Losses to legal costs
The Office of Inspector General of the Federal Housing Finance Agency (FHFA) is reporting today that legal fees for former leaders of Fannie Mae and Freddie Mac are roughly $110 million, with taxpayer dollars funding at least $47 million of the bills. According to the report, the total amounts may actually be higher as this only accounts for one legal case against Fannie and does not examine the entire legal costs of the housing agency which according to a 2011 congressional hearing is over $160 million.
The cases in question was launched in 2004 against three former Fannie Mae senior executives who allegedly inflated Fannie’s stock prices to inflate their own bonuses. This case has cost $99.4 million with $37 million having been paid by taxpayers. Freddie Mac has racked up $10 million in legal fees.
In 2008, the FHFA became the conservator of Fannie and Freddie and the agency reports lawmakers questioning the appropriateness of legal payouts despite any benefits packages agreed to prior to their taking over.
“Given the significant amounts of taxpayer money involved and the issue’s high visibility, FHFA must continue to scrutinize intensively the enterprises’ advances in order to limit costs,” the report noted.
The FHFA agreed with the Inspector General that future legal fees should be limited, especially in light of the recent U.S. Securities and Exchange Commission filing against six former senior executives at Fannie Mae and Freddie Mac.