Every New Revelation Leads to Same Inexorable Conclusion,” Schatz says

(Washington, D.C.)—Citizens Against Government Waste (CAGW) today criticized Congress for failing to enact legislation to establish basic oversight over Freddie Mac and Fannie Mae.  Freddie Mac disclosed Friday that it had inflated its earnings for 2001 in financial reports by $1 billion.  CCAGW President Tom Schatz made the following statement in response to the latest revelation:

Every new revelation in the ongoing accounting scandal at Freddie Mac leads to the same inexorable conclusion:  the  Government Sponsored Enterprises (GSEs) operate in the dark without any meaningful oversight.   For example, the GSEs are exempt from Securities and Exchange Commission disclosure requirements.  It is glaringly apparent that their current regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), is still being caught off-guard by these revelations. 

This situation is untenable for taxpayers, consumers, investors, and homeowners.  GSE officials are well versed in the mantra that their activities pose no risk and that they are the nation’s premier do-gooders.  Yet they are permitted to manage their business operations by whatever accounting standards they deem fit, essentially operating massive hedge funds well outside the oversight and regulatory regimes that effectively govern every other American securities firm. 

The only thing keeping Congress from enacting simple,  common-sense legislation to establish some basic oversight over the GSE is the phenomenal lobbying pressure that Fannie Mae and Freddie Mac have brought to bear on some members of Congress to sideline this important effort this year.  In July of this year, Senators Chuck Hagel  (R-Neb.), John Sununu  (R-N.H.) and  Elizabeth Dole  (R-N.C.) introduced S. 1508, The Federal Enterprise Regulatory Reform Act of 2003.  That bill would have moved the current regulator, OFHEO out of Housing and Urban Development (HUD) and into the Treasury Department and endowed it with new and broader powers.  Although Congress has missed its chance this year to protect taxpayers with regard to the GSEs’ activities, CCAGW encourages these senators to stay the course.  CCAGW also encourages other members of Congress to support these reforms again next year before it is too late. 

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Governmetn Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.