The Securities and Exchange Commission brought civil fraud charges against six former senior executives at Fannie Mae and Freddie Mac Friday, alleging that the employees understated the amount of subprime loans the mortgage giants held at the peak of the financial crisis. It's not the criminal prosecution some people have been hoping for but it certainly aims high. The big fish include Daniel Mudd, the former CEO of Fannie Mae, and Richard Syron, the former CEO of Freddie Mac, i.e., "the highest-profile individuals to be charged in connection with the 2008 financial crisis," notes the Associated Press. Looking at the individual lawsuits, Bloomberg reports that the SEC is seeking "financial penalties, disgorgement and bars on them serving as officers or directors in other companies."
"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said the SEC's enforcement director Robert Khuzami. "These material misstatements occurred during a time of acute investor interest in financial institutions' exposure to subprime loans, and misled the market about the amount of risk." Just to keep tabs, the amount of money Fannie and Freddie have run up on the taxpayer dime so far is $150 billion but according to the Federal Housing Finance Administration that number could increase to $259 billion.