Taxpayers to Pay Legal Fees for Fannie Mae and Freddie Mac Executives

In what is now emerging as one of the more ludicrous aspects of the $700 Billion bailout package, US taxpayers may inadvertently end up paying for the legal defenses of the mortgage executives who oversaw the financial meltdown in the first place. To clarify, that would mean that taxpayers would be responsible for paying to prosecute AND defend the mortgage executives deemed most responsible for the recent financial collapse.

Obviously, this is silly and seems to make absolutely no sense. But there are several aspects of our government that could be described in exactly the same way. That said, at least this issue has been brought to light and the Bush administration is taking some action to try to avoid this embarrassing expenditure of taxpayer money. Rough estimates would put the legal cost to defend the embattled executives in the tens of millions of dollars. And if you are a law firm and you know that your bills are being paid directly by the federal government, do you think you might find a few extra billable hours or incidental expenses to throw on your invoice?

One important caveat here is that if a prosecuted executive is found guilty, then they are required to repay the money spent to defend them. Of course, if they are found guilty, it's likely that the executive would be going to jail, so it's difficult to say how the collection procedures might work in such a reimbursement program.

In general, this is an almost laughable example of how our bankrupt financial system can be trumped by our corrupt legal system. The prudent approach in this situation may be to hold off on legal prosecution of the mortgage executives in question -- and keep any taxpayer money that would be allotted to that pursuit. Obviously, they weren't "trying" to lose billions of dollars. Quite the contrary, they were unwisely taking huge risks to try to make huge sums of money. Making and losing a stupid bet is just that - stupid. It only becomes criminal when you're making that bet with other people's money. But in this instance, it may be best to stop the bleeding and focus on fixing the problems before prosecuting those who may be responsible.