Legal Fees Mount at Fannie and Freddie
Taxpayers have advanced almost $50 million in legal payments to defend former executives of Fannie Mae and Freddie Mac in the three years since the government rescued the giant mortgage companies, a regulatory analysis has found.
In that time, $37 million has gone to three former Fannie Mae executives accused of securities fraud, according to the analysis by the inspector general of the Federal Housing Finance Agency, which oversees both companies. Acting as their conservator, the agency is charged with protecting taxpayers from further losses at Fannie Mae and Freddie Mac. Those losses now stand at $183 billion.
Although the legal costs for the former executives are a small fraction of the companies’ mortgage losses, it is imperative that the housing agency move to limit these fees, said Steve A. Linick, inspector general of the agency.
“F.H.F.A. and Fannie Mae believe that their options are limited in paying current legal fees for former officers and directors,” Mr. Linick said in a statement. But he called for greater oversight. The legal costs are the responsibility of taxpayers because of contracts struck by the companies before they collapsed. Those agreements, which are typical in corporate America, state that legal fees incurred by executives defending against lawsuits will be advanced by the companies. If a court or jury rules that officials breached their duties or acted in bad faith, the officials will have to repay the advances.