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SEC Reaches "Appropriate" Settlement With Freddie Mac Execs Who Will Pay Nothing And Receive No Punishment

Tyler Durden's picture




 

Last month, we discussed a government report which showed that, much to the chagrin of a few billionaires and a long line of retail investors who bought the proverbial dip, Fannie Mae and Freddie Mac may be destined, by design, by decades of reckless behavior, and by Treasury decree, to be insolvent most of the time. Today, we learned that when it comes to accountability for the executives who helped put the companies in a position whereby receivership became necessary in mid-2008, we can forget about it. 

In what was billed as a “high profile” case, the SEC had sought financial and other penalties against three former Freddie Mac executives who allegedly “misled” investors in 2006 by understating the amount of subprime exposure the GSE had on its books while it was simultaneously still sucking up and packaging bad loans. If the SEC allegations are indeed accurate, it’s probably safe to say that using the term “understated” to describe the executives’ misrepresentations is, well, an understatement, because it appears they may have lowballed the figure by a factor of 28. Here’s AP:

According to the SEC, Fannie and Freddie misrepresented their exposure to mortgages for borrowers with weak credit in reports, speeches and congressional testimony.

 

The SEC said Freddie told investors in late 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books — but its actual subprime holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.

But all’s well that ends in a catastrophic housing market meltdown apparently because as WSJ notes, everyone seems to have gotten a pretty good deal considering their actions may have contributed mightily to the worst financial crisis since The Great Depression:

The civil case, filed in 2011, had alleged that three Freddie executives, including former Chief Executive Officer Richard Syron, knowingly misled investors about the volume of risky mortgages the company purchased as the housing boom came to an end. The SEC had sought financial penalties against the executives and an order barring them from serving as officers and directors at other companies.

 

Instead, the executives agreed for a limited time not to sign certain reports required by chief executives or finance chiefs and to pay a total of $310,000 to a fund meant to compensate defrauded investors. 

The breakdown of the fees is as follows: Richard Syron, $250,000; Donald Bisenius, $50,000; Patricia Cook, $10,000. As you can see, Ms. Cook got off pretty easy, but then again, they all did because they don’t actually have to pay the fines:

Those amounts will be paid by insurance from Freddie Mac that covered the executives. 

And no one had to admit to anything of course:

The pact said both sides agreed to the settlement “without conceding the strengths and weaknesses of their respective claims and defenses.”

Which is just fine with the folks from Freddie who understandably believe it’s not in their best interest for the government to continue to investigate them for fraud and who are pleased to report that in addition to the fact that they will not have to pay anything out of pocket, they will not be limited “in any practical way” by the decision:

Mr. Syron said, “The agreement states that it is not in the interests of justice to continue to litigate this matter, and I wholeheartedly agree with that sentiment.”

 

Steven Salky, who represented Ms. Cook, said, they ”are extremely pleased with this resolution.” Mr. Bisenius said, “The undertakings to which I have agreed in order to put this case behind me do not limit me in any practical way.”

So in the end, all three executives were slapped with fines which they don’t have to pay and were reprimanded in a way that doesn’t limit their future activities at all, which the SEC reckons is commensurate with their part in sinking the entire world economy:

“The settlement’s limitations on future activities (ZH: these are the limitations that don’t limit any one in a practical way) and financial payments (ZH: financial payments they don’t have to pay) reflect an appropriate resolution of the matter,” said Andrew Ceresney, the SEC’s enforcement director.

And remember, there's just one month left under Eric Holder's recent ultimatum which may or may not mean that after May...

*  *  *

Meanwhile, FHFA officials are busy making sure there’s no chance that the two entities will ever get themselves into another situation where their securitization practices are likely to encourage shoddy lending standards. Here’s WSJ from an article that was posted Wednesday afternoon:

After more than a year of deliberations, the regulator of Fannie Mae and Freddie Macwill direct the companies to reduce mortgage fees on some borrowers…

 

The fee changes will put an end to more than a year of speculation as to what the FHFA would do under Director Melvin Watt, a former Democratic congressman from North Carolina who some advocates had hoped would prove more amenable to lessening borrowing costs than his predecessor....

