There's no law against running a flawed business poorly. If there were, the Securities and Exchange Commission (SEC) would have far more to work with in going after former Fannie Mae and Freddie Mac bosses for misleading investors.

Federal investigations of the GSEs have been underway for several years on a notably modest scale. The Department of Justice looked into filing criminal charges but ultimately decided against doing so. Now comes the SEC's new bid to prove former execs misled investors or mismanaged the GSEs. Even if the SEC prevails with either charge, it isn't likely to recoup much financially. The SEC's potential fines are limited to the value of ill-gotten profits, and any judgments would likely be covered by insurance on Fannie and Freddie directors and officers.

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