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Lawmakers Grill Mortgage Chiefs
Former Freddie Mac CEO Richard Syron, when asked at a House hearing about buying loans that didn't require borrowers to state income or assets, said, "In perfect hindsight, I think we always wish that we hadn't bought them."
(By Melina Mara -- The Washington Post)
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Raines has been at odds with Fannie regulators since 2004 when the agency accused him and other executives of manipulating profits in a way that boosted bonuses. The allegations led to a $6.3 billion accounting restatement, but Raines denied wrongdoing. Raines has been sparring in court with the regulator in the years since.
Yesterday, when the lawmakers pushed the executives on why they entered risky new markets, the chief executives responded that lenders wanted the companies to buy the loans, which were fast becoming a big share of the mortgage market.
"We couldn't afford to make the bet that the changes were not going to be permanent," Mudd said.
Despite the losses their companies have suffered, the executives said the companies did not play a major role in bringing about the wider financial crisis.
"All four of you seem to be in complete denial that Fannie and Freddie are in any way responsible for this," said Rep. Darrell Issa (R-Calif.). "You're either standing behind the mandate of Congress or your mandate of your stockholders or perhaps the mandate of your bonus packages and you're telling us everyone's doing it."
Rep. Carolyn B. Maloney (D-N.Y.) pressed Syron about his decision to buy loans that didn't require borrowers to state their income or assets.
"In perfect hindsight, I think we always wish that we hadn't bought them," he responded. "But given the information that we had at the time and given the balance we were trying to achieve, we thought we were making the right decision."
Maloney asked why Syron fired David Andrukonis, the Freddie Mac chief risk officer who authored many memos warning about the dangers of moving into riskier parts of the mortgage market.
"Do you regret firing him?" Maloney asked. "Do you regret buying these risky loans? Do you regret the way you led -- and I would say mismanaged -- this company?"
Syron said Andrukonis "was fired for a variety of reasons. It was not primarily for his having a view on credit."
Mudd told the panel that Fannie's shape was not so bad that it required the government to take it over.
"While I deeply respect the myriad challenges facing the Treasury Department and the regulator, I did not believe that conservatorship was the best solution for Fannie Mae," Mudd said. He said he favored "more modest" steps, such as what the government has done with banks.
