“FHFA and Fannie Mae believe that their options are limited in paying current legal fees for former officers and directors, which now amount to almost $100 million,” FHFA’s inspector general, Steve Linick, said in a statement, adding that his office “nonetheless believes that FHFA must continue its efforts to both control and scrutinize these legal expenses now and in the future.”
The key case cited in the report involved a pending case against Fannie Mae in which a trio of former senior executives — former Chief Executive Officer Franklin D. Raines, former Chief Financial Officer J. Timothy Howard, and former Controller Leanne G. Spencer – are accused of engaging in practices that artificially inflated the price of Fannie Mae’s publicly traded stock. Between 2004 and 2011, the report states, Fannie Mae advanced $99.4 million in legal expenses to cover the representation of Raines, Howard, and Spencer in connection with government investigations and lawsuits stemming from accounting irregularities uncovered in 2004. That amount includes $37 million that FHFA has permitted Fannie Mae to advance to the the three former officials since the companies were placed into conservatorship during the financial crisis.
The inspector general’s report comes a day after the FHFA released a plan for beginning to scale back Fannie and Freddie, even as the Obama administration is pressing the taxpayer-backed companies to do more to help homeowners.
That’s even more money than Raines made by virtue of Enron-style accounting while at Fannie.
What makes this particularly outrageous is that, as I’ve pointed out before, Eric Holder’s DoJ is practicing Patrick Fitzgerald-style selective prosecution against Raines’ successor and his associates. Fannie and Freddie have been a huge cash cow for lefty organizations such as ACORN, as well as making millionaires of its failed advisers, chosen for their left-leaning politics. Obama’s not about to let a little trouble like their role in the housing bubble prevent that.
These people are being defended from paying the consequences of losing billions of dollars that became the responsibility of taxpayers.