SEC charges former execs of Fannie, FreddieBy Aaron Smith @CNNMoney December 16, 2011: 12:01 PM ET
The Securities and Exchange Commission charged Daniel Mudd, former chief executive officer of Freddie Mac, and Richard Syron, former CEO of Fannie Mae, with securities fraud.
NEW YORK (CNNMoney) -- The Securities and Exchange Commission charged six former executives of Fannie Mae and Freddie Mac with securities fraud on Friday for misrepresenting their holdings of high-risk mortgage loans.
The SEC is targeting three former executives of Freddie Mac (FMCC, Fortune 500), including chief executive officer Daniel Mudd, chief risk officer Enrico Dallavecchia and executive vice president of single-family mortgage business Thomas Lund.
The agency is also going after three former executives of Fannie Mae (FNMA, Fortune 500): CEO Richard Syron, executive vice president and chief business officer Patricia Cook and executive vice president for the single family guarantee business Donald Bisenius.
The SEC is seeking financial penalties against them, but did not specify an amount.
The suit claims that the executives knowingly approved of misleading statements, downplayed the size of their holdings of subprime loans and falsely claimed that their risky investments were minimal and manageable.
"Fannie and Freddie were not innocent victims, but were major players in a game they helped design and develop," said SEC attorney Andrew Stoltmann. "The bailout of Fannie Mae and Freddie Mac has cost American taxpayers in excess of $168 billion with potentially another $51 billion to come."
"The executives who engaged in this conducts must be held liable," he said.
A lawyer for Syron did not immediately respond to CNNMoney's request for comment, and Mudd's lawyer declined to comment.
Mortgage finance giants Freddie Mac and Fannie Mae, which play a central role in the U.S. housing market by keeping the cost of mortgages lower, received the biggest federal bailout of the financial crisis, topping $124 billion.
In addition, top executives have drawn some $100 million in pay.
The U.S. government took over Fannie and Freddie on Sept. 7, 2008, along with the $5 trillion in home loans they were backing at the time. That's when Mudd and Syron left the companies.
The mortgage giants, which were created by the U.S. government, were badly hurt in 2007 by the sharp decline in home prices as well as rising mortgage delinquencies and foreclosures.
Fannie Mae is currently led by Michael Williams, who become CEO in April of 2009. Williams succeeded Herbert Allison, who replaced Mudd.
Freddie Mac is currently led by Charles Halderman, who replaced the former CEO David Moffet in 2009 who had taken over for Richard Syron.
The turnover at Freddie Mac continues. Halderman said he will resign in 2012.
First Published: December 16, 2011: 10:35 AM ET