The Gov't Is Sueing Who?

The Federal Housing Finance Agency (FHFA) — the arm that oversees the government-sponsored entities Fannie Mae and Freddie Mac — announced they plan to sue a list of major Wall Street banks for... drumroll, please... lying about the quality of the mortgages they packaged into securities and sold to Fannie and Freddie.
Seriously.
If you’ve been keeping score at home, you already know why this is a joke. The standards by which subprime mortgages were originated, then guaranteed, then packaged and foisted on the investment markets were originally established by Fannie Mae and Freddie Mac.
The pertinent facts were relayed in this video. (Warning: When we linked to this video in 2008, our inbox was flooded with partisan rants. If after watching you have an insatiable need to cast blame, please target a buddy or spouse who may actually care enough about the two-party system to debate you.)
“While I believe that FHFA is acting responsibly in its role as conservator,” one-time Fannie flunky Tim Rood (now a partner at the Collingwood Group) told The New York Times this morning, “I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again.”
Hmmmnn... let’s see if we can get this: A bankrupt government is suing on behalf of two bankrupt quasi-government firms… hoping to recover money from bankrupt banks that were already bailed out once by the aforesaid bankrupt government… and as a consequence may yet need to be bailed out again.


Looks like fun, doesn’t it?
If the suit is going to drag Congress into another political quagmire, why, you might be tempted to ask, do it at all... and why now?
Well, because the statute of limitations expires next Wednesday.
The FHFA will file suit — if not today, then first thing next week. Fannie and Freddie’s losses on these deals are estimated to be $30 billion.