(Alexandria, VA) -- Participants in Senate hearings today have hinted that the bailout of Fannie Mae and Freddie Mac is a done deal and more may be necessary, but the 362,000-member National Taxpayers Union (NTU) disagrees. The group vowed to wage a grassroots campaign supporting efforts to scale back the Fannie/Freddie bailout and protect taxpayers from further harm.
"When Treasury Secretary Paulson fired the self-described bazooka Congress gave him to rescue Fannie and Freddie, his mission seemed to be 'shoot at taxpayers' wallets first and ask questions later,'" said NTU Vice President for Policy & Communications Pete Sepp. "Hopefully now they'll realize that the painful stock-market correction is still less traumatic than the consequences of expanding the government's half-trillion-dollar portfolio of financial bailout liabilities."
NTU has long sought reforms that would cut the government's purse strings to Government-Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac. In 1989, NTU's then-Chairman warned in testimony before Congress that, "[D]espite dramatic increases in borrowing by GSEs, too little is known about the magnitude of the very real risks underwritten by American taxpayers." Less than two months ago, NTU recommended nine pro-taxpayer prescriptions for mitigating Fannie and Freddie's financial woes in an open letter to Congress. Few of those reforms were enacted into law.
For that reason, NTU has launched a new initiative -- centered upon cyber-alerts, talk radio, and Capitol Hill lobbying -- designed to curtail the government's authority to put taxpayers on the hook for this or future bailouts. Specific proposals include:
- Truth in Budgeting. Unless Fannie and Freddie are privatized, their liabilities should be part of the federal budget, not "off the books." This recommendation from the Congressional Budget Office should be cemented into law.
- Make it Shorter. Rep. Connie Mack's (R-FL) recent call to "ensure [the bailout] is temporary and short" deserves support; Congress should pressure the Treasury to shrink Fannie and Freddie more quickly than the 10-year period Paulson envisions. Rep. Scott Garrett's (R-NJ) bill to encourage a "covered bond" market will help private institutions stabilize and streamline mortgage financing. This in turn can aid an economic recovery.
- Stop the Slush Fund. Rep. Michele Bachmann (R-MN) has urged Federal Housing Finance Agency Director Jim Lockhart to suspend GSE financing for the "Housing Trust Fund," a political giveaway to left-leaning housing activists.
- Don't Go Backward. Congress should reject "go-soft" proposals such as a 90-day moratorium on GSE foreclosures that would raise the burden on taxpayers.
"Lehman Brothers aside, the government's actions toward Bear Stearns, Fannie and Freddie, and now handout requests from Detroit automakers could signal an ominous new trend of meddling in markets," Sepp concluded. "Politicians have been digging taxpayers deeper into the fiscal hole, and we have to take their shovels away before we're all buried for good."
NTU is a nonprofit, nonpartisan citizen group founded in 1969 to work for lower taxes, less wasteful spending, and accountable government at all levels. Note: More information on NTU's work in the area of GSE policy is available at www.ntu.org.