Fannie Mae and Freddie Mac on Capitol Hill

December 9, 2008 12:00:00 AM PST
The leaders of Fannie Mae and Freddie Mac are got an earful on Capitol Hill Tuesday morning. They're answering questions about their roles in the collapse of the housing giants. The result of the subprime mortgage meltdown can be felt across the country. Single family home sales in Wake County, North Carolina are down nearly 40- percent this year compared to last.

Neal Driver had to cut his asking price by $10,000 dollars. "It's not what I wanted but I'm happy with it especially the way the market is holding right now."

Many analysts assign much of the blame for the mortgage meltdown to Freddie Mac and Fanny Mae for investing in the risky subprime mortgage market. "Their own risk managers warned them again and again about the dangers of investing heavily in the subprime mortgage crisis, but those warnings went ignored," said Rep. Henry Waxman (D) CA.

Before the house oversight and government reform committee, a former Freddie Mac CEO insisted the now government-controlled entity was essentially forced into the subprime mortgage market. "As the private lending sector shifted toward those types of loans, Freddie needed to participate in order to carry out its public mission of promoting affordability, liquidity and stability in housing finance."

And former Fannie Mae chief Daniel Mudd refuted many of the claims made by the committee.

Tierney: "Do you agree that was the wrong decision to make?"

Mudd: "No, sir, I would not."

Tierney: "But, you bought $200-million dollars worth of that?"

Mudd: "No."

That's when the hearing took on a much more combative tone. "One thing I see: all four of you are in complete denial that you are in any way responsible," said Rep. Darrell Issa (R) CA.

There is some encouraging news: it was revealed Tuesday morning that pending sales of existing U.S. homes fell by a smaller-than-expected margin in October.

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