Fannie, Freddie Ignored Risky Loan Warnings

Dec. 9, 2008— -- Fannie Mae and Freddie Mac executives went on the hot seat today over the mortgage meltdown as House members criticized them for ignoring warnings about risky mortgages.

Former Freddie Mac chief executives Leland Brendsel and Richard Syron and former Fannie Mae chief executives Daniel Mudd and Franklin Raines were at Capitol Hill for the House Oversight and Government Reform Committee hearing on the causes of the companies' meltdown.

"All four of you still seem to be in complete denial that Freddie and Fannie are, in any ways, responsible for this," Rep. Darrell Issa, R-Calif., said. "Your whole excuse for going to risky and unreasonable loans that are defaulting at an incredibly high rate is, everyone is doing it, if we don't do it, we will be left out. Well, I am sorry that you wanted to be the most popular girl in school and you forgot what your mother told you about your activities."

Documents released by the committee Tuesday showed that the top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans long before the housing market plunged.

Chairman Henry Waxman, D-Calif, said the committee had obtained nearly 400,000 documents from Fannie Mae and Freddie Mac as part of their investigation.

E-mails and other internal documents released by the committee show that Mudd and Syron disregarded recommendations that they stay away from riskier types of loans.

"We have before us, some of the people who are the perpetrators of the largest meltdown of the country," said Rep. John Mica, R-Fla.

Mica argued that the underwriting standards started to deteriorate during Bill Clinton's presidency. Republicans blame the two mortgage giants for causing the national housing meltdown by thwarting tighter regulations, and also the Clinton administration, for loosening regulations in the first place.

Many Democrats lay the blame on Wall Street banks for loose and flexible lending standards.

But on Tuesday, both sides criticized the executives. Rep. Virginia Foxx, R-N.C., said it was the most bipartisan hearing the House has had.