctrine.[FHFA] currently is withholding two responsive records that are not alleged to outline types of legal challenges and potential responses to such challenges. Instead, [FHFA] is withholding in their entirety two records “that were created for meetings with senior executives at FHFA to discuss various policy options that the agency could take with regard to the Enterprises (Fannie Mae and Freddie Mac) and were provided to these senior policymakers in order to assist their decision-making” [Emphasis added].…Because [FHFA] has failed to show that the disclosure of the material would expose [FHFA’s] decision-making process in such a way as to discourage candid discussion and thereby undermine [the agency’s] ability to perform its functions, FHFA improperly claims that the…records may be withheld in their entirety pursuant to the deliberative process privilege.
Judicial Watch suggests the Court should, at minimum, conduct an in camera review of the documents in question so that it can determine whether or not the documents should be released to the public.With its FOIA lawsuit, Judicial Watch continues to seek the following information on behalf of Mr. McKinley:
[A]ny and all communications and records concerning or relating to the assessment of an adverse impact on systemic risk in addressing Fannie Mae and Freddie Mac, and in particular how the FHFA and the Department of the Treasury determined that conservatorship was the preferred option to avoid any systemic risk of placing Fannie Mae and Freddie Mac into receivership.
Mr. McKinley filed his FOIA request on May 23, 2010. FHFA was required to respond to the FOIA request by June 28, 2010, but failed to produce any documents, to demonstrate why documents should be withheld, or to indicate when a response was forthcoming. Judicial Watch, therefore, filed its lawsuit on July 12, 2010, on behalf of Mr. McKinley.American taxpayers have spent at least $145 billion dollars on Fannie and Freddie so far, with analysts estimating the ultimate cost could be hundreds of billions of dollars more. The Obama administration has said that there is no upper limit to the level of taxpayer support of Fannie and Freddie.“Thanks to the Fannie/Freddie bailout, the Obama administration has taken government control of the mortgage market. And taxpayers are exposed to over $5 trillion in potential liabilities through the government mortgage giants. So it is beyond the pale that the Obama administration continues to choose secrecy over transparency regarding these bailouts, even as the associated costs continue to mount at an astonishing rate,” said Judicial Watch President Tom Fitton. “Simply put, the Obama administration’s lack of transparency on the bailouts is a crisis for government accountability and the rule of law.”In separate litigation being pursued by Judicial Watch, the Obama administration maintains that no documents from Fannie and Freddie are subject to public disclosure under the Freedom of Information Act.