 

Nevertheless, the changes that are being made—which include the termination of a borrowing surcharge imposed by Fannie and Freddie during the financial crisis—are likely to draw the ire of some conservatives on Capitol Hill, who believe that the government is generally encouraging riskier lending practices.

 

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Wed, 04/15/2015 - 15:27 | 5995971 SethDealer
SethDealer's picture

this is bullshit, they should be in Gitmo jail

Wed, 04/15/2015 - 15:33 | 5995995 nuubee
nuubee's picture

And I think for hard-labor, they should be forced to document the risk in all the bad loans that were issued and rehypothecated.

Wed, 04/15/2015 - 15:36 | 5996004 macholatte
macholatte's picture

 

CRONY PROGRESSIVISM

 

Meanwhile, Raines, the head of a government-supported institution, made $52 million of his $90 million compensation package thanks in part to fraudulent earnings statements.

Fannie Mae's Franklin Raines $90 Million Compensation

 

 

Franklin Raines to pay $24.7 million to settle Fannie Mae lawsuit

 

The amounts that Raines, Howard and Spencer are paying under the settlement are far less than what the government was seeking when it sued them in December 2006. OFHEO sought fines of around $100 million against the three and restitution totaling more than $115 million in bonus money tied to an improper accounting scheme.

 

Raines’ total compensation from 1998 through 2004 was $91.1 million, including some $52.6 million in bonuses, according to OFHEO. Howard earned $30.8 million during the period, including $16.8 million in bonuses; Spencer received $7.3 million, of which some $3.5 million was bonus money.

 

http://www.seattletimes.com/business/franklin-raines-to-pay-247-million-to-settle-fannie-mae-lawsuit/

 

 

 

Wed, 04/15/2015 - 15:46 | 5996063 pods
pods's picture

The government spent money on this?

<facepalm>

So by investigating a problem, the government actually made it worse.

pods

Wed, 04/15/2015 - 16:39 | 5996275 world_debt_slave
world_debt_slave's picture

yep, harken back to the days of Raines.

Wed, 04/15/2015 - 15:36 | 5996022 813kml
813kml's picture

Gitmo is for brown people.

Wed, 04/15/2015 - 15:50 | 5996076 RafterManFMJ
RafterManFMJ's picture

Ooooo raycissss! We gotta get some Yellows, Blacks, and Reds in there, tonto! I mean, pronto!

Wed, 04/15/2015 - 15:37 | 5996024 Jumbotron
Jumbotron's picture

Fascisim on parade.

Same as it ever was since 1886 when the Supreme Court ruled that corporations are people.

http://www.ratical.org/corporations/SCvSPR1886.html

Same as it ever was since 1913 when the Congress and the Supreme Court legalized income theft and Central Banking.

Income Tax of 1913

Federal Reserve Act 1913

 

Move along....nothing to see.....nothing can be done about it. 

Wed, 04/15/2015 - 16:36 | 5996266 kchrisc
kchrisc's picture

"this is bullshit, they should be in Gitmo jail"

My guillotine begs to differ.

The banksters need to repay us.

 

"Think of the guillotines."

Wed, 04/15/2015 - 22:54 | 5997417 chilli sauce
chilli sauce's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com

Thu, 04/16/2015 - 06:59 | 5998043 doctor10
doctor10's picture

the keys to the world right now, go to those "creating collateral" which is all Raines et al were trying to do. Some wiseacres that lend money to Fed.gov wanted to see more collateral in the form of mortgage (and "tax paying") citizens so the party in DC does'nt come to an end.

but at the end of the day-all the creditors in the world are hungering for collateral. they have yet to figure out that hypertaxed, hyper- regulated criminally governed and  spied upon peoples aren't particularly productive or profitable, or even fun to be around (that part comes next)

Wed, 04/15/2015 - 15:30 | 5995981 Racer
Racer's picture

I have come to expect shocking reading from the justus system but my jaw did literally drop when I read this

Wed, 04/15/2015 - 15:30 | 5995982 goldhedge
goldhedge's picture

"Justice is blind"

 

yeah right.

