The U.S. Securities and Exchange Commission sued a former chief executive of Fannie Mae, Daniel Mudd, and a former chief executive of Freddie Mac, Richard Syron, Friday morning in U.S. District Court in Manhattan over disclosures they allegedly made about subprime home loans.
Also sued were many other former top executives of the lending agencies.
“This action arises out of series of materially false and misleading public disclosures,” the SEC said in the complaint filed against Syron.
“The agency seeks unspecified damages against the defendants. Fannie Mae or Freddie Mac aren’t named as defendants in the case,” Bloomberg reported.
Mudd, who led Fannie Mae from 2004 through the 2008 government takeover, expanded the firm’s holdings of low-quality mortgages. He told investors in 2006 that he planned to increase its higher-risk loans — that anything else would be “counter-productive.”
He changed his tune in 2007, telling lawmakers that Fannie’s exposure to subprime loans “remains minimal, less than 2.5 percent of our book.” Syron added that his organization hadn’t “been heavily involved in subprime all along.”
But 18 months later, Fannie Mae and Freddie Mac reached the brink of insolvency and were seized by U.S. regulators.
Both former CEOs’ attorneys have not yet commented on their clients behalf.