Mortgage Giants Leave Legal Bills To The Taxpayers

New York Times:

Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.

The bulk of those expenditures -- $132 million -- went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.

Read the whole story: New York Times

Comments

[USNDC]

09:00 AM on 01/25/2011

That's what the corrupt, self-annointed ruling class does ... they use the federal government as their slush fund ... playing selfishly and recklessly with the taxpayers money ... without any fear of consequence.

Nothing short of a citizen revolt will change this abuse.

I welcome the Tea Party.

[Doug Compagner]

10:28 PM on 01/24/2011

1) Why are they cival lawsuits an not criminal?

2) Who is policing these lawyer fee's.



This is completely uncalled for!

[wardropper]

06:38 PM on 01/24/2011

"Mortgage giants"?
Well we can at least make a start by ceasing to flatter these unremarkable human beings.
They are spoiled brats and bullies, and we all know how that ends in the schoolyard.
It's time we found the adult version of the antidote to these destructive parasites.

On a small scale, one could say that Nature has her uses for parasites, but wrecking a whole country is only achieved by actively nourishing parasites.
That's what has to stop.

[sunsetter]

04:19 PM on 01/24/2011

Simple solution - you write a loan, you service the loan, the loan is on your books - case closed. No need for Fannie and Freddie.

[mistykane]

04:50 PM on 01/24/2011

Exactly right!

[Birdman372537]

05:42 PM on 01/24/2011

FNMA and FHLMC revolutionized the mortgage industry and made reasonably priced, standardized mortgages available in a way that would be unthinkable if all mortgages had to be funded locally. Fannie and Freddie aren't the problem, their management is.

You don't throw the baby ourt with the bathwater.

[mistykane]

08:06 AM on 01/25/2011

F&F don't issue mortgages to borrowers.
1. The private banks and lenders (Chase, BOA) finance mortgages do. In the early 90's, they started 'creative' (sub-prime) financing to include low income people that couldn't qualify for a conventional loan.

2. Clinton wanted F&F to start buying the subprimes in addition to conventional loans. The taxpayer is now backing these bad loans. F&F bundle them and sell them to mutual funds and pension funds world wide.

3. Mass foreclosures, collapse of the housing market, global recession.

F&F were at the heart of the housing collapse and should be dismantled to protect the taxpayer and limit their power.

[Its-All-Good]

03:16 PM on 01/24/2011

Please do not prosecute the perps for subprime fraud and Mortgage Backed Security sales fraud..

Make the banksters whole with taxpayer money and fed newly printed money.. so we can catch some unsuspecting investors to take on more, a lot more, risk and debt.. this will help gobble up the inventory ..heck lower the down payment to 3.5 percent.. actually fha already does this.. so maybe lower it or No Money Down!

[AndyWright68]

03:13 PM on 01/24/2011

And people still support this government? How sad is that?

[wardropper]

06:47 PM on 01/24/2011

The "mortgage midgets" are still bigger than the government...

[Father Tom]

02:46 PM on 01/24/2011

Millions in waste to defend Fannie Mae and cover up for Barney Frank. Where's the outrage similar to that over wasted funds paid to government defense contratctors? Typical double standard.

[Carolab]

03:14 PM on 01/24/2011

Fannie has been around since 1938, Freddie since 1968, the CRA has been around since 1977 -- suddenly, all of housing goes to hell in 2005, and then credit collapses 2 years after -- and the best explanatio­n some people can come up with is Fannie, Freddie and CRA?  Gee, isn't that rather odd -- especially after 70 years?

Then there is the internatio­nal issue: If Fannie and Freddie and the 1977 CRA (and amendments­) are to blame for the US boom and bust, how did the rest of the world end up with a housing boom too? Why did prices and sales go skyward in the UK, France, Spain, Ireland, Australia, etc.?  They had no CRA, or a Fannie Mae, or a  Freddie Mac, -- so then what caused their housing bo-om?

The short answer: Ultra low rates, securitiza­tion, and perhaps some of our homegrown, innovative lending standards. 

http://big­picture.ty­pepad.com/­comments/2­008/10/fan­nie-mae-an­d.html”

[mistykane]

03:26 PM on 01/24/2011

The reason Fannie and Freddie are responsibl­e for the collapse and the cost to the taxpayer is because the private banks and lenders were writing sub primes, but those loans were contained to those private banks and not a threat to the taxpayer - only the individual­s they were giving the loans too. The govt. never should have allowed the smaller banks to be writing these loans, but it still wouldn't have had as far reaching potential to damage the housing market and economy as when they pushed F&F into the sub prime business.
In 1999, the Clinton put more pressure to increase sub prime lending and told F&F to lower their credit requiremen­ts so that they could buy the banks' sub prime loans, resell them and pour more equity into the housing market - to make even more loans. Before, they would only buy the safer loans.
Well once F&F bought these risky loans the taxpayer became responsibl­e for guaranteei­ng them. To make matters worse, they would bundle them up and sell them world-wide - spreading the economic damage around the globe.”

[samtee]

06:12 PM on 01/24/2011

You need to read the Community Reinvestment Act and learn something.

[builderman55]

02:26 PM on 01/24/2011

I can't think of any better way to say this other than that this system sucks... We have capitalism, really???

[Wirehedd]

08:12 PM on 01/24/2011

capitalism disappeared with the appointment of Reagan and the corporatists who controlled him implemented their "trickle down" nonsense.

It's commonly referred to as fascism by people who actually understand it.

[BannedFromCommenting]

01:27 PM on 01/24/2011

$24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.