Wed, 04/15/2015 - 15:31 | 5995985 jcaz
jcaz's picture

Well of course......

Wed, 04/15/2015 - 15:32 | 5995986 Longduckydong
Longduckydong's picture

by 2018 i'll be sitting on the beach clipping negative coupons

Wed, 04/15/2015 - 15:32 | 5995989 BoPeople
BoPeople's picture

Has anyone to date gone to jail for Sarb-Ox violations?

As I recall there are also such things as criminal fraud, racketeering and embezzlement.

Wed, 04/15/2015 - 15:32 | 5995990 J J Pettigrew
J J Pettigrew's picture

Franklin Raines?

How about Rahm Emanuel and the others that cashed checks while on the board?

Thieves complicit in the sytemic near collapse.....

Mayb they should get big bonuses like Wall Street and Goldman

Wed, 04/15/2015 - 15:33 | 5995993 Cognitive Dissonance
Cognitive Dissonance's picture

Yeah, but do the lawyers get paid? That's all that counts.

Wed, 04/15/2015 - 15:33 | 5995998 MFL8240
MFL8240's picture

No bonus for these fine Americans?

Wed, 04/15/2015 - 15:33 | 5995999 Joebloinvestor
Joebloinvestor's picture

This is like the Greeks prosecuting any Greek who got them in the fucking mess from the get go.

Wed, 04/15/2015 - 15:34 | 5996000 youngman
youngman's picture

Fellow politicians or politicians appointees  going to jail...or paying a fine...never...that is not how the system works....

Wed, 04/15/2015 - 15:34 | 5996001 Mr. Bones
Mr. Bones's picture

Holder still can't find anyone to prosecute.  Despite all of the lies and malfeasance not a single person was actually responsible.  That's real fuckin' neato.  I guess whenever I lie to someone from the government I'll try the jedi mind trick too.  "We don't need to litigate this further." 

 

I'll be sure to report back if it works, wish me luck!

Wed, 04/15/2015 - 15:47 | 5996067 astoriajoe
astoriajoe's picture

you may boost your chances of success if you build a big corporation and use it to fund senate campaigns.

Wed, 04/15/2015 - 15:35 | 5996011 Bill of Rights
Bill of Rights's picture
ObamaCare Making Tax Day Even More Of A Nightmare

http://news.investors.com/ibd-editorials-perspective/041315-747594-april...

 

OOPS!

Wed, 04/15/2015 - 15:36 | 5996018 Bay of Pigs
Bay of Pigs's picture

The SEC has never enforced anything that I know of. The give cover to the Wall St Banksters which is their real job and only function.

The people who work there should be ashamed to call themselves Americans. Liars, frauds, pussies, and sellouts.

Wed, 04/15/2015 - 15:41 | 5996036 813kml
813kml's picture

Completely untrue, they took down that notorious inside trader Martha Stewart after she fled to Candyland with her ill-gotten gains.

Wed, 04/15/2015 - 15:45 | 5996058 Grinder74
Grinder74's picture

Only against small-time operators whose lives they can completely ruin and drive into bankruptcy.

Wed, 04/15/2015 - 15:44 | 5996039 Callz d Ballz
Callz d Ballz's picture

It "pays" to be an insider.

 

Meanwhile, in the private sector:

 

http://www.mortgagenewsdaily.com/02122015_cfpb_consent_orders_suits.asp

Wed, 04/15/2015 - 15:42 | 5996047 Exit through th...
Exit through the gift store's picture

Remember kids the justice system is only there for Just Us.

