Khuzami said that starting in 2006, as Wall Street banks began to gobble up a larger portion of Fannie and Freddie's market share, the two companies began downplaying the amount of risky loans they held.
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"There was no shortage of meaningful disclosures, all of which permitted the reader to asses the degree of risk in Freddie Mac's guaranteed portfolio," attorneys Thomas Green and Mark Hopson said in the statement. "The SEC's theory and approach are fatally flawed."
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In 2007 Fannie Mae reported that only .2 percent, approximately $4.8 billion, of its Single Family loan portfolio was comprised of loans "made to borrowers with weaker credit histories" when in fact, the exposure to subprime loans was nearly ten times that amount, the SEC alleges.
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The federal government took control of the two mortgage giants in 2008 after poor lending practices put them at the brink of bankruptcy. Fannie Mae and Freddie Mac have cost taxpayers $150 billion.
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Fannie Mae's former Chief Executive Officer Daniel H. Mudd, former Chief Risk Officer Enrico Dallavecchia, and former Executive Vice President of Single Family Mortgages, Thomas A. Lund have also been charged with fraud.
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Because the SEC cannot press criminal charges, the executives do not face jail time. Under the civil charges they could be forced to pay fines and penalties that range from the hundreds of thousands into the low millions.
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"Today, the House came together in a spirit of compromise to keep the doors of the federal government open," Pelosi, D-Calif., said in a statement after the vote. "Now, it is time for Republicans to remain at the negotiating table to extend the payroll tax cut for 160 million Americans and unemployment benefits for those who lost their jobs through no fault of their own. We must not recess for the holidays until we get the job done. We must act to strengthen our economy, our middle class, and our future."
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The Senate is not scheduled to vote until tomorrow on the omnibus, technically after the deadline for final passage. The Majority Leader said final passage from the Senate is not necessary today in order to avoid a shutdown at midnight tonight, that it will be just fine to hold the vote tomorrow with no ramifications.
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"There's a ruling from this White House, its predecessors that if one House passes a spending bill as we are doing here, and there's a presumption it will pass in the other body, the time is extended for 24 hours," Reid said.
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Both sides in the Senate will continue to work through the weekend on the payroll tax proposal, with both parties stressing that issues still remain that need to be worked out. But today, both sides again spoke confidently that a deal is on the horizon.
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There is a proposal in the work for a Continuing Resolution (CR) for the payroll plan - likely a short, two-month, $40 billion extension of the payroll tax cut, unemployment insurance and the current Medicare reimbursement rates for doctors.
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"We are making significant progress and reaching an agreement on a package that will have bipartisan support," McConnell echoed today. "I think we're going to get to that place. And I share his view that good progress is being made."





