The Men Behind the Mortgage Bust!
Fraud is a funny thing.
Sometimes everyone is so busy lining their pockets it never occurs to anyone they might get caught. It’s a slippery slope for even the most highly credentialed of us. Maybe especially for them.
And, so it is with Fannie Mae and Freddie Mac: the one-time mortgage market leaders. But they aren't leaders any more. They’re essentially wards of the state. We’ve given them 183 billion taxpayer dollars to pay their debt and they still keep coming back to us for more.
But there's been a debate raging about whether the mortgage market and Freddie and Fannie's role in it was just bad management or fraud. Today, the Securities and Exchange Commission answered that question.
The agency is charging that six of the companies' executives broke the law by approving financial statements that were lies. Financial statements that made the two companies look healthy when they were actually poised at the brink of oblivion.
The two men in question were well known, experienced executives with impressive resumes. Like Richard Syron, the CEO of Freddie Mac. He ran the American Stock Exchange for five years and worked at the Boston Federal Reserve. And Daniel Mudd, the CEO of Fannie Mae who was an officer in the marine corps and CEO of GE’s Japan operations. He also ran a big investment company called fortress, a job he got after running Fannie. But they weren't the only public figures making out like bandits from Fan and Freddie.
GOP presidential candidate Newt Gingrich reportedly earned around $1.6 million working for Freddie. I'm not really sure it matters whether Newt was consulting or not. The fact of his pay is enough to show where his loyalties lay. When a financial institution gives two million dollars to a retired politician is sure isn't because of his trading skills. Mudd and Syron's pay similarly impressive. They made 16 million and 17 million respectively. Men who were highly credentialed. Men who were respected. Men who were corrupted by the big pot of cash being dangled in front of them.
I’ve said it before and I’ll say it again. It's time to shut down these two mortgage giants before they do more harm. But also, it's time to watch for the next government kitty that could turn into a fat mess. I think the federal government's green energy loan program comes to mind.
For more on how these former execs could lose their pay, check out this story.