I have mixed emotions here. I think loser pays should apply to all legal proceedings. Nobody should be bankrupted defending themselves from spurious charges. On the other hand, we certainly shouldn't be defending corrupt executives of a quasi-governmental agency.

The solution is to have fewer governmental agencies.

I don't have any mixed emotions at all. This is a civil matter that has zero to do with the fed, other than to cover there ass. The tax payers of this country did not bail out (against our will) Fannie and Freddie so they could defend themselves against civil litigation. The monies were an effort to try and protect the housing market from further collapse. How far the extra 160 million (and counting) would have helped as opposed to being spent to save the collective asses of the very people who created the bubble in the first place is unknown. We can however logically conclude that it would have helped exponentially better than being siphoned off in order to protect themselves. Using the loan for reasons other than attended is fraud and the loan with all interest should be recalled and these guys should be prosecuted.

The federal government should be ashamed for allowing this to occur in the first. Just add it a very long list of the corruption that goes on in DC…..

The situation with the financial GSO's is a classic demonstration of moral hazard. You provide incentives for risk taking, in the form of generous compensation and bonuses, but then remove executive and legal accountability through government underwriting and legal indemnification. Voila! - The principles take imprudent risks to maximize their compensation, because the costs that they face for risk taking, both financial and legal, have been absorbed by the government. It may not be ethical, but it is a perfectly rational strategy.

If they were executives of a private company who were covered by D&O insurance, I wonder if the insurance company under these circumstances would have been so eager to shell out tens of millions of dollars so readily...

This is terrible--and also terrible that we all accept lawyer's bills as somehow okay.

How about all business disputes compelled into binding arbitration? The legal system has run amok.

> How about all business disputes compelled into
> binding arbitration? The legal system has run
> amok.

Arbitration is not normally cheaper, and can be more expensive than, litigation:

http://www.citizen.org/publications/publicationredirect.cfm?ID=7173

Snoopy, that is an interesting study, but seems to also suggest we could improve arbitration to reduce costs.

I stand by my statement the legal system has run amok--$38 million to defend Mr. Raines? And counting?

Okay, we all hate Raines. But suppose for second he is in fact innocent. What should have he done in that case? Plead guilty to avoid costs?

Many, many times we have heard crooks and possibly innocent or honest people say they settled, to avoid court costs. Really, this is a system designed for the benefit of lawyers, the same way our military is for the benefit of federal employees and contractors, and the USDA is for agribusiness.

Man, oh man, never go into a business where you face competition in the open market.
That is the lesson here.

So the taxpayer is paying for both sides of this show. Well, as a rational-actor taxpayer, here's my response to that: Screw the whole thing. Drop all charges and let Raines walk. Seeing him spend a year (at worst) at a Club Fed is a lot less important to me than the waste of my damn money.

So how do we discourage future Franklin Rainses? Simple. Shut down Freddy's Fanny. The housing market's already completely fucked; it can't possibly get any worse. Killing this atrocity will deny any more Rainses the opportunity to do their dirty work. And while we're at it, let's pass a Constitutional amendment that prohibits the federal government from ever having an ownership interest in any corporation, for any reason whatsoever. No more Freddy's Fannies, ever.

Barney Frank should be drawn and quartered with his entrails set ablaze...

And while we're at it, let's pass a Constitutional amendment that prohibits the federal government from ever having an ownership interest in any corporation, for any reason whatsoever.

The will never happen at the fed level. But I'll sign the petition so that a state says that it will not allow the fed to operate such orgs in a state.