WASHINGTON — Rep. Brad Miller on Tuesday lauded the federal agency that oversees Fannie Mae and Freddie Mac for filing lawsuits in an effort to recover billions of dollars from large financial institutions.
"I want them to pursue those claims, legitimate claims, to reduce taxpayer losses," Miller, a North Carolina Democrat, said during a conference call with reporters. "And the failure to pursue legitimate claims that would reduce taxpayer losses would very obviously be a subsidy to the banks."
Miller was reacting to the Federal Housing Finance Agency's decision to sue 17 financial institutions over losses on private-label mortgage backed securities that Fannie and Freddie bought from the banks from 2005 to 2008. The institutions being sued include five of the six largest U.S. banks — Bank of America, JPMorgan Chase, Goldman Sachs, Citigroup, and Morgan Stanley — but not Wells Fargo.
The lawsuits, filed Friday, allege that the financial institutions misrepresented the quality of nearly $200 billion in mortgage bonds. Bank of America, which has the largest exposure to the suits of any bank, is being sued over $57 billion in bonds. B of A's potential exposure is far less than that amount, but nonetheless in the billions of dollars.
Miller has been urging FHFA to pursue mortgage claims against large banks for at least a year. He said that failing to do so — out of a concern about bank solvency — would undermine the rule of law.
Moreover, he said that federal bank regulators took into account the banks' potential legal liability for mortgages in the most recent round of bank stress tests earlier this year, though they apparently did not in the 2009 stress tests.
"That is something that the regulators should have been taking into account for months or years," Miller said.
When asked about the appetite for the U.S. Treasury to continue funding losses at Fannie and Freddie, he showed little patience: "I know I don't have much appetite for that. I want our money back."
