Six executives charged
The Securities and Exchange Commission charged six former Fannie Mae and Freddie Mac executives today with civil fraud for misrepresenting their holdings of high-risk mortgage loans. The agency plans to financially penalize all six but has not yet announced how much they will seek. The SEC’s lawsuit alleges that all six executives knowingly approved of misleading statements, falsely claimed that their risky investments were minimal and manageable, and they allegedly downplayed the size of their holdings of subprime loans.
The SEC has named former Freddie Mac Chief Executive Officer, Daniel Mudd, former Chief Risk Officer, Enrico Dallavecchia as well as Thomas Lund, Executive VP of single-family mortgage business.
Also targeted are former Fannie Mae CEO Richard Syron, Executive VP and Chief Business Officer, Patricia Cook as well as Donald Bisenius, the Executive VP of single family guarantee business.
“The executives who engaged in this conducts must be held liable,” said an SEC attorney to CNN. “Fannie and Freddie were not innocent victims, but were major players in a game they helped design and develop. The bailout of Fannie Mae and Freddie Mac has cost American taxpayers in excess of $168 billion with potentially another $51 billion to come.”
Fannie Mae and Freddie Mac have taken heat for their role in the housing market crash which many believe was the top cause of the tumbling economy. Fannie Mae posted losses of $5.1 billion last quarter and requested $7.8 billion more in taxpayer support from the Treasury Department whileFreddie Mac posted losses of $4.4 billion last quarter and requested $6 billion more.
The agency made these requests despite continuing to award top executives with large “performance” bonuses and despite leaking exorbitant amounts of money on wasteful spending like the $640,000 they recently spent to send ten employees to a conference. Meanwhile, current executives at Freddie Mac are leaving from the CEO who has not named a replacement, to several board members, several of whom are retiring.
There is no word as to the SEC’s plan to file charges against any other executives for knowingly misrepresenting their holdings.