Government-controlled mortgage giants Fannie Mae and Freddie Mac were bailed out by taxpayers, but their regulator opposes making them subject to greater transparency requirements under federal public records laws.
Edward DeMarco, acting director of the companies’ now-regulator, the Federal Housing Finance Agency, told lawmakers last week that Fannie and Freddie “did not cease to be private legal entities when they were placed into conservatorship,” according to MarketWatch. (Read DeMarco’s testimony [PDF].)
His argument? Making the companies subject to the Freedom of Information Act would ultimately cost taxpayers:
The mandates that FHFA as conservator preserve and conserve the property and assets of the Enterprises and minimize losses to the taxpayers, may be undermined by subjecting the Enterprises to FOIA, as they will incur significant operational and compliance costs in establishing and administering a function to respond to such information requests. FOIA requests made to the Enterprises would also lead directly to added legal administrative burdens on FHFA, as conservator.
The FOIA blog, a blog dedicated to news about the Freedom of Information Act, has argued that making the mortgage giants subject to FOIA will save money in the long run but surmised that regulators don’t want the extra scrutiny.
Meanwhile, DeMarco voiced concerns about another proposal that would limit how much taxpayers are on the hook for Fannie and Freddie’s legal expenses.
Fannie and Freddie have spent $160 million and counting on legal fees since the government took them over. That’s money that’s gone to defending the companies and their ex-execs against fraud claims, and as the New York Times reported in January, that sum remained secret until just a few months ago when Fannie, Freddie and the FHFA disclosed it at the request of lawmakers.
DeMarco has defended billing taxpayers for the legal fees, saying that forcing employees to pay their own legal expenses and would make it harder for Fannie and Freddie to attract talent.
As the Associated Press notes, it is common for companies to cover their executives’ legal expenses unless they’re found guilty of wrongdoing. Of course, it’s not common for taxpayers to be paying for it.
Overall, taxpayers have spent more than $160 billion so far bailing out the two mortgage giants.