The Rise and Fall of Hope and Change

The Rise and Fall of Hope and Change

Alexis de Toqueville

The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.
Alexis de Tocqueville

The United States Capitol Building

The United States Capitol Building

The Constitutional Convention

The Constitutional Convention

The Continental Congress

The Continental Congress

George Washington at Valley Forge

George Washington at Valley Forge

Friday, March 9, 2012

Judicial Watch Sues Federal Housing Finance Agency for Fannie/Freddie Documents on Housing Meltdown

From Judicial Watch:

Judicial Watch Sues Federal Housing Finance Agency for Fannie/Freddie Documents on Housing Meltdown

Judicial Watch has been locked in a series of battles with the Obama administration over Fannie Mae and Freddie Mac records.  Fannie and Freddie are now run directly by the Obama administration, specifically the Federal Housing Finance Agency (FHFA).

The Obama administration continues to advance the arrogant notion - first put forth in its defense against our lawsuit attempting to shake loose Fannie and Freddie records detailing political contributions) - that their records are not subject to the Freedom of Information Act (FOIA).

We vehemently disagree. We launched an investigation into a controversial lawsuit filed by the FHFA intended to extort billions of dollars from private financial institutions on behalf of Fannie and Freddie.

On March 5, 2012, we sued the FHFA to obtain documents related to this lawsuit, which targets 17 financial institutions alleging violations of federal securities laws in the sale of mortgage loans to Fannie and Freddie.

Specifically, Judicial Watch seeks the following records in its September 20, 2011, FOIA request:

Records of, indicating, and/or demonstrating the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) purchased from 17 financial institutions. The specific financial institutions from which the securities were purchased are identified in the enclosed FHFA press release announcing its lawsuit, as conservator for Fannie Mae and Freddie Mac, seeking damages and civil penalties under the Securities of 1933.

Again, we hit a stone wall. The Obama administration continues to maintain that not one record from Fannie or Freddie will be released under FOIA.  

The documents that the Obama administration is keeping secret may go to the heart of the continuing housing crisis.   

On September 2, 2011, the FHFA announced that it had filed a lawsuit against 17 financial institutions, including Bank of America, Countrywide, Citigroup, Morgan Stanley and JP Morgan Chase.

With its lawsuit, the FHFA alleges "some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings." (Private-label mortgage-backed securities were allegedly sold and marketed to Fannie Mae and Freddie Mac.) 

The FHFA contends that these institutions misrepresented the level of risk associated with these financial instruments when selling them to Fannie and Freddie. In other words, these financial institutions somehow tricked Fannie and Freddie into buying these mortgage-backed securities.  

But as reported by The New York Times "…financial service industry executives argue that the losses on the mortgage-backed securities were caused by a broader downturn in the economy and the housing market, not by how the mortgages were originated or packaged into securities. In addition, they contend that investors like…Fannie and Freddie were sophisticated and knew the securities were not without risk."

Frankly, the argument that these financial institutions somehow duped Fannie and Freddie is ludicrous.  As best as I can tell, Fannie and Freddie (and federal housing policy, generally) helped to create the mortgage-backed securities and secondary mortgage markets that collapsed in 2008. The collapse came about because of the loss of confidence in the sub-prime mortgage market - which was also pushed along by the federal government.  (Take a look at this Wall Street Journal editorial for some background on these "fast and easy" government-sponsored mortgages.)

This Obama administration lawsuit is a red herring designed to avert blame from government social engineering/housing policy that has resulted in over $150 billion (and counting) in taxpayer losses.  And the Obama administration says that not one document from Fannie and Freddie, through which the federal government runs the nation's mortgage markets, is subject to disclosure under FOIA to the American people.

Now that it has a shakedown disguised as a lawsuit against much of the private banking industry, the Obama administration is doubling down on its obsessive secrecy.  We hope, through our new lawsuit, that the federal courts will vindicate the public's right to know about this truly epic scandal.

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