Wed, 04/15/2015 - 15:45 | 5996057 Weaponized Innocense
Weaponized Innocense's picture

Anything for HUD

Wed, 04/15/2015 - 15:45 | 5996061 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Unfucking believable Bankster largesse!!!

p.s. Z/H has been acting funny today and many of the previous comments are deleted. What is going on here today?
Can anyone offer some troubleshooting?

Wed, 04/15/2015 - 15:50 | 5996079 Callz d Ballz
Callz d Ballz's picture

Firefox with adblocker

Wed, 04/15/2015 - 15:55 | 5996093 mastersnark
mastersnark's picture

You don't understand, all of the comment tracking via the account page was wiped out. You can't go back through your account page and find your old comments or those of other posters.

Wed, 04/15/2015 - 16:05 | 5996146 Callz d Ballz
Callz d Ballz's picture

Stuff breaks, I'd try again later.

Wed, 04/15/2015 - 16:17 | 5996196 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

You are right, mastersnark. I looked around on other threads and it's evident that Z/H has been hacked BIG time given the deletions of comments.

 

Tyler(s) I sent an article that I saw on Z/H last week to the Prime Minister's Office [PMO] in CANADA, so that I could politely give Harper the finger on his incompetence regarding the Alberta Oil Sands taxation conundrum and point out, at the same time, that the top Economics website on Internet [ZeroHedge] views Harper's legacy a little differently than the MSM in CANADA does. Frankly, if my suspicions are correct Z/H has been hacked by CSEC operatives in CANADA for the Harper article published last week. Please let me know what you suspect if you think CSEC did it? And I am extremely sorry if it turns out that I am correct in my suspicion, Tyler(s).

 

http://www.zerohedge.com/news/2015-04-09/harper%E2%80%99s-folly-canada-losing-30-billionyear-tar-sands-oil

Wed, 04/15/2015 - 15:47 | 5996068 venturen
venturen's picture

I see some future Hillary cabinet members!

Wed, 04/15/2015 - 15:48 | 5996069 pashley1411
pashley1411's picture

You ever get the feeling that for these SEC people, these "investigations" are merely extended job interviews?   

Wed, 04/15/2015 - 15:53 | 5996070 mastersnark
mastersnark's picture

After he helped address a particularly bad decision by a local Crown representative, John Adams once complained that they should be able to mix the tar with the feathers ahead of time and not carry each separately. Not sure what that has to do with this article, but anything the Colonials did or said should be remembered by us. 

Wed, 04/15/2015 - 15:56 | 5996105 withnmeans
withnmeans's picture

Nice to see Reuters putting up some Bankruptcy print for the good people. All while the markets are on a tear, corporate America may not be, As We All Know.

http://www.reuters.com/article/2015/04/14/usa-bankruptcy-increase-insigh...

Wed, 04/15/2015 - 16:12 | 5996173 agstacks
agstacks's picture

Guys, relax, I'm sure they got a stern talking to!

Wed, 04/15/2015 - 16:16 | 5996188 Mike Honcho
Mike Honcho's picture

BAU in USA

Wed, 04/15/2015 - 16:22 | 5996213 Joebloinvestor
Joebloinvestor's picture

FUCK the SEC.

Anybody remember the scumbag Frank Rains?

http://hennessysview.com/2008/09/15/franklin-raines-criminal-enterprise-...

Wed, 04/15/2015 - 16:29 | 5996242 yogibear
yogibear's picture

Criminals overseeing the criminals.

Wed, 04/15/2015 - 16:41 | 5996282 Fun Facts
Fun Facts's picture

and please don't leave out the CFTC, the enablers for the financial fraud we all endure.

Wed, 04/15/2015 - 16:51 | 5996315 Monty Burns
Monty Burns's picture

HATER!

/sarc

Wed, 04/15/2015 - 16:24 | 5996221 SillySalesmanQu...
SillySalesmanQuestion's picture

Of course they were all pleased with this decision...

