Over $160 million has been spend defending Fannie Mae and Freddie Mac and their former top executives in civil lawsuits, and that number hadn't been disclosed until being forced to do so by Rep. Randy Neugebauer, R-Texas. From the New York Times:
The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.
Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.
The legal fees are the least of it. Neugebauer sent a letter requesting this information from Edward DeMarco at the Federal Housing Finance Agency in November, and The Examiner followed up in December. But Neugebauer's letter requested the information no later than December 31, 2010.
I hereby request that FHFA provide a detailed report on all legal fees incurred by the GSEs or on their behalf since they were placed into conservatorship on September 7, 2008, including, but not limited to the following:
• The total dollar amount of legal expenses for the defense of all former Fannie executives (Executive Vice President and above), including Franklin Raines, Timothy Howard, and Leanne Spencer, as well as the ongoing expenses for pending class action, shareholder derivative, or other law suits for current and former Fannie executives. This information should be compared to the expenditures for these individuals in connection with any such lawsuits prior to the imposition of the conservatorships.
• The total dollar amount of legal expenses spent on firms retained by the GSEs that are under investigation by State attorneys general for fraud related to ‘robo-signing’, including the David J. Stern Law firm in Florida.
Your report should include a breakdown of each law firm that has provided legal representation to the GSEs, the total dollar amount for legal services rendered paid to each firm, a description of the type of legal service or the reason for legal representation, and a dollar amount for continual or ongoing legal services through retained counsel. Please provide me with your report by no later than December 31, 2010.
Why are these legal fees continuing to make it to Raines and company? DeMarco feels that it's in the best interest of the conservatorship:
Asked why it has not cut off funding for these mounting legal bills, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, said: “I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees. It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship.”
Unfortunately, that's the very kind of thinking that led to the financial crisis: What was good for the executives at Fannie Mae and Freddie Mac was also good for the companies and their customers.
Congress defunded ACORN. They should defund the legal defense for Fannie and Freddie executives.