WASHINGTON - Top executives at mortgage finance companies Fannie Mae and Freddie Mac ignored warnings that they were taking on too many risky loans years before the housing market plunged, according to documents released yesterday by a House committee.
E-mails and other internal documents released by the House Oversight and Government Reform Committee show that former Fannie Mae chief executive officer Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they stay away from riskier types of loans.
Republicans argued that weak government regulation of Fannie and Freddie and policies to promote homeownership during the Clinton administration were the key causes of the financial meltdown.
Democrats acknowledged the two government-sponsored companies contributed to the financial crisis, but stressed that Wall Street banks - not Fannie and Freddie - led the dramatic decline in lending standards that caused mortgages to start defaulting in huge numbers two years ago.
The two companies were seized in September by government regulators.
Fannie and Freddie own or guarantee around half the $11.5 trillion in U.S. outstanding home-loan debt.
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.
Rep. Carolyn Maloney (D., N.Y.) grilled Syron about Freddie Mac's decision to fire David Andrukonis, its former chief risk officer.
Andrukonis sounded warnings as far back as 2004 about the risks posed by loans in which borrowers did not provide proof of their incomes or detail their assets, according to e-mails released by the committee.
"Do you regret firing him?" Maloney asked. "Do you regret buying these risky loans? Do you regret the way you led - and I would say mismanaged - this company?"
Syron said Andrukonis "was fired for a variety of reasons. It was not primarily for his having a view on credit."
Lawmakers were clearly frustrated by what they called a lack of willingness among Syron and Mudd, plus former Fannie Mae CEO Franklin Raines and former Freddie Mac CEO Leland Brendsel, to share any blame for the companies' fortunes.
Repeated attempts to impose tighter regulation on the two companies were thwarted by the companies' powerful lobbyists.
Raines defended his company's lobbying, saying that "Fannie Mae, like any other corporation owned by shareholders, came to Congress and expressed its views."