Letter
A Letter in Support of the GSE Bailout Elimination and Taxpayer Protection Act
April 4, 2011
The Honorable Jeb Hensarling
United States House of Representatives
129 Cannon House Office Building
Washington, DC 20515
Dear Representative Hensarling:
On behalf
of the 362,000 members of the National Taxpayers Union (NTU), I write in
support of your “GSE Bailout Elimination and Taxpayer Protection Act.” This
bill would put a stop to more taxpayer bailouts of Fannie Mae and Freddie Mac
and set the two Government Sponsored Entities (GSEs) on a path towards
competing in the free market.
For
years, Fannie and Freddie have saved billions in borrowing costs each year by
using their implied federal guarantee to borrow at below market rates.
Following the financial crisis, that guarantee was realized, carrying with it
an enormous pricetag for taxpayers. Fannie and Freddie’s poor underwriting
standards, risky investments, and misguided pursuit of “affordable housing” goals
(largely at Congress’ insistence) have cost taxpayers more than $150 billion.
The enormous financial drain isn’t expected to end anytime soon. President
Obama’s budget estimates that losses by the GSEs could reach $224 by the end of
the year.
Prior to
the crisis, NTU strongly pushed for GSE reform, citing the enormous threat to
taxpayers should they face bankruptcy or default. Unfortunately, we cannot turn
back time, your legislation does ensure taxpayers aren’t imperiled by these
mortgage giants in the future. Your bill would end the conservatorship of the
GSEs and, assuming they are viable, allow them to resume limited operation for
a three year period. During that phase, taxpayers would be protected by
comprehensive new rules which establish bedrock accounting principles such as
increased minimum capital requirements, minimum loan down payment requirements,
and an end to the affordable housing mandate that encouraged poor lending
standards in the first place. After the transition, your bill ensures Fannie
and Freddie become fully private sector companies that must complete in the
marketplace without any government advantages or implicit taxpayer guarantees.
While the
“Troubled Asset Relief Program” draws more ire from angry taxpayers, it is the
GSEs that have triggered much larger costs and pose a grave danger in the
future. It is therefore essential to protect taxpayers from further excesses of
Fannie Mae and Freddie Mac by passing your “GSE Bailout Elimination and
Taxpayer Protection Act.” We will be urging the 112th Congress to
act decisively on GSE reform and we look forward to working with you in this
endeavor.
Sincerely,
Brandon
Greife
Federal Government Affairs Manager
