Fannie Mae and Freddie Mac sued for fraud

Last week the SEC brought civil fraud charges against Freddie Mac and Fannie Mae executives. The SEC alleges top executives misled the public about subprime mortgages that the housing giants owned and insured.

I’m not sure what to think about the lawsuit. I think it’s good that some of these executives are being pursued for risky the kind of behavior that put all of us in this economic situation. On the other hand the SEC, Freddie Mac, and
Fannie Mae are all federally funded government enterprises. Essentially as taxpayers we are paying for legions of attorneys to litigate a lawsuit in which the government is both the plaintiff and the defendant.

Since this is a civil suit and no one will spend any time in prison, what’s the best possible outcome? That the executives are liable for millions of dollars in damages? Match that against the cost of the attorneys, judges, and everyone involved I’m sure this trial costs millions of dollars. My point is that the lawsuit won’t change anything for long term investor who’s portfolio value dropped 40%, or the homeowner who owes more on the mortgage than the house is worth. Perhaps we should be devoting more time, energy, and money to helping the people and companies most affected by the economic downturn, not pursuing those who profited from it most.

What are your thoughts on all of this?

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