Taxpayers Foot Bill For Fannie, Freddie Legal Fees U.S. taxpayers have spent more than $160 million defending former executives at Fannie Mae and Freddie Mac. Meanwhile, the Treasury Department is finishing up a report on how the mortgage giants should be restructured, with the government playing a smaller role in the housing market.
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Taxpayers Paid Millions In Fannie, Freddie Legal Fees

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Taxpayers Paid Millions In Fannie, Freddie Legal Fees

Taxpayers Paid Millions In Fannie, Freddie Legal Fees

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MICHELE NORRIS, Host:

That's how much taxpayers have spent on legal fees to defend the mortgage giants and their former executives against pending lawsuits, as NPR's Tamara Keith reports.

TAMARA KEITH: Throughout the past decade, these firms and their top executives made some huge mistakes - bad investments, bad decisions. In September 2008, the two massive firms became the responsibility of U.S. taxpayers. And so did their legal fees. Since the government took over Fannie and Freddie, those fees have totaled more than $160 million.

RANDY NEUGEBAUER: The fact that we are still paying those legal fees is a great concern to me and should be a concern to the American taxpayers.

KEITH: Congressman Randy Neugebauer is a Texas Republican who heads the subcommittee that oversees Fannie and Freddie. He requested the information about legal fees from the firms' regulator and then released the information.

NEUGEBAUER: It brings the question, what other things are going on over there that might not be in place to minimize taxpayers' exposure?

KEITH: The firms' regulator defends paying the legal fees. And Charles Elson, a professor of corporate governance at the University of Delaware, says there's really no choice.

CHARLES ELSON: It's one of these you can feel bad and be angry about it, but in the end, you're not going to change very much and probably nor should you.

KEITH: He says almost all contracts for corporate executives include indemnification clauses that say the company will pay legal fees if there's a lawsuit or criminal investigation. Otherwise, no one would take these sorts of jobs.

ELSON: Bottom line is until the court says that these people have acted badly, the company and obviously its owners, the taxpayers, are on the hook.

KEITH: Phillip Swagel is a professor of public policy at the University of Maryland.

PHILLIP SWAGEL: I would say the most important thing now is to resolve the situation of Fannie and Freddie so that there are not more losses.

KEITH: Tamara Keith, NPR News, Washington.

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