Republican Congressman Darrell Issa of California has requested the Federal Housing Finance Agency for documentation behind the decision to use taxpayer’s money to fund the legal costs, an Associated Press report said.
Rep. Issa, chairman of the House Oversight and Government Reform Committee said “”At a time of runaway federal deficits and 10 percent unemployment, it is extremely distasteful for the American taxpayers to be forced to pay the legal bills of former executives of Fannie Mae and Freddie Mac, companies which were central players in the financial crisis.”
According to reports, most of the money used to defend Fannie, Freddie and their former heads were related to to lawsuits over activities that took place prior to the 2007-2010 subprime lending crisis. The government took over the two mortgage giants in September 2008.
To many Republicans, Fannie and Freddie’s backing of risky loans were the main cause behind the crisis. The AP report said, Rep. Issa’s probe is the latest GOP attempt to pin the blame on the mortgage giants.
Some observers say it is common practice for companies to cover the legal fees of their executives. Professor Charles Elson of the University of Delaware told the AP the arrangement is “basically universal,” and that, “otherwise no one would ever go work for a business.”
Federal Housing Finance Agency acting head Edward J. DeMarco said he understands the “frustration,” over the use of taxpayer’s money for the payment of the legal fees. DeMarco said he was merely following state and federal laws and by doing so was only acting out for the government’s best interest as it manages and controls both institutions.
In our earlier report we said that $24 million alone was spent to for the legal defense of former Fannie Mae boss Franklin Raimes and two other former officials.
Congressman Issa said he wants DeMarco to inform Congress, “how best to protect taxpayers from having to pay any additional legal bills for Mr. Raines and other former executives.”
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