Federal regulators are suing former Fannie Mae boss Daniel Mudd and ex-Freddie Mac CEO Richard Syron for vastly downplaying the volume of subprime loans their firms held. Freddie Mac suggested it was exposed to between $2 billion and $6 billion in subprime loans; the figure was more like $244 billion. Fannie Mae pointed to $4.8 billion in subprime exposure when the figure was really 10 times that, the SEC says. The regulators have reached non-prosecution agreements with both firms.
Those agreements mean the firms must "accept responsibility" in the case and allow an SEC probe of some executives. The companies' "material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books," an SEC official said in a statement. Four other executives at the firms are named in the suits, which call for financial penalties as well as disgorgement and a ban on the execs running other companies, Bloomberg reports. (Read more Daniel Mudd stories.)