Ranking Democrats on the House Financial Services Committee are encouraging the GSE regulator to continue pursuing claims against Wall Street firms that sold private-label MBS to Fannie Mae and Freddie Mac.
The Federal Housing Finance Agency has the power to pursue claims against private companies that sold the GSEs loans or securities based on "fraudulent documents," according to chairman Barney Frank, D-Mass.
"These transactions created private profits at public expense, and they should be fought with every tool at the companies' and agencies' disposal," Rep. Frank says in an August 20 letter to President Obama.
In July, FHFA issued 64 subpoenas to securities firms for information about the PLS MBS they sold the government-sponsored enterprises.
In a separate letter to the President, Rep. Paul Kanjorski, D-Pa., said Fannie and Freddie have suffered significant losses from their $255 billion in investments in private-label MBS.
He urged the FHFA to "vigorously pursue all available legal claims for losses" sustained by the GSE conservatorships, including demands for lenders to repurchase bad loans.
And he urged the President to nominate a FHFA director that will pursue these claims. (Acting director Edward DeMarco is currently running the agency.)
Rep. Kanjorski chairs the capital markets and GSE subcommittee and he intends to hold an oversight hearing on FHFA in September.
"The failure to pursue legitimate legal claims to limit losses to taxpayers would be another indirect subsidy for an industry that has received too many subsidies already," Kanjorski said.
