GSEs, at last

16 December 2011 By Richard Beales, Daniel Indiviglio Follow @richardbeales1

The U.S. watchdog has charged six ex-executives of Fannie Mae and Freddie Mac, the biggest bailout recipients, over subprime loans. It’s about time. Wherever the charges go, they’re symptomatic of the twisted consequences of the U.S. mortgage lending model. Its reform is overdue.

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The U.S. Securities and Exchange Commission on Dec. 16 charged six former top executives of government mortgage giants Fannie Mae and Freddie Mac with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

The financial crisis of 2008 caused the two firms’ collapse, forcing the government to take them into conservatorship in September that year. Through last quarter, their combined net bailout from the U.S. Treasury exceeds $150 billion.

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