Little Orphan Fannie Mae

The commission learned from John Kerr, an examiner with the Federal Housing Finance Agency, that Fannie was "the worst-run financial institution" he had seen in 30 years as a bank regulator. Austin Kelly, an official at FHFA's predecessor agency, said regulators couldn't trust Fannie's numbers because their "processes were a bowl of spaghetti."And you should hear what people were saying inside these firms. Former Fannie Mae Chief Risk Officer Enrico Dallavecchia wrote in a 2007 email to the company's COO that Fannie "was not even close to having proper controls processes for credit,Fashion Dresses market and operational risk." He added that "people don't care about the risk function or they don't get it."Over at Freddie, former CEO Richard Syron acknowledged in an interview with the commission that one of the reasons he fired longtime chief risk officer David Andrukonis in 2005 was that Mr. Andrukonis opposed relaxing Freddie's loan underwriting standards.

According to civil charges filed by the Securities and Exchange Commission, around the end of 2004 Mr. Syron rejected the advice of Freddie credit risk officers who had urged him to stop Freddie from guaranteeing so-called NINA loans, which required no verification of borrower income or assets.Adding to the absurdity of the FHFA suit,Fashion Dresses even Fannie and Freddie don't claim they were innocent. The two companies have agreed to a deferred prosecution agreement in which they don't deny misleading investors about the size of their investments in subprime mortgages and liar loans.The SEC is still suing former senior executives at both companies for securities fraud. The cases may not come to trial until 2015,Fashion Dresses which is convenient for the government as it pursues the Fan-and-Fred-as-victims case with Morgan and other banks.

You never know what a trial might tell us about how the companies decided to buy mortgage-backed securities sold by banks.But we do already know that Fan and Fred were in constant communication with issuers and Fashion Dresses were informed in detail what exactly they were buying. In its 2005 annual report, Freddie told investors: "We manage institutional credit risk on non-Freddie Mac mortgage-related securities by only purchasing securities that meet our investment guidelines and performing ongoing analysis to evaluate the creditworthiness of the issuers and servicers of these securities and the bond insurers that guarantee them."

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