In today’s Wall Street Journal, there is an article that discusses Fannie Mae and Freddie Mac liability projections, as based on the results of a home-price “stress test” by the Federal Housing Finance Agency. The WSJ reports that the housing giants could cost taxpayers $154 billion under the “most likely scenario” for home prices - potentially much more if darker forecasts prove true:
“Under the regulator's most positive home-price scenario, Fannie and Freddie would lose $6 billion over the next three years and they would still have to ask the government for 11 times that amount to make dividend payments. On its most likely projection - which assumes an end to the housing crisis is close and that home prices will stop falling soon - it will lose $19 billion in the same period.
On the other hand, if the economy slides back into recession and home prices fall by another 20% to 25%, the companies could cost taxpayers an additional $124 billion, before dividend payments.”
Whatever the "final" cost of the Fannie/Freddie bailout, the WSJ is correct in saying it’s “on track to become the most expensive legacy of the 2008 financial crisis.” When conservatorship first began, the Bush Administration claimed the companies would only need $100 billion. Last December, President Obama pledged unlimited sums from the federal government. It is unfathomable for taxpayers to be expected to bear this incredible financial burden. Rather than resisting further cynical political calculations, Congress must act NOW and rein in these housing giants.
In case you missed it, here is some of our most recent work on the issue:
https://www.ntu.org/governmentbytes/the-myth-of-tarps-profit.html
https://www.ntu.org/governmentbytes/still-the-elephant-in-the.html
https://www.ntu.org/news-and-issues/economy/financial-industry/mccain-amnd-3217.html
https://www.ntu.org/news-and-issues/economy/bailouts/honest-accounting-freddie-and-fannie.html