WASHINGTON, DC--(Marketwire - July 14, 2010) - Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it filed a Freedom of Information Act (FOIA) lawsuit on July 12 against the Federal Housing Finance Agency (FHFA) regarding the agency's September 2008 decision to place Fannie Mae and Freddie Mac under "conservatorship." Judicial Watch filed the lawsuit on behalf of Vern McKinley, who has worked in supervision of financial institutions, central banking and deposit insurance for the past 25 years, as part of its comprehensive investigation of the federal government's response to the financial crisis.
In the FOIA lawsuit, Judicial Watch seeks the following information on behalf of Mr. McKinley:
"[A]ny and all communications and records concerning or relating to the assessment of an adverse impact on systemic risk in addressing Fannie Mae and Freddie Mac, and in particular how the FHFA and the Department of the Treasury determined that conservatorship was the preferred option to avoid any systemic risk of placing Fannie Mae and Freddie Mac into receivership."
Mr. McKinley filed his FOIA request on May 23, 2010. The FHFA acknowledged receipt of the request on May 26, 2010, but has failed to produce any documents or demonstrate why documents should be withheld. The agency was required by law to respond by June 28, 2010, but has failed to indicate when a response is forthcoming.
On September 7, 2008, in a joint press conference with former FHFA Director Jim Lockhart, then-Treasury Secretary Henry "Hank" Paulson announced that after examining "all options available," Fannie Mae and Freddie Mac would be placed under "conservatorship" by the federal government. "Based on what we have learned about these institutions over the last four weeks -- including what we learned about their capital requirements -- and given the condition of financial markets today, I concluded that it would not have been in the best interest of the taxpayers for Treasury to simply make an equity investment in these enterprises in their current form," Paulson said. Lockhart expressed support for the Treasury Secretary's decision, indicating that he told the Treasury Secretary "conservatorship was the only form in which I would commit taxpayer money to [Fannie and Freddie]."
To date, there has been little information released regarding the internal assessments used by federal officials to justify the takeovers. For example, nothing has been detailed regarding why the option of conservatorship was chosen over another option under law: placement of Fannie Mae and Freddie Mac into receivership, a form of outright liquidation. Meanwhile, taxpayers have "invested" $145 billion dollars in Fannie and Freddie so far, with some analysts estimating the total cost could ultimately be hundreds of billions of dollars higher. The FHFA requested additional funding for Fannie and Freddie in its recent report to Congress. Last December, the Obama administration pledged an unlimited amount of taxpayer dollars to keep Fannie and Freddie afloat, a commitment that was formerly capped at $400 billion.
"The American people remain in the dark regarding the collapse of Fannie Mae and Freddie Mac. This untenable secrecy continues despite the astonishing costs being borne by taxpayers. Frankly, if Fannie and Freddie had simply been liquidated, taxpayers would likely have saved tens and possibly hundreds of billions of dollars, depending upon what the ultimate costs are. Given Fannie and Freddie's mounting losses, one wonders why liquidation still seems to be off the table. The Obama administration owes the American taxpayer the full details regarding the government's decision to seize control of Fannie and Freddie. The FHFA should stop stonewalling and release all documents requested by Mr. McKinley," said Judicial Watch President Tom Fitton.
Judicial Watch currently is litigating three additional FOIA lawsuits on behalf of Mr. McKinley related to the government's response to the financial crisis. Visit www.JudicialWatch.org to access documents related to these lawsuits.
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