4 former Fannie, Freddie executives to be grilled at House hearing on companies' collapse
Alan Zibel, AP Real Estate Writer
Tuesday December 9, 2008, 12:02 am EST
WASHINGTON (AP) -- Lawmakers are poised to trade barbs Tuesday about who deserves most of the blame for the collapse and government takeover of mortgage finance titans Fannie Mae and Freddie Mac.
The two companies, which were seized by federal regulators in September, have become highly charged political targets in the debate over what caused the U.S. housing crisis and the resulting financial fallout.
Four former top executives are scheduled to be grilled at the hearing, which is being led by Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee. But there are doubts about whether the hearing will produce any solid conclusions or will just devolve into partisan bickering.
"I think we're going to get a lot of finger-pointing, which will be totally unproductive," said Bert Ely, a banking industry consultant in Alexandria, Va.
Fannie and Freddie, which own or guarantee around half the $11.5 trillion in U.S. outstanding home loan debt, long used their lobbying muscle in Washington to thwart efforts to impose tighter regulation.
Washington-based Fannie and McLean, Virginia-based Freddie are the engines behind a complex process of buying, bundling and selling mortgages as investments.
They traditionally backed the safest loans, 30-year fixed rate mortgages that required a down payment of at least 20 percent. But in recent years, they lowered their standards, matching a decline fueled by Wall Street banks that backed the now-defunct subprime lending industry.
Republicans blame Fannie and Freddie, and the effort to promote homeownership under the Clinton administration for sowing the seeds of the financial meltdown. Democrats defend the companies' role in encouraging homeownership and note that Wall Street banks -- not Fannie and Freddie -- led a dramatic decline in lending standards.
Both companies have been asked to turn over a long list of documents and e-mail messages concerning the risks they took in their mortgage investments, accounting, and compensation for the companies' former CEOs.
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