As finger-pointing escalated in Washington in the search for blame for the housing crisis, at least one ousted mortgage official in the cross hairs says it wasn’t his fault.
Franklin Raines, booted nearly four years ago as chief of mortgage finance giant Fannie Mae, defended himself and his former agency at a congressional hearing yesterday.
“Fannie Mae did not cause the current crisis,” Raines told the House Oversight and Government Reform Committee.
“By the time [Fannie] began its most significant investments in riskier loans in 2005, the roots of the present crisis had long taken hold,” he said.
The panel, headed by Rep. Henry Waxman (D-Calif.), is trying to affix blame and causes for the collapse of Fannie and its sibling Freddie Mac, both of which were taken over by the government in a rescue earlier this year.
Raines and his counterparts at Freddie Mac testified yesterday that blame should start with regulators and members of Congress for pressuring the two entities to expand into riskier loan products with limited oversight.
Raines had been pushed out for alleged accounting rigging at Fannie.
He and his successor, Daniel Mudd, and former Freddie Mac CEOs Richard Syron and Leland Brendsel, told the committee they were always bogged down trying to meet their companies’ “dual mandates as profit-making, shareholder-owned corporations that were also required to promote affordable housing.”
Mudd told the panel that regulators never raised the red flag, despite warnings about troubles ahead.
“At the time the government declared conservatorship over the company, we were still maintaining capital in accord with the relevant regulatory standards, and we were still – along with Freddie Mac – the principal source of lending to the mortgage market,” Mudd said.