S.E.C. Sues 6 Former Top Fannie and Freddie Executives

[coyotes_geek]

The Securities and Exchange Commission has brought civil actions against six former top executives at the mortgage giants Fannie Mae and Freddie Mac, saying that the executives did not adequately disclose their firms' exposure to risky mortgages in the run-up to the financial crisis.

The cases represent the first major action by the federal agency in its investigation of more than three years into the government-controlled mortgage giants that were at the center of the housing crisis.

The agency filed complaints against three former executives at Fannie Mae - its chief executive, Daniel H. Mudd; chief risk officer, Enrico Dallavecchia; and executive vice president, Thomas A. Lund.

Freddie Mac's former chief executive, Richard F. Syron; Patricia Cook, its chief business officer; and its executive vice president, Donald J. Bisenius, were also named in a separate complaint.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," Robert Khuzami, the head of enforcement for the S.E.C., said in a statement. "These material misstatements occurred during a time of acute investor interest in financial ins utions' exposure to subprime loans, and misled the market about the amount of risk on the company's books. All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors."

As part of its announcement, the S.E.C. said that Fannie Mae and Freddie Mac agreed to settle with regulators and cooperate with its investigation of former executives. The Justice Department has also investigated the two mortgage giants, but no charges have been brought.

The S.E.C.'s cases against the executives will rely heavily on whether the two mortgage companies underreported or misled investors about their ownership of subprime loans and mortgages that required few do ents from borrowers in the years leading up to and including the housing bust.

The complaint alleges, for instance, that Fannie Mae executives described subprime loans as those made to individuals "with weaker credit histories" while only reporting one-tenth of the loans that met that criteria in 2007. The S.E.C. complaint contends that Freddie Mac executives falsely proclaimed that certain businesses had virtually no exposure to ultra-risky loans.

The S.E.C., which spent roughly two years interviewing former and current employees of the two companies, has been under tremendous pressure to produce cases in the wake of the financial crisis.

Earlier this year, the agency sent Wells notices, which warn of potential enforcement actions, to a number of top executives at the two firms. At the time, Mr. Syron, Mr. Mudd, Mr. Bisenius and Mr. Piszel all challenged those potential accusations.

Mr. Mudd and Mr. Syron are the two most prominent subjects of the complaint. Mr. Mudd is now chief executive of the Fortress Investment Group, a private equity giant. Mr. Syron is a former president of the American Stock Exchange and currently an adjunct professor and trustee at Boston College.

Lawyers for Mr. Syron and Mr. Mudd did not immediately respond to requests for comment.

Michael M. Levy, a lawyer for Mr. Lund, said his client did not mislead anyone. "During a period of unprecedented disruption in the housing market, nobody worked more diligently or honestly to serve the best interests of both investors and homeowners," Mr. Levy said. "When the truth comes out at trial, it will be abundantly clear that Mr. Lund -- who did not sell a single share of Fannie Mae stock during this entire period -- acted appropriately at all times."

A lawyer for Mr. Dallavecchia did not immediately respond to a request for comment.

Lawyers for Ms. Cook and Mr. Bisenius could not immediately be reached for comment.

Fannie Mae and Freddie Mac were created by Congress to facilitate homeownership. Though they do not loan money to borrowers themselves, they buy mortgages from lenders and resell them in packages to investors, which allows banks and others to issue more loans. By 2005, the two companies began an aggressive push to expand their mandate to include less-fortunate borrowers who were typically excluded, an effort encouraged by lawmakers and lenders. The companies were also looking to reclaim business from Wall Street, which was thriving in the world of subprime mortgages.

But by the middle of 2008, as the housing market was sinking, exposure to subprime and other weak borrowers threatened the two companies. The Bush administration stepped in to rescue the two mortgage giants in September 2008, taking control of them in the process. Since then, the government has loaned the Fannie Mae and Freddie Mac more than $100 billion.

That the settlement with the two companies did not include a fine reflects their financially precarious situation. The Obama administration announced plans earlier this year to wind down the two companies.

http://finance.yahoo.com/news/e-c-su...184203714.html

[Winehole23]

no hustle points, SEC, but wino appreciates the effort. guess we still needed Fannie and Freddie as shock absorbers before we could hold em accountable for their misdeeds.

[boutons_deux]

Why go after the GSE guys for lying to the govt,

but let Goldman and other such trash get away with lying to investors about the they were selling?

but let the ratings agencies get away with lying about their paid-for-by-Wall-st AAA ratings on toxic crap?

Too Rich To Jail

Too Many To Jail

but on the bottom end, jailing Human-Americans by the 1000s in debtor prisons:

The Return of Debtor’s Prisons: Thousands of Americans Jailed for Not Paying Their Bills

Federal imprisonment for unpaid debt has been illegal in the U.S. since 1833. It’s a practice people associate more with the age of ens than modern-day America. But as more Americans struggle to pay their bills in the wake of the recession, collection agencies are using harsher methods to get their money, ushering in the return of debtor’s prisons [4].

NPR reports [5] that it’s becoming increasingly common for people to serve jail time as a result of their debt. Because of “sloppy, incomplete or even false do entation [6],” many borrowers facing jail time don’t even know they’re being sued [5] by creditors:

Take, for example, what happened to Robin Sanders in Illinois. She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.

“That’s when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn’t know what it was about.” Sanders owed $730 on a medical bill. She says she didn’t even know a collection agency had filed a lawsuit against her. [...]

A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.

More than a third of all states [6] now allow borrowers who don’t pay their bills to be jailed, even when debtor’s prisons have been explicitly banned by state cons utions. A report [7] by the American Civil Liberties Union found that people were imprisoned even when the cost of doing so exceeded the amount of debt they owed.

Sean Matthews, a homeless New Orleans construction worker, was incarcerated for five months for $498 of legal debt, while his jail time cost the city six times that much. Some debtors are even forced to pay for their jail time themselves, adding to their financial troubles.

Fight corporate influence by keeping independent media strong! Click here to make a tax-deductible contribution to Truthout. [8]

Stories of surprise arrests for unpaid debt have been reported in states including Indiana, Tennessee and Washington. In Kansas City, one man ended up in jail after missing only a furniture payment [9]. The Federal Trade Commission received more than 140,000 complaints [5] related to debt collection in 2010, and they’ve taken 10 debt collection agencies to court [4] for their practices in the past three years.

Since the start of 2010, judges have signed off on more than 5,000 arrest warrants [10] since in nine counties alone. Beverly Yang, a legal aid attorney, says many debtor’s — and judges — don’t know debtor’s rights [5], which results in the accused being intimidated into a pay agreement. She’s seen judges interrogate debtors about why they can’t pay more and whether they are trying hard enough to find a job.

Yang says some collection agencies are only too eager to use [5] needlessly harsh tactics. “Whatever the creditors or the creditors’ attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these.” Debt collection is a lucrative business — the industry is set to grow 26 percent [11] in the next three years.


http://www.truth-out.org/print/10405

[Yonivore]

They should be prosecuting them. Barney Franks, too.