Fraud charges against Fannie Mae, Freddie Mac execs

The Securities and Exchange Commission on Friday brought civil fraud charges against six former top executives at Fannie Mae and Freddie Mac, saying they misled investors about risky subprime loans the mortgage giants held when the housing bubble burst.

Those charged include the agencies' two former CEOs, Fannie's Daniel Mudd and Freddie's Richard Syron. They are the highest-profile individuals to be charged in connection with the 2008 financial crisis.

The federal government has faced criticism for not bringing charges against top executives who may have contributed to the worst financial meltdown since the Great Depression.

Mudd, 53, and Syron, 68, led the mortgage giants in 2007, when home prices began to collapse. The four other top executives also worked for the companies during that time.

The lawsuit was filed in federal court in Manhattan.

"Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was," said Robert Khuzami, SEC's enforcement director. "These material misstatements . . . misled the market about the amount of risk." Fannie and Freddie both entered into agreements with the government on Friday, accepting responsibility for their conduct without admitting or denying the charges.

The Justice Department has opened up probes into Fannie and Freddie but has not charged anyone with a crime.

In a statement released through his attorney, Mudd said the lawsuit "should never have been brought" and said the government reviewed and approved all of the company's financial disclosures.

Syron's lawyers said the case was "without merit," and said the term "subprime had no uniform definition" at that time.

During the financial crisis, the two firms verged on collapse. The Bush administration seized control of them in September 2008.

So far, the companies have cost taxpayers almost $150 billion -- the largest bailout of the financial crisis.