American taxpayers have already bailed out Fannie Mae to the tune of at least $45 billion, thanks to the congressionally-mandated purchase of sub-prime loans and conversion to mortgage-backed securities that poisoned the global financial markets and caused the current economic crisis. Now American taxpayers will get to bail out the executives who created the crisis by paying their legal bills. That includes at least one executive who hasn’t worked for Fannie for five years and left under a cloud of suspicion for fraud and corruption:
PRECISELY one year ago, we lucky taxpayers took over Fannie Mae and Freddie Mac, the mortgage finance giants that contributed mightily to the wild and crazy home-loan-boom-turned-bust. In that rescue operation, the Treasury agreed to pony up as much as $200 billion to keep Fannie in the black, coughing up cash whenever its liabilities exceed its assets. According to the company’s most recent quarterly financial statement, the Treasury will, by Sept. 30, have handed over $45 billion to shore up the company’s net worth.
It is still unclear what the ultimate cost of this bailout will be. But thanks to inquiries by Representative Alan Grayson, a Florida Democrat, we do know of another, simply outrageous cost. As a result of the Fannie takeover, taxpayers are paying millions of dollars in legal defense bills for three top former executives, including Franklin D. Raines, who left the company in late 2004 under accusations of accounting improprieties. From Sept. 6, 2008, to July 21, these legal payments totaled $6.3 million. …
[T]he government sued Mr. Raines, Mr. Howard and Leanne Spencer, Fannie’s former controller, seeking $100 million in fines and $115 million in restitution from bonuses the government contended were not earned. Without admitting wrongdoing, Mr. Raines, Mr. Howard and Ms. Spencer paid $31.4 million in 2008 to settle the litigation.
When these top executives left Fannie, the company was obligated to cover the legal costs associated with shareholder suits brought against them in the wake of the accounting scandal.
Now those costs are ours. Between Sept. 6, 2008, and July 21, we taxpayers spent $2.43 million to defend Mr. Raines, $1.35 million for Mr. Howard, and $2.52 million to defend Ms. Spencer.
The most ironic, or offensive, factoid is that all this money has yet to buy one single deposition from Raines or any of the other executives. They have utterly stonewalled the investigations. We are spending millions of dollars for their attorneys to attend the depositions of everyone else but the execs who created the fraud.
Raines got off the hook cheaply in that government lawsuit. He had to return two million dollars for restitution and fines — money which came from Fannie Mae’s insurer. Now he doesn’t even have to pay his attorney fees, even though Raines got kicked out five years ago.
Comparatively speaking, $6.3 million is a drop in the $45 billion bucket we’ve had to shovel into Fannie Mae’s coffers to keep the agency afloat. The cost isn’t so much the issue as the slap in the face of taxpayers having to pay for the defense of the very execs that created the $45 billion hole in the first place. None of these men are indigent, and they should be paying for their own lawyers. The taxpayers have paid enough for Franklin Raines and his ethically-challenged cohorts. (Via Joe Scarborough on Twitter)