So, defending 3 people costs this much?? I think the lawyers well paid off their student loans and any overhead costs... nothing justifies $500 an hour + rates.

[martin2]

01:40 PM on 01/24/2011

The rates are so high because a third party pays you me and all the other taxpayers.
Private firms negotiate layers fees and keep a sharp eye on hours billed.

[jhendrix]

01:44 PM on 01/24/2011

When's the last time you saw the government comparison shop for lawyers based on what they charge? How about a lifetime ban on lawyers being a part of government? During the transition, every law will be required to be re-written in plain English. A group of farmers from the midwest will provide a pass/fail rating on each re-write.

[capt ayhab]

01:09 PM on 01/24/2011

As a tax payers I am not paying a dime to these crocked spɹɐʇsɐq..................

Sorry for the French ladies and gentlemen, But I for one have had it with these corrupt banker and wall street suɐʇɐןɹɐɥɔ.

[martin2]

01:42 PM on 01/24/2011

You are Look under Federal Income Tax payed on your W2 form.

[dbg2]

12:56 PM on 01/24/2011

Check out comment 41 at http://community.nytimes.com/comments/www.nytimes.com/2011/01/24/business/24fees.html

[jhendrix]

01:48 PM on 01/24/2011

Part 1: From the New York Times Blog:

"I think the part of this debacle that's more sickening than most of the other parts is the sheer SIZE of the purported legal bills:

From the article: "Lawyers for Mr. Raines, for example, have received almost $38 million so far, while Ms. Spencer’s bills exceed $31 million."

Let's look at the math:

The legal bills for 2 individuals exceed $69,000,000.

At an average of $250/hour (don't forget that most of the hours are attributed to "associates" fresh out of law school), that would be 276,000 hours of work!!!! For 2 individuals' legal matters.

According to the article, Mr. Raines and Ms. Spencer were sued by the government sometime in 2006 and settled sometime in 2008. That's 2 years of litigation. Throw in another year of pre-action legal work and let's say 3 years of legal work.

Now, let's assume that one attorney works full-time on the cases for 250 days/year(50 weeks @ 5days/week). Let's further assume the attorney bills 8 hours/day for her work. Such a fully-occupied attorney would therefore be billing 2000 hours of work per year, working solely on the cases of these 2 individuals. Such an attorney would have billed 6000 hours over 3 years."

[jhendrix]

01:49 PM on 01/24/2011

Part 2: From the New York Times Blog:

"It would take 46 attorneys working and billing full-time for 3 years -- never spending one minute on any other legal matter -- to reach 276,000 hours of billable time.

Or, put another way, Mr. Raines and Ms. Spencer could have a kept one attorney busy -- full-time, working exclusively for them, charging $250/hour, billing 8 hours/day -- for 138 years . . .

There are lots of ways to think about the volume of hours and legal costs involved here -- one more absurd than the next.

This is for the legal problems of 2 individuals!!! Problems caused while working for one company! Whose cases were settled -- never made it to trial!!!!!

Is it just me or is there something about this that is inconceivable?"

[Dave Limon]

03:11 PM on 01/24/2011

I believe that if you need that many hours of legal work; you are probably guilty of something. Please, tell us what you are hiding.

[martin2]

02:02 PM on 01/24/2011

Thank you for the link.
Sometimes I think that if we do not indite Bush and Cheney there is no hope for justice in our land.

[Wow Unbelievable]

12:41 PM on 01/24/2011

Maybe we should go and recoup the millions and millions we gave Franklin Raines as a bonus.

Thanks Barnie & Chrissy Dodd for making that all possible!

[Carolab]

03:16 PM on 01/24/2011

Fannie and Freddie didn't get into subprimes until the very end of the "bo-om" and their biggest problem was Alt-A not subprimes anyway.

[mistykane]

04:34 PM on 01/24/2011

In the early 1990's only the private banks were making the sub prime loans, but in 1999, Clinton pressured Fannie and Freddie to lower their credit requirements and buy up more of the banks' sub primes - previously they had only bought safer loans.
Then they would issue bonds or bundle them and resell them - pouring liquidity back into the housing market and creating even more risky loans. And now these sub prime mortgages were backed by the U.S. taxpayer.
Once F&F owned these loans, they would sell them as MBS's to mutual funds, pension funds and insurance companies. These were now guaranteed by the govt. and sold world-wide, spreading the economic damage globally.

[dbg2]

12:39 PM on 01/24/2011

Let me get this straight

"Legal costs incurred by Mr. Raines, Mr. Howard and Ms. Spencer in the roughly four and a half years prior to the government takeover totaled almost $63 million."

So how much will it cost to investigate the fraudulent legal costs.

The USA the most corrupt country on Earth as measured in dollars. Time to clean house.

[jhendrix]

01:50 PM on 01/24/2011

I see a lot or pre-med students changing to pre-law.

[Hiqutipie]

12:33 PM on 01/24/2011

Are you sure this is an Mortgage Institution or a Correctional Institution that makes license plates on the side. It's so hard to tell anymore who the prison inmates are, They're all crooks!!!

[martin2]

02:13 PM on 01/24/2011

The crooks in jail are mostly minor crooks ex Marijuana sales.
Big crooks CEO of major Banks and rating agencies.
Testify before their friends in Congress chat with the President.
Then drive off in their limos to obscene salaries bonuses and pensions.

[hobo62]

12:25 PM on 01/24/2011

Where else would they leave it. I mean, after all, isn't that what the taxpayers are here for, to pick up the garbage and sewage the banks leave behind. I believe the banks call us "bottom feeders".