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Written by José D. Roncal
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Monday, 10 November 2008 06:23 |
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Even though an Obama administration promises to deliver tax breaks to a large percentage of U.S. citizens, there’s still plenty of bad news to go around for taxpayers. In addition to the whopping sums already paid to bail out certain failing financial institutions, will we now be expected to foot the legal costs for defending their executives? Maybe so.
We all know that mortgage giants Fannie Mae and Freddie Mac were bailed out with tax dollars via the Treasury Department. Then insurance giant AIG received a windfall of $85 billion, ($440,000 of which was immediately blown on lavish spa accommodations and pedicures). Now the AIG stakes have been raised to a record $150 billion because the “smaller” rescue plan wasn’t quite enough to stabilize the ailing company.
Then the Washington Post broke the news that the Treasury pulled some under-the-radar shenanigans and gave a quiet windfall (tax loopholes) to U.S. banks for up to as much as $140 billion – which could cost between $105 billion to $110 billion in lost tax revenues. (See story:A Quiet Windfall For U.S. Banks.
But wait, there’s more. Now we learn that taxpayers might actually have to foot the bill for Fannie and Freddie execs’ legal expenses.
According to a Reuters news release:
| Legal fees can add up quickly. After Freddie Mac restated its earnings in 2003, it became embroiled in several investigations and lawsuits. By the middle of 2005, the company had paid $16.8 million in legal fees for its executives and employees.
Executives who are convicted of wrongdoing are required to give the money back. Those who are acquitted, who are merely witnesses or who are investigated but never charged do not need to reimburse the company.
It's impossible to determine how much money might be at stake. In taking over the two mortgage giants, the government pledged to spend up to $200 billion to keep both companies afloat. The amount the government actually will spend depends on how well the companies perform in a changing mortgage industry.
With so much money at stake, defense attorneys are watching closely to see how broadly housing regulators restrict any future legal payments. The Fannie and Freddie contracts give the executives the right to sue to force the companies to pay their legal fees. If the executives win, the cost of those lawsuits gets passed to Fannie and Freddie, and potentially to the taxpayers.
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See the full story:Taxpayers May Pay Legal Bills for Mortgage Execs. |
