Tuesday, December 9, 2008

Foxx Demands Accountability For Freddie/Fannie

The following is a press release from NC Congresswoman Virginia Foxx.

Foxx demands accountability for Freddie/Fannie
Grills former Fannie/Freddie executives at congressional hearing

WASHINGTON – Congresswoman Virginia Foxx today grilled former Fannie Mae and Freddie Mac executives at a Congressional hearing in Washington. Foxx asked them to account for the failures of the organizations they led and the costs borne by average Americans as a result of the government takeover of Fannie and Freddie.

“You have been irresponsible,” Rep. Foxx told a panel of former Fannie and Freddie executives. “You have exhibited no sense of accountability for your actions. What in the world were you getting paid millions of dollars to do?” Foxx asked the CEOs.

Earlier this decade, Fannie Mae and Freddie Mac dramatically expanded their investments in securities derived from subprime and Alt-A loans made to homeowners with weaker credit or reduced loan verification requirements. According to media reports, Fannie Mae and Freddie Mac moved into these investments despite both internal and public concerns regarding the potential risks of such actions.

These Fannie and Freddie investments helped feed the subprime lending boom and as these investments began to fail, Fannie and Freddie’s actions contributed to the meltdown in the housing market

“This is not a Democrat or a Republican issue,” Foxx said. “This is about protecting the people of North Carolina—average, responsible people who made prudent decisions and are now being hurt by the reckless greed of Fannie and Freddie’s corporate leadership. We cannot allow this to happen again.”

Note: In June 2008, Fannie Mae alone owned or guaranteed nearly $400 billion in risky securities. On September 7, 2008, after watching both Fannie and Freddie post massive losses on their failed housing investments, Treasury Secretary Henry Paulson helped orchestrate a federal government takeover of Fannie Mae and Freddie Mac and committed as much as $100 billion to each company.

According to expect testimony from today’s hearings, more than 40 percent of Fannie and Freddie’s loans are “junk loans” for a total of $4.63 trillion in potentially bad debt. With the federal government’s takeover of these lenders, taxpayers are ultimately on the hook for the cost of these bad loans.

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