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U.S. Covers Millions in Legal Fees for Ex-Freddie, Fannie Executives

Taxpayers have spent more than $160 million defending executives of Fannie Mae and Freddie Mac, infuriating lawmakers who want to know why taxpayers are footing the bill for heads of agencies that have already cost Americans at least $150 billion.

According to The New York Times, the bulk of those legal expenses -- $132 million -- went to pay for the defense of former top executives named in civil lawsuits accusing them of fraud and in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted.

Of the payments, $24 million went to defend former Fannie CEO Franklin Raines and two other executives.

Rep. Randy Neugebauer, R-Texas, chairman of the House Financial Services oversight subcommittee, told Fox News that he wants to know why the U.S. would defend executives who were fired from the lenders. 

"The question I think that doesn't pass the smell test is: why are we paying the legal fees for former employees?" Neugebauer asked. "What kind of litigation is pending that would cause us to think we need to continue to put taxpayers' money in legal fees for people that actually got fired?"

Neugebauer said his committee wants to hold hearings on why the U.S. continued to pick up the tab for these defenses after the two lenders went into conservatorship.

The government took over Fannie and Freddie in 2008 after the housing bust that was, in part, attributed to disreputable accounting practices by the mortgage lenders, including years of inflated profit reports. In 2008, ex-Fannie chief Franklin Raines, who left the agency in 2004, personally paid back nearly $25 million in compensation after settling a lawsuit that claimed he had been improperly rewarded for the billions of dollars in profits that didn't exist.

On Monday, Edward J. DeMarco, acting director of the Federal Housing Finance Agency, which now oversees Fannie and Freddie, provided a statement to Fox News defending the ongoing legal payments.

"I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees. It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship," DeMarco said.

The controversy comes just three weeks before the Obama administration submits its plans for overhauling Fannie and Freddie and getting taxpayers off the hook for them.

Fox Business' Peter Barnes contributed to this report.