The first question taxpayers would ask would be in regard to the role that Congress’s public policy decisions played in the failure of the financial services markets.  Since the current crisis enveloped the country, populist sentiment toward “big banks” and “Wall Street fat cats” has become increasingly negative.  If, in fact, there was excess, gamesmanship, unethical or illegal activity among banks, taxpayers have a right to know and appropriate regulatory and legal actions should be taken.  Taxpayers also have a right to fully comprehend the impact that Congress’s decisions on financial services issues, especially in regard to Fannie Mae and Freddie Mac, the two mortgage government-sponsored enterprises (GSEs) currently under government conservatorship, had on the subsequent meltdown.  Fannie Mae and Freddie Mac, which at one time owned or guaranteed more than half of the nation’s mortgages and reportedly misled ratings agencies about the quality of those assets, had an important role in the financial crisis, yet, so far, no one from either company is listed as a witness before the Commission. 

“Congress and the current administration have been incoherent vis-à-vis the financial services industry,” said CAGW President Tom Schatz.  “On the one hand, the President and some members of Congress publicly excoriate bankers, laying much of the blame for the meltdown at their feet and stoking rage about their compensation.  Yet Congress has bailed out two of the biggest players in the mortgage market meltdown, Fannie Mae and Freddie Mac, after failing for many years to address the systemic risk posed by the two GSEs.  On Christmas Eve, the Obama administration quietly lifted the $400 billion cap on taxpayer funds available to Fannie Mae and Freddie Mac, issuing the two bankrupt wards of the Treasury a blank check on taxpayer funds, while announcing no exit strategy to wind down these entities.  In addition, the U.S. Treasury is now paying the GSE executives, who are essentially government employees now, $42 million in executive compensation.  President Obama routinely attacks the banks, demanding that they step up their lending and do more to help rescue the economy, while simultaneously proposing a new set of taxes on consumer lending.  The Congress itself is poised to pass a draft of sweeping financial services regulations, even before the Commission has begun its analytical work to determine how to mitigate future risk.  Congress’s public