The Federal Housing Finance Agency, which was set up to essentially wind down the big housing GSEs, has found itself in a rather odd position.
It wants to limit the legal liability that others would like to inflict on Fannie Mae and Freddie Mac. So far, that has meant that the big two GSEs have had to cover the legal costs of defending executives who led the firm as far back as 2000, including former chief executive Franklin D. Raines, former chief financial officer J. Timothy Howard and former controller Leanne Spencer, according to the Washington Post.
So far, authorities have authorized $100 million in legal bills, including nearly $40 billion since Fannie Mae essentially went into receivership after being bailed out by the government. While some may recoil at the idea of taxpayers paying these legal bills, it has little choice when it comes to private suits. But what about suits by the government?
Recall that the SEC recently charged six top executives of Fannie Mae and Freddie Mac with various violations of the securities acts of the 1930s. The executives are basically accused of misrepresenting the GSEs exposure to various classes of risky loans by artfully leaving out certain securities. Will the agencies pay the legal costs of these executives in this case?
To some, it would seem ubsurd to use taxpayer funds to pay for the legal defense of executives against charges by an agency supported by taxpayer funds. It's unclear whether the GSEs are contractually bound to pay the ex-executives' legal bills.
For more:
- here's a Washington Post article
Related articles:
SEC charges top Fannie Mae, Freddie Mac execs
A muddled, unsatisfying end to the GSE saga?
