Lawmakers blast former execs of Fannie Mae, Freddie Mac

WASHINGTON — Three months after the government seized control of Fannie Mae and Freddie Mac, lawmakers on Tuesday blamed former top executives at the mortgage giants for fueling the financial market turmoil that has dragged the country into a recession.

And the housing fallout continues. The National Association of Realtors' index of pending U.S. home sales beat expectations in October — but deeply discounted foreclosures and distressed sales accounted for nearly half the deals.

On Wall Street, stocks fell after a two-day rally as downbeat corporate news reminded investors that the economy's troubles won't soon ease. The Dow Jones industrials fell nearly 243 points, while broader indexes showed more moderate declines.

Seeking the safety of government securities, investors drove demand for ultra-safe Treasury bills so high Tuesday that they were willing to earn no interest on their investments at a Treasury Department auction. Interest rates on four-week Treasury bills slid to zero from 0.04 percent a week earlier.

At the same time, Congress and the White House pushed to clear the final obstacles to a $15 billion bailout of the auto industry.

Internal e-mails and other documents released by the House Oversight and Government Reform Committee show that former Fannie Mae CEO Daniel Mudd and former Freddie Mac CEO Richard Syron disregarded recommendations that they avoid riskier types of loans.

"Their irresponsible decisions are now costing the taxpayers billions of dollars," said Rep. Henry Waxman, D-Calif., chairman of the committee,

which reviewed nearly 400,000 internal documents from Fannie and Freddie.

Republicans argued that the primary causes of the financial meltdown were weak government regulation of Fannie and Freddie and Clinton administration policies to promote homeownership. "We knew a long time ago that this train was going to crash," said Rep. Christopher Shays, R-Conn.

Democrats acknowledged that the two government-sponsored companies contributed to the financial crisis. But they stressed that Wall Street banks — not Fannie and Freddie — led the dramatic decline in lending standards that caused mortgages to start defaulting in huge numbers two years ago.

Two months after federal regulators seized the two companies in September, Freddie Mac asked for an injection of $13.8 billion in government aid after posting a huge quarterly loss. Fannie Mae has yet to request any government aid but has warned it may need to do so soon.