We noted how the FHFA IG’s report on examination staff highlighted the conflict inherent in being both a prudential regulator and conservator. Far more damning is today’s report, in which the IG argues that FHFA dismissed examiner alerts to taxpayer risk in Freddie Mac’s settlement with BofA. The details of the IG’s report show that Freddie continued to focus on doing business with BofA, trying to enhance its relative competitiveness to Fannie Mae, agreeing to a settlement that the examiner believed and the IG concludes costs the taxpayer even if it seemed at first to minimize claims from Freddie on the Treasury. Congress will get into this with vigor, expanding the IG and putting more heat on FHFA possibly to the point of forcing its hand on refis.


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