Understatement of the year.

Fines paid with insurance money provide by Fannie & Freddie....? Really

Can you and I get this kind of justice like this when we fuck up...?  Not.

Wed, 04/15/2015 - 16:27 | 5996235 yogibear
yogibear's picture

No punishment.

Rewarded for criminal behavior and off to create even larger financial schemes.

Bailout #2 coming. 

It's all about socializing loses and privatizing profits for the bankster.

Rinse and repeat each time. 

Wed, 04/15/2015 - 16:31 | 5996246 Fun Facts
Fun Facts's picture

Absolute systemic corruption from the very bottom to the very top.

Why would anyone expect a different result ?

Wed, 04/15/2015 - 16:31 | 5996249 kchrisc
kchrisc's picture

"It's not stealing if it's plunder."

The banksters need to repay us.

 

Plunder for Zion, that is.

Wed, 04/15/2015 - 16:38 | 5996272 kchrisc
kchrisc's picture

I guess I must be the one today, so here goes: "Free Corzine!"

The banksters need to repay us.

 

"Your wealth is safe with us, but we just don't have it anymore."

Wed, 04/15/2015 - 16:50 | 5996312 Son of Loki
Son of Loki's picture

There's never been a better time then now ... to be a Big Time Wall Street Crook.

Wed, 04/15/2015 - 16:53 | 5996323 Atlantis Consigliore
Atlantis Consigliore's picture

Markets?  Fuggedaboutit,  corruption, its russia...on the potomic

steal all you can as much as you can, as fast a you can.

......steal, and contribute to the party

Wed, 04/15/2015 - 17:06 | 5996365 Feel it Reel it
Feel it Reel it's picture

Let me explain this again....The Lawyers protect the Bankers..The Bankers fund/donate campaign contributions to the Politicians who are the Lawyers....50-55% of the House and Senate are Lawyers/Trail Lawyers..This is a fact look it up yourself...and now you know why the U.S is in serious trouble...The Law profession is corrupt and a serious danger to that silly thing called "The Constitution"....Where's John Corzine?

Wed, 04/15/2015 - 17:12 | 5996386 Dre4dwolf
Dre4dwolf's picture

There is no law.

Wed, 04/15/2015 - 17:36 | 5996482 roadhazard
roadhazard's picture

I guess that showed them.

Wed, 04/15/2015 - 17:45 | 5996519 rwe2late
rwe2late's picture

Just wondering,

was the "kid gloves" treatment given

as reward for silence about any complicity

of higher-ups

in the political/financial food chain?

Wed, 04/15/2015 - 18:57 | 5996798 SmittyinLA
SmittyinLA's picture

The former CEO of FNM went on to the Schlumberger Board of Directors, she served from 2002-2010, now she gives ethics lectures https://www.youtube.com/watch?v=YkPNzIr2S2g

Schlumberger just admitted to commiting SIX YEARS of treason from 2004-2010 

http://www.justice.gov/opa/pr/schlumberger-oilfield-holdings-ltd-agrees-...

the DOJ took a total pass on criminal prosecution

The DOJ prosecutors will retire to a lawfirm partnership with the former CEO of FNM http://www.washingtonpost.com/politics/courts_law/us-attorney-ronald-c-m...  Associates said Machen, who is married and has three sons, including two who are school-age, is likely to return to his old law firm, WilmerHale, where, they said, compensation exceeding $1 million is not unusual. By comparison, the U.S. attorney for the District earns $158,700 a year, less than first-year associates at major firms.

 

Hmm WilmerHale that sounds familiar https://www.wilmerhale.com/jamie_gorelick/

 

No conflict of interst here 

Wed, 04/15/2015 - 20:03 | 5996978 Downtoolong
Downtoolong's picture

That will stop them from doing it again.

With punishment like this, you can bet they will try something far worse than it next time.

Do NOT follow this link or you will be banned from the site!