The House Oversight and Investigations subcommittee next Tuesday will hold a hearing to examine the taxpayer-funded expenditure of legal fees incurred on behalf of former executives at Fannie Mae and Freddie Mac.
Subcommittee chairman Rep. Randy Neugebauer (R-Texas) estimates that roughly $160 million of taxpayer money has been used to defend securities-related lawsuits against the GSEs and their executives.
Since being placed in conservatorship 30 months ago, Fannie has paid $24 million in legal fees to cover civil claims involving former chairman and CEO Franklin Raines ($7.9 million), and senior executives Timothy Howard ($4.5 million), and Leanne Spencer ($11.8 million).
An additional $30 million has been spent defending other officers and directors.
The GSEs, however, have contractual obligations to cover civil lawsuits against their current and former executives as long as it pertains to their official duties at the companies. One legal source told National Mortgage News, "These obligations remain because Fannie and Freddie are in conservatorship. If they had gone through a receivership, it might be a different matter because contracts can get wiped out."
Rep. Neugebauer added that, "Legal fees expended by Fannie Mae and Freddie Mac in defense of the officials who led those organizations prior to, and during the subprime mortgage mess raises serious questions about the conservators' responsibilities to prevent any further losses to the American taxpayer."
The hearing is set for February 15th at 2 p.m. in the House Rayburn Building.
