The Honorable Jeb Hensarling
United States House of Representatives
129 Cannon House Office Building
Washington, DC 20515
Dear Representative Hensarling:
On behalfof the 362,000 members of the National Taxpayers Union (NTU), I write insupport of your “GSE Bailout Elimination and Taxpayer Protection Act.” Thisbill would put a stop to more taxpayer bailouts of Fannie Mae and Freddie Macand set the two Government Sponsored Entities (GSEs) on a path towardscompeting in the free market.
Foryears, Fannie and Freddie have saved billions in borrowing costs each year byusing their implied federal guarantee to borrow at below market rates.Following the financial crisis, that guarantee was realized, carrying with itan enormous pricetag for taxpayers. Fannie and Freddie’s poor underwritingstandards, 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. PresidentObama’s budget estimates that losses by the GSEs could reach $224 by the end ofthe year.
Prior tothe crisis, NTU strongly pushed for GSE reform, citing the enormous threat totaxpayers should they face bankruptcy or default. Unfortunately, we cannot turnback time, your legislation does ensure taxpayers aren’t imperiled by thesemortgage giants in the future. Your bill would end the conservatorship of theGSEs and, assuming they are viable, allow them to resume limited operation fora three year period. During that phase, taxpayers would be protected bycomprehensive new rules which establish bedrock accounting principles such asincreased minimum capital requirements, minimum loan down payment requirements,and an end to the affordable housing mandate that encouraged poor lendingstandards in the first place. After the transition, your bill ensures Fannieand Freddie become fully private sector companies that must complete in themarketplace without any government advantages or implicit taxpayer guarantees.
While the“Troubled Asset Relief Program” draws more ire from angry taxpayers, it is theGSEs that have triggered much larger costs and pose a grave danger in thefuture. It is therefore essential to protect taxpayers from further excesses ofFannie Mae and Freddie Mac by passing your “GSE Bailout Elimination andTaxpayer Protection Act.” We will be urging the 112th Congress toact decisively on GSE reform and we look forward to working with you in thisendeavor.
Federal Government Affairs Manager