Senator Robert Casey Demands Answers from Freddie Mac’s Regulator

Senator Demands Answers from Freddie Mac’s Regulator

Jesse Eisinger, ProPublica, and Chris Arnold, NPR News

Senator Robert Casey (D-PA) sent a list of questions about Freddie Mac’s controversial trades to the mortgage giant’s regulator, highlighting how much remains unknown even after a flurry of statements from the regulator.

ProPublica and NPR reported on Monday that Freddie Mac, the taxpayer-owned mortgage-insurance company, placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.

Questions the Senator put to the regulator, the Federal Housing Finance Agency, include why Freddie made the deals in the first place; when the FHFA learned of the trades; what role, if any, the FHFA played in them; and what the FHFA plans to do about the billions of dollars worth of deals Freddie still has on its books.

Freddie began increasing those deals, called inverse floaters, deals dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.

No evidence has emerged that these decisions were coordinated, and Freddie says that they weren’t.

But the trades highlight a conflict of interest: Freddie’s charter calls for the company to make home loans more accessible, but Freddie also has giant investment portfolios and could lose substantial amounts of money if too many borrowers refinance.

Freddie and its sister company Fannie Mae are regulated by the Federal Housing Finance Agency. But with those companies in government conservatorship, the FHFA is more than a regulator. It also acts essentially as Freddie’s board of directors.

In a letter to Senator Casey dated Tuesday, FHFA acting director Edward DeMarco said that last that Freddie’s trades, known as inverse floaters, had raised “concerns.” He explained that FHFA believed “that the risk associated with these transactions is inconsistent with FHFA’s goals of having Freddie Mac reduce its risk profile and avoid unnecessary complexity that requires specialized risk management practices.”

In a previous statement, Mr. DeMarco said that those concerns forced Freddie to agree not to engage in any new inverse floater deals. Freddie had stopped making the deals a few months earlier, according to the FHFA, but it is unclear why. Freddie retains about $5 billion worth of the floaters on its books.

In his letter today to Mr. DeMarco, Senator Casey wrote:

2026I would appreciate you addressing some additional questions:

· What rationale did Freddie Mac have for its increased purchase of inverse floaters in 2010 and 2011?

· What was FHFA’s involvement in the sale? Please detail for me when FHFA was made aware of these purchases, and when they intervened.

· What type of oversight does FHFA practice over Freddie Mac’s investment division? Are potentially risky trade pre-approved by you or other FHFA officials?

· Although Freddie Mac has ceased their purchase of the types of securities in question, they are still in their portfolio. How does FHFA plan to address these securities moving forward?

· What steps will you take to ensure that in the future FHFA is able to intervene before risky trade take place?

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Comments
7 Responses to “Senator Robert Casey Demands Answers from Freddie Mac’s Regulator”
  1. Al says:

    When is Obama going to tell the Banks that are funding his campaign to let the people who are in foreclosure and people who are still paying but not in foreclosure that they were ‘bailed out’ and all these bad mortgages were paid for! WTF? How many times do these pricks what to be paid? No one owes any of these bailed out banks a damn penny. Tell J. Dimon to FO!

    • Fury says:

      i feel really burned by obama.

      i thought he was going to be a great leader like FDR and shepherd us into a new era of
      social responsibility and renewed prosperity.

      i was scammed!

      he is nothing but a puppet of the banks.

      i do believe that we can take back control from the banksters.
      i am just not sure if any politician is up to the task or deserves our trust.

      • lvent says:

        FIRST AND FOREMOST…their will be no change unless the masses wake up …and face reality… no one can go up against this evil moneyed elite empire alone..! J.F.K. IS PROOF OF THAT…!

      • lvent says:

        Throw out the FED…RESTORE THE U.S. CONSTITUTION…ISSUE OR OWN CURRENCY BACKED BY OUR OWN NATURAL RESOURCE REVENUES…ISSUED BY STATE BANKS…TIME TO FORCE TGESE TRAITORS IN CONGRESS AND TGE SENATE TO BE OUTED…AND MAKE THEM DO THESE THINGS THAT NEED TO BE DONE TO CORRECT THE MISTAKES THAT HAVE BEEN MADE..THEY ARE TGE REAL PUPPETMASTERS…DICTATING POLICY TO OBAMA…!!! CONgress are the dirty double crossers…they created the FED…SAYS BERNANKE…THEY ARE WHO MUST DRAW UP THE MANDATE TO ABOLISH THEM…THEY ARE WHO CREATED THE NDAA, PASSED IT AND FORCED OBAMA TO PASS IT BY THROWING OTHER THINGS THAT THE PEOPLE NEEDED IN THERE..THEY ARE A CABAL OF EVIL DOERS…CRIMINALS!!!…BEWARE THE DECEIVERS…THE WOLVES IN SHEEPS CLOTHING!!!!

  2. Ron Moss says:

    Mr. DeMarcco needs a bonus to lean on.

  3. lies is all they tell says:

    funny we all know this why is this all a question to them

  4. lies is all they tell says:

    to funny is the only comment i could think of

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