Fannie, Freddie legal fees defended

Associated Press / February 16, 2011

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WASHINGTON — The federal regulator overseeing Fannie Mae and Freddie Mac defended his agency’s approval of millions of taxpayer dollars for legal fees to cover lawsuits against the housing giants and their executives, telling angry House committee members yesterday that his agency was obligated to do so.

Figures gathered by the House Financial Services Committee’s oversight subcommittee show that since the government took over the two corporations in September 2008 as the housing market collapsed, taxpayers have provided $162 million to defend them. That includes $24 million defending former Fannie Mae chief executive Franklin Raines and two other Fannie executives, who left the company after an accounting scandal and were targets of civil suits.

“I share the frustration’’ of lawmakers, said Edward J. DeMarco, head of the Federal Housing Finance Agency. But, he said, his agency was legally required to cover the payments.

DeMarco did not rule out taxpayers eventually recovering the money, should ongoing legal action result in a finding that the officials who were sued took actions that violated their duties to their company.

Raines and the two others — former chief financial officer Timothy Howard and former controller Leanne Spencer — left Fannie and agreed to pay a $31.4 million settlement, but did not admit to wrongdoing.