Posted by Staff Writer December 10, 2008 : 1:55 PM
(From time to time, starting today, the Icahn Report will be publishing news of interest written by staff.)
The CEOs of mortgage giants Fannie Mae and Freddie Mac were warned repeatedly by their risk officers about the dangers of investing in subprime mortgages, but pushed ahead anyway into the strategy that ultimately caused their collapse, Rep. Henry Waxman charged at a House Committee on Oversight hearing on Tuesday. The two government-sponsored entities, which buy mortgages from banks and lenders, were seized by the government in September and given access to $200 billion in capital.
Rep. Henry Waxman, the outgoing head of the House Oversight Committee, said risk managers "raised warning after warning about dangers of investing heavily in subprime and the alternative mortgage market. But these warnings were ignored."; Waxman, whose committee obtained nearly 400,000 documents from both companies, also said Freddie fired its chief risk officer after he warned of the dangers of targeting borrowers who would have trouble qualifying for mortgages.
"The CEOs of Fannie and Freddie made reckless bets that led to the downfall of these companies," said Waxman. The strategy, he said, was "tremendously lucrative" for the CEOs, who took home over $30 million between 2003 and 2007. "Their irresponsible decisions are now costing the taxpayers billions of dollars," Waxman said. –D.H.