US mortgage bosses face fraud case

The former chief executives of the US mortgage finance giants Fannie Mae and Freddie Mac could become the next senior figures facing fraud charges, as regulators pursue wrongdoing in the lead up to the credit crisis.

Richard Syron, who ran Freddie Mac until it was taken over by the US government in September 2008, has received notification from the Securities and Exchange Commission that it is planning to file civil charges alleging that Mr Syron's firm misled investors over its exposure to subprime mortgages, it emerged yesterday. The notification came in the form of a so-called Wells notice, to which Mr Syron is given the opportunity to respond before charges are filed.

Daniel Mudd, the former Fannie Mae chief executive, who now runs the hedge fund group Fortress, disclosed earlier this week that he too has received a Wells notice. The forced nationalisation of Fannie Mae and Freddie Mac marked the start of the most tumultuous period of the credit crisis, coming just a week before Lehman Brothers went bankrupt.

The two companies operated with an implicit government guarantee in return for helping to promote homeownership among lower-income Americans, and because they owned or guaranteed the majority of US mortgages. They were deemed too big to fail by the Bush administration.

Source: The Independent