Fannie Mae and Freddie Mac are a microcosm of the federalgovernment – a well intentioned, but hugely wasteful enterprise that just can’tstop itself from burning a hole in taxpayer wallets. Today, Fannie and Freddieare back at the government trough, asking for more money to fund theiruncompetitive business structures.
Just how much are we on the hook for this time? Combined,the two mortgage behemoths have requested another $3.1 billion from theTreasury after once again reporting losses in the millions. Since 2008 when thecompanies were placed under government conservatorship, the two companies havereceived nearly $156 billion in taxpayer money.
The enormous financial drain isn’t expected to end here.President Obama’s budget estimates that losses by Fannie and Freddie couldreach $224 billion by the end of the year.
At a time when taxpayers are already drowning in red ink,the federal government must take steps to throw us a life-raft, namely throughreforming Fannie and Freddie. But as with all things, the Obama administrationis urging patience. “Given Fannie Mae and Freddie Mac’s current role in themortgage market, we must proceed carefully with reform to ensure governmentsupport is withdrawn at a pace that does not undermine economic recovery,” saidTreasury Secretary Timothy Geithner is a report to Congress made earlier thismonth.
Such patience has not been rewarded in the past. As we madeclear during the debate over H.R. 4173, the Wall Street Reform and ConsumerProtection Act,” the administration neglected a perfect chance to reform thesebroken housing giants. For the better part of 20 years, successive Congressesand Administrations from both parties have failed to address the fundamentalissues surrounding the structure of GSEs. As NTU Founder James Davidson arguedbefore the House Ways and Means Committee in 1989,
“One of the unfortunate lessons of theSavings and Loan debacle is that off-budget activities, loan guarantees, andquasi-government functions can have a tremendous impact on the federal budget.. . Should a similar catastrophe hit GSEs, bailout costs could multiply tolevels that would not currently seem credible.”
More than 20 year later, ourpatience has run out. Senate Republicans have already offered ideas for reformincluding mandating an end to the federal conservatorship within 30 months,requiring a gradual dissipation of their mortgage portfolios by 10 percent eachyear, and establishing post-conservatorship guidelines for loan guarantees. Itis time for this Administration to address the dire financial situation ofFannie and Freddie before taxpayers are left with another quarterly bill.