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Rep. Issa wants explanation for Fannie, Freddie legal fees

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Rep. Darrell Issa (R-Calif.) wrote a letter to Federal Housing Finance Agency Acting Director Edward DeMarco, demanding more information on legal fees paid in defense of former executives at Fannie Mae and Freddie Mac and vowing to keep taxpayers from paying additional legal bills. Last week, Rep. Randy Neugebauer (R-Texas) released the results of his investigation into the fees. Since entering conservatorship in September 2008, Fannie and Freddie have spent more than $160 million in legal fees, including $24 million in defense of former Fannie CEO Frank Raines ($7.9 million), former Chief Financial Officer Tim Howard ($4.5 million) and former Controller Leanne Spencer ($11.8 million), according to the data. "At a time of runaway federal deficits and 10% unemployment, it is extremely distasteful for the American taxpayers to be forced to pay the legal bills of former executives of Fannie Mae and Freddie Mac, companies which were central players in the financial crisis and which have cost taxpayers nearly $151 billion in bailouts since being taken over by the government," Issa wrote. In response to the Neugebauer investigation, DeMarco defended his decision to clear the payments. "I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees," DeMarco said. "It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship." Issa said he wants a "complete explanation of the FHFA's decision," and asked the agency to provide the state and federal laws and agency bylaws that give it the authority to clear such payment. Issa wants the information by Friday. He also asked for all records and communications between Fannie, Freddie, the FHFA, the Treasury Department and the White House in reference to the legal fees. Issa, chairman of the House Oversight and Government Reform Committee, said in January that he plans to lead six investigations, including one on the role Fannie and Freddie played in the foreclosure crisis. Democratic members of the Financial Crisis Inquiry Commission found the GSEs followed Wall Street into the subprime risks, while a dissenter claims their failure resulted from flawed housing policy. Write to Jon Prior. Follow him on Twitter: @JonAPrior

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