SEC files complaint against former Freddie, Fannie CEOs
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SEC files complaint against former Freddie, Fannie CEOs
Steve Chiotakis: Federal regulators at the Securities and Exchange Commission just this morning charged several former executives at mortgage giants Fannie Mae and Freddie Mac with civil fraud. They’re accused of “perpetuating half-truths” about exposure to risky bonds.
Marketplace’s Scott Tong is with us live from Washington with the latest on that story. Good morning Scott.
Scott Tong: Good morning, Steve.
Chiotakis: What’s the key issue here?
Tong: Let’s be clear, this is not about Fannie and Freddie the institutions — it’s about former executives. The Securities and Exchange Commission believes these individuals helped Fannie and Freddie mislead the public — as in understating the subprime mortgage loans they held, how much risk they were exposed to during the housing crash.
For instance, at Fannie Mae, it said in 2006 that Fannie Mae held $5 billion dollars in risky mortages, whereas in reality — according to the SEC– it was $43 billion. And over at Freddie Mac, it reported just about 10 percent of its actual risk according to this complaint. As you know, the government later had to bail out Freddie and Fannie to the tune of $150 billion taxpayer dollars.
Chiotakis: So what happens next then, Scott?
Tong: It could contentious. The Feds are seeking financial penalties and already, former Fannie Mae CEO Daniel Mudd has fired off a statement that the public and the government had every piece of information it needed at the time. The statement says this is politically motivated, and that “the SEC is wrong.” Now, the agencies here, they say they plan to cooperate with all this — so we’ll be watching.
Chiotakis: We shall watch. All right, Marketplace’s Scott Tong in Washington. Scott, thanks.
Tong: You’re welcome.
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