AP) — The government is considering whether to sue banks and other mortgage servicers to recover its losses from alleged insurance kickbacks that may have cost government-controlled mortgage giants Fannie Mae and Freddie Mac hundreds of millions of dollars, according to an internal report.The Federal Housing Finance Agency, which is responsible for guarding Fannie and Freddie's finances, told its inspector general's office that it will consider filing the lawsuits and will make a formal decision over the next year.Fannie Mae and Freddie Mac, which have been under the FHFA's conservatorship since 2008, lost an estimated $168 million from the fees in 2012 alone, according to the report by the FHFA's inspector general. The FHFA didn't accept the inspector general's estimate of damages, but the agency's official response to the report said it "does not object" to the recommendation that it consider suing.Banks and other mortgage servicers that might be subject to such lawsuits did not immediately respond to phone calls and email messages seeking comment on the threat of litigation.
Gary Edwards on 23 Mar 09The new Obama administration needs to understand that greatest heist in history is underway - at least $1 trillion is being transferred from taxpayers to debt holders of failed financial institutions - and take steps to stop it before taxpayers suffer further unnecessary losses. Whitney Tilson explains the financial crisis and makes his recommendation. Rather than sticking it to the taxpayers, these insolvent banks should be put into conservatorship: "..... So what's a better solution? I'm not arguing that BofA (or Citi or WaMu or Fannie or Freddie or AIG or Bear) should have been allowed to go bankrupt - we all saw the chaos that ensued when Lehman went bankrupt. Rather, if a company blows up (and can't find a buyer), the following things should happen: 1) The government seizes it and puts it into conservatorship (as Fannie, Freddie, IndyMac and AIG effectively were, to one degree or another); 2) Equity is wiped out (again, as with Fannie, Freddie, IndyMac and AIG); 3) However, unlike Fannie, Freddie, IndyMac and AIG (and certainly Citi and BofA), everything in the capital structure except maybe the senior debt is at risk and absorbs losses as they are realized; the government would only provide a backstop above a certain level. This is what happened in the RTC bailout; 4) Over time, in conservatorship, while the businesses continue to operate (no mass layoffs, distressed sales, etc.), the government disposes of the companies in a variety of ways (just as the RTC did via runoff, selling the entire company or piece-by-piece, etc.), depending on the circumstances (as it's doing with AIG and IndyMac, for example - these are good examples, except that the debt holders were protected). ......"
