Thanks to the few readers who sent in the links about the Fannie/Freddie executives who had civil lawsuits filed against them today – but it doesn’t look like they will be facing jail time. Excerpted from the AP:
In a lawsuit filed in New York, the Securities and Exchange Commission brought civil fraud charges against six former executives at the two firms, including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron.
The executives were accused of understating the level of high-risk subprime mortgages that Fannie and Freddie held just before the housing bubble burst.
“Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, SEC’s enforcement director.
Many legal experts say they don’t expect the six executives to face criminal charges.
“If the U.S. attorney’s office was going to be bringing charges, they would have brought it simultaneously with the civil case,” said Christopher Morvillo, a former federal prosecutor now in private practice in Manhattan.
Robert Mintz, a white-collar defense lawyer, says he doubts any top Wall Street executives will face criminal charges for actions that hastened the financial crisis, given how much time has passed.
The SEC has brought other cases related to the financial crisis since it began a broad investigation into the actions of Wall Street banks and other financial firms about three years ago.
Most cases, however, didn’t involve charges against prominent top executives.
An exception was Angelo Mozilo, the co-founder and CEO of failed mortgage lender Countrywide Financial Corp. He agreed to a $67.5 million settlement with the SEC in October 2010 to avoid trial on civil fraud and insider trading charges that he profited from doling out risky mortgages while misleading investors about the risks.
(These perpetrators will probably settle for something less than the Tan Man?)
They will probably walk as it seems that former WaMu Execs are, but not their insurer. See:
http://www.americanbanker.com/syndication/washington-mutual-officials-settle-lawsuit-fdic-1044812-1.html
Excerpts…
The FDIC … accused former Chief Executive Kerry Killinger, ex-President Stephen Rotella, and David Schneider, the bank’s former home-loans president, of taking gambles that sparked the thrift’s collapse in 2008. The agency also accused the three, along with the wives … of seeking to shield cash and their houses from legal claims. The three former executives received a total of $95 million in compensation between 2005 and 2008, the FDIC said …
… the FDIC alleged the three executives “focused on short term gains to increase their own compensation, with reckless disregard for WaMu’s longer-term safety and soundness.”
The three denied the allegations. Mr. Rotella said last March in a statement that it was “patently unfair for the FDIC to expect an individual to have perfect foresight into a crisis that the FDIC itself did not see coming.” Mr. Killinger said in a statement in March that “the management of Washington Mutual was sound and prudent.” He said banking regulators had reviewed the bank’s position and had “unfettered access” to its books in the months leading up to its collapse.
… The FDIC, which didn’t suffer any losses in taking over Washington Mutual, plans to use the funds it recovers in the lawsuit to defray the cost of other bank failures
In the old days the judicial system would take off their fingers or hands.