SEC Charges Ex-Fannie, Freddie CEOs With Fraud
Published December 16, 2011
| Associated Press
WASHINGTON -- The Securities and Exchange Commission has brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled the government and taxpayers about risky subprime mortgages the mortgage giants held during the housing bust.
Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.
Mudd, 53, and Syron, 68, led the mortgage giants when the housing bubble burst in late 2006 and 2007. The four other top executives also worked for the companies during that time.
The case was filed in federal court in New York City.
In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.
"Every piece of material data about loans held by Fannie Mae was known to the United States government to the investing public," Mudd said. "The SEC is wrong, and I look forward to a court where fairness and reason -- not politics -- is the standard for justice."
Syron's lawyer couldn't be immediately reached for comment.
According to the lawsuit, Fannie told investors in 2007 that it had roughly $4.8 billion worth of subprime loans on its books, or just 0.2 percent of its portfolio. The SEC says that Fannie actually had about $43 billion worth of products targeted to borrowers with weak credit, or 11 percent of its holdings.
Mudd told a congressional panel in March 2007 that Fannie's subprime business represented less than "2 percent of our book." He also said the company held subprime mortgages "very carefully."