FBI Reportedly Investigating Fannie Mae, Freddie Mac For Role In Subprime Crisis

It's been a bad month for Fannie Mae and Freddie Mac.

The Securities and Exchange Commission announced last week that it was suing half a dozen former executives from the mortgage giants, including the ex-CEOs of both companies. Now, the Federal Bureau of Investigation is reportedly asking questions about Fannie and Freddie's behavior in the months preceding the financial crisis, according to The Daily.

At issue is whether Fannie and Freddie -- two of the largest mortgage companies in the country, and the recipients of a major government bailout in September 2008 -- misled the public and investors about the relative risk of their loans in the lead up to the financial crisis, the Daily reports. The matter has serious implications, since many allege that mortgage lenders' enthusiasm for making loans to homeowners with shoddy credit, and banks' penchant for using those loans as financial instruments, are among the principal reasons for the housing crash and financial crisis.

The SEC's lawsuit probes much the same question, hitting six former executives at the two companies with charges of security fraud, and accusing them of continuing to hold onto questionable loans even after the magnitude of the risk became clear. Neither company is directly named as a defendant in the SEC's suit.

The SEC appears to be framing that suit as a response to critics who have accused the agency of going easy on the major banks and financial institutions who played a central role in the financial meltdown, according to The New York Times.

However, it's unclear whether the SEC's pursuit of Fannie and Freddie alumni will assuage taxpayer ire or merely inflame it further, since, as CNBC recently pointed out, it's taxpayers who may end up paying the legal fees for the six defendants named in the suit, as Fannie and Freddie are now owned by the government.

One of the defendants in the SEC suit -- Daniel Mudd, the former CEO of Fannie Mae -- announced this week that he would be taking a leave of absence from his current position as CEO of Fortress Investment Group, citing the need to focus on "matters outside of Fortress."

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Comments

[troutabout]

02:32 PM on 02/01/2012

I don't get it. Doesn't anyone remember attorney general Janet Reno ordering all mortgage companies to stop using 'base lining' to determine if applicants could afford a loan ? With base lining if you didn't earn enough income you couldn't get a mortgage loan. Made sense.

Then Janet Reno said she would file racial discrimination suits against any mortgage or loan firm that was suing base lining after a certain date. At that time the mortgage/loan companies had to make loans available to customers that clearly could not afford the payments. And the FBI is investigating this why ? Investigate Janet Reno.

[nobodysgirl]

10:27 AM on 12/23/2011

The American people / taxpayers would greatly appreciate a focus on Mr. Gringrich's involvement and monetary windfall via Freddie and Fannie be included in the investigation, please FBI.

[Apov]

09:32 AM on 12/23/2011

And when will the President demand that the banks be investigated?

And when will Congress demand that the banks be investigated?

And when will the FBI investigate the banks?

And when will Justice start prosecuting?

[RitaS]

06:25 AM on 12/23/2011

It's about f*ng time....

[Dosadi]

10:55 PM on 12/22/2011

Why investigate? The banks had the laws written in a way to insure they actually broke no laws. That is the problem. Our elected officials are shirking their duties and letting lobbyists write the bills that become law. Let me write the laws and it would be impossible to keep me from getting filthy rich.

[VoteThemAllOut]

10:30 PM on 12/22/2011

Have to wonder if there is any connection with this probe and Ole Barney Frank's decision to retire? Is his next 'home' going to be a country that does not have extration treaty with the USA?

Who next, Ole Maxine Waters and her hubby?

[masaccio]

01:25 PM on 12/22/2011

How many times do we have to debunk the Fannie and Freddie did it myth before the FBI is allowed to investigate the private sector banksters who actually caused the disaster?

[Peter Combs]

04:19 PM on 12/22/2011

Fannie and Freddie DID do it...wait and see.....watch for the Countrywide connection! You'll pull your hair out...

and now you know why Barney Frank isn;t running again....

[Dosadi]

10:57 PM on 12/22/2011

Barney had nothing to do with the day to day running of Countryside. Nor did he create their business models. You are barking up the wrong. tree. If a man gives his son a car then the son goes out gets drunk and kills somebody you cannot truthfully blame the man who gave his son the car. It was the son who broke the law and caused the accident, not his father.

[EdCorner]

11:31 AM on 12/22/2011

Uhh ohh - look out the FBI is involved.

