(Washington, D.C.) – Today, House Capital Markets Subcommittee Chairman Scott Garrett (R-N.J.) held a hearing on the long-term outlook for the nation’s two massive government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.  The Council for Citizens Against Government Waste (CCAGW) commends Chairman Garrett for leading the way to protect taxpayers, end bailouts, and foster an economic environment that will lure private capital back into the mortgage market by eliminating the government’s interference and influence.  The hearing will help determine the long-term disposition of the GSEs and build a sustainable housing finance system that guarantees that taxpayers will be fully insulated from wayward government policies.  The combined portfolios of Fannie Mae and Freddie Mac currently stand at $1.5 trillion and their liabilities are not accounted for on the U.S. budget balance sheets.   

On September 6, 2008, the GSEs were taken under conservatorship by the U.S. Treasury.  At the time, then-Treasury Secretary Henry Paulson stated that “conservatorship was the only form in which I would commit taxpayer money to the GSEs.”  He further said that he attributed the need for the action “primarily to the inherent conflict and flawed business model embedded in the GSE structure, and to the ongoing housing correction."  In a February 6, 2011 editorial, The Washington Post pointed out that due to the GSEs’ over-subsidization of homeownership and its subsequent collapse the “national homeownership rate today has slipped back to its 1998 level, according to the Census Bureau.  In terms of building community, etc., it’s as if the past 13 years never happened, except for the catastrophic losses to taxpayers – and home buyers.  It might be more accurate to say that federal housing policy has helped destroy communities.”

The GSE bailout has already cost taxpayers $150 billion and some have estimated the total could reach $350 billion.   Recent news reports indicate that Treasury Secretary Timothy Geithner will unveil the administration’s long-awaited plan for the GSEs this Friday.  It will include a proposal to wind down and eliminate the two firms altogether, as well as the option to preserve the present system but make other changes, such as reducing the value of the mortgage loans they can purchase. 

“This is a decisive moment for the country,” said CCAGW President Tom Schatz.  “Burying our collective heads in the sand and repeating the same grievous mistakes of the past is no longer an option.  Fannie Mae and Freddie Mac’s metastatic entanglement with private sector mortgage markets and politicized meddling by Congress ended up driving the economy into the ditch.  CCAGW testified about the need to reign in Fannie and Freddie in 2000 and vocally supported reforms throughout the past decade.  Enough is enough.  Taxpayers are paying an outrageous price for the rank failure of Congress to take action.  It is time to eliminate government involvement in the housing finance system and prevent additional risk and exposure to taxpayers.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.