Ralph Nader Calls for an Investigation

On April 11, 2011, Ralph Nader sent a letter to Inspector General Eric Thorson at the Department of the Treasury. Nader called for an investigation of "misleading statements by high government officials about the financial health of Fannie Mae & Freddie Mac" prior to their nationalization. This 11 page document outlines a variety of issues, little noticed by the general public.

First, Nader points out some of the basics of the situation. The companies were suddenly and swiftly seized by the U.S. Government in September 2008. Shareholders were not bought out. They weren't eliminated. They continue to exist as 20.1% owners of a company without a defined future. Since 2008, they've become the de facto mortgage market, along with FHA, making mortgages at a government mandated loss.

Next, Nader illustrates the fact that multiple government officials said the companies were "well capitalized," "adequately capitalized," or in "good shape" two months before shareholders were essentially wiped out. The list of shareholder pacifiers includes James Lockhart (OFHEO Director), Barney Frank (Congressman), Chuck Greener (Fannie VP), Christopher Dodd (Senator), Hank Paulson (Treasury Secretary), Ben Bernanke (Federal Reserve Chairman), and Daniel Mudd (Fannie CEO).

The letter then continues to outline some questions that need to be answered. In my opinion, the following questions are the ones most important to be answered by the Treasury:

• "If the two companies should recover, does the FHFA intend to release Fannie Mae and Freddie Mac from conservatorship and relist their securities on the NYSE?"
• "Does the Treasury Department have a moral obligation to provide GSE common stockholders with the legal rights they had before the conservatorship was established?"