Hahahahaaaaa

The FBI has adopted the Mortgage Bankers Assoc. definition of fraud where the banks can never be guilty of mortgage fraud - according to Bill Black.

I Quote ...."the FBI has continued its "partnership" with the Mortgage Bankers Association (MBA). The MBA is the trade association of the "perps." It created a ridiculous on its face definition of "mortgage fraud." Under that definition the lenders -- who led the mortgage frauds -- are the victims. The FBI still parrots this long discredited "definition." That is one of the primary reasons why -- in complete contrast to prior financial crises -- the Justice Department has not convicted a single senior officer of the large nonprime lenders who directed, committed, and profited enormously from the frauds.

[oldtree]

11:25 AM on 12/22/2011

What was created for fraud, acted to defraud, and acted to quash any investigation into fraud is now being investigated for fraud, maybe. Most people don't realize that it was probably one of these two that actually financed your home, and that means your documents that don't include them may be fraudulent.
How come fraud comes up so often when in reference to Fannie and Freddie? And why isn't Mozilo being charged with crimes? Fraud.

[Peter Combs]

04:21 PM on 12/22/2011

Mozillo was working hand in hand with these two outfits...thats why he paid a fine and kept hi 400 million....

Fannie and Freddie were in this thing up to their necks..more than has been previously reported...watch and learn..

[Trustfunded1]

11:00 AM on 12/22/2011

IOW's the FBI is still dragging it's feet in an industry that it helped protect.

[SMASH AUTHORITY]

10:07 AM on 12/22/2011

wit does dis have to to with Canada?

[Peter Combs]

04:21 PM on 12/22/2011

Nothing...

[EdCorner]

09:56 AM on 12/22/2011

"The matter has serious implications, since many allege that mortgage lenders' enthusiasm for making loans to homeowners with shoddy credit, and banks' penchant for using those loans as financial instruments, are among the principal reasons for the housing crash and financial crisis."

Principle reasons??!! They were the ONLY reasons we had a housing crash. The loans were sold as soon as they were made and when the banks ran out of eligible borrowers they went to normally ineligible borrowers - and they didn't care because they were getting their money upfront as soon as the loan was signed. Liar loans, NINJA loans and No-Doc loans comprised nearly 50% of their loans in 2006. Almost 6 years later and they're acting like their actions were just "alleged" and "among the principle reasons" and that they not the ONLY reasons. Charges should be made against the SEC for ineptness and sheer idiocy. Nothing is going to happen though. This administration will fine them pocket change only and allow the corruption to continue unabated. SOP

[free reign]

09:00 AM on 12/22/2011

HEY FBI! Will you see exactly what ACCESS to OUR PROPERTY $1,600,000 got F&F for the Gingrich "consulting fees."
TREASON= offering of American property by these RACKETEERS.
Fed USES OUR MONEY to flood the housing mkt, buy OUTSOURCING AND INFLATION DRIVING tax/tariff BREAKS, and DRIVE INFLATION Y E S!, on every single WS leeching, product and service, THEN!, pirates homes that cannot meet their PROFITEERED, LOANSHARKED financial extortion.
FBI, HOMELAND SECURITY, stop dancing around the details and arrest those who defund govt, and decimate PROTECTIONS of OUR property BY BUYING GOVERNMENT.
GET these despots OUT and let jobs and working equity/capital return TO THIS COUNTRY.
FAIR TRADE will help America and it's trading partners WITHOUT GIVING UP TRILLIONS UNTAXED to Wall St lechers.
Fed dumbing down INFLATION/wage starving revolt USING OUR PROPERTY IS TREASON. Using 4500 American lives for KP-OIL FUTURES CROOKS IS TREASON!

[Eagleman]

08:58 AM on 12/22/2011

Is Barney Frank worried ?

[free reign]

09:18 AM on 12/22/2011

His intended benefactors, the poor in ghettos, probably didn't pay him as mush as the preppy preyed on, BANKER FEEDING frenzy DRIVING MTG BANKERS. $1,600,000 is alot of "consulting."The loans were meant for working poor not a FED/mtg banker loanshark, ORGY.

[Peter Combs]

04:22 PM on 12/22/2011

hes not running for re-election....nuff said.

[mdh461]

08:29 AM on 12/22/2011

"Misled the public and investors?" I hope the FBI also investigates these issues and what if any connection there is to the US Debtors Congress oversight of these transactions.