Last month, we discussed a government report which showed that, much to the chagrin of a few billionaires and a long line of retail investors who bought the proverbial dip, Fannie Mae and Freddie Mac may be destined, by design, by decades of reckless behavior, and by Treasury decree, to be insolvent most of the time. Today, we learned that when it comes to accountability for the executives who helped put the companies in a position whereby receivership became necessary in mid-2008, we can forget about it.

In what was billed as a “high profile” case, the SEC had sought financial and other penalties against three former Freddie Mac executives who allegedly “misled” investors in 2006 by understating the amount of subprime exposure the GSE had on its books while it was simultaneously still sucking up and packaging bad loans. If the SEC allegations are indeed accurate, it’s probably safe to say that using the term “understated” to describe the executives’ misrepresentations is, well, an understatement, because it appears they may have lowballed the figure by a factor of 28. Here’s AP:

According to the SEC, Fannie and Freddie misrepresented their exposure to mortgages for borrowers with weak credit in reports, speeches and congressional testimony. The SEC said Freddie told investors in late 2006 that it held between $2 billion and $6 billion of subprime mortgages on its books — but its actual subprime holdings were actually closer to $141 billion, or 10 percent of its portfolio in 2006, and $244 billion, or 14 percent, by 2008.

But all’s well that ends in a catastrophic housing market meltdown apparently because as WSJ notes, everyone seems to have gotten a pretty good deal considering their actions may have contributed mightily to the worst financial crisis since The Great Depression:

The civil case, filed in 2011, had alleged that three Freddie executives, including former Chief Executive Officer Richard Syron, knowingly misled investors about the volume of risky mortgages the company purchased as the housing boom came to an end. The SEC had sought financial penalties against the executives and an order barring them from serving as officers and directors at other companies. Instead, the executives agreed for a limited time not to sign certain reports required by chief executives or finance chiefs and to pay a total of $310,000 to a fund meant to compensate defrauded investors.

The breakdown of the fees is as follows: Richard Syron, $250,000; Donald Bisenius, $50,000; Patricia Cook, $10,000. As you can see, Ms. Cook got off pretty easy, but then again, they all did because they don’t actually have to pay the fines:

Those amounts will be paid by insurance from Freddie Mac that covered the executives.

And no one had to admit to anything of course:

The pact said both sides agreed to the settlement “without conceding the strengths and weaknesses of their respective claims and defenses.”

Which is just fine with the folks from Freddie who understandably believe it’s not in their best interest for the government to continue to investigate them for fraud and who are pleased to report that in addition to the fact that they will not have to pay anything out of pocket, they will not be limited “in any practical way” by the decision:

Mr. Syron said, “The agreement states that it is not in the interests of justice to continue to litigate this matter, and I wholeheartedly agree with that sentiment.” Steven Salky, who represented Ms. Cook, said, they ”are extremely pleased with this resolution.” Mr. Bisenius said, “The undertakings to which I have agreed in order to put this case behind me do not limit me in any practical way.”

So in the end, all three executives were slapped with fines which they don’t have to pay and were reprimanded in a way that doesn’t limit their future activities at all, which the SEC reckons is commensurate with their part in sinking the entire world economy:

“The settlement’s limitations on future activities (ZH: these are the limitations that don’t limit any one in a practical way) and financial payments (ZH: financial payments they don’t have to pay) reflect an appropriate resolution of the matter,” said Andrew Ceresney, the SEC’s enforcement director.

And remember, there's just one month left under Eric Holder's recent ultimatum which may or may not mean that after May...

* * *

Meanwhile, FHFA officials are busy making sure there’s no chance that the two entities will ever get themselves into another situation where their securitization practices are likely to encourage shoddy lending standards. Here’s WSJ from an article that was posted Wednesday afternoon: