Since Fannie Mae and Freddie Mac were taken under government conservatorship in 2008, taxpayers have spent almost $50 million on legal fees to defend former executives of the two government-sponsored enterprises, The New York Times reported Feb. 22.
According to a recent analysis by the Federal Housing Finance Agency’s inspector general, $37 million alone was spent defending three former Fannie Mae executives against claims of securities fraud.
FHFA Inspector General Steve A. Linick told the Times that the GSEs need to do a better job of limiting legal costs — costs passed onto taxpayers because agreements that were in place before the GSEs were taken under conservatorship allowed for the defense of executives against lawsuits.
Linick’s report indicated that the legal contracts requiring taxpayers to foot the bill for lawsuits could have been repudiated when the GSEs first came under government conservatorship.
The FHFA submitted a proposal to Congress Feb. 21 outlining its plan for shrinking Fannie and Freddie, and the Inspector General would like a reduction of legal expenditures added to the plan. He suggested that Fannie and Freddie write new agreements to reduce taxpayer obligation for future legal costs.
FHFA officials agreed to work on implementing the Inspector General’s suggestions and are expected to have a summary report completed by June, the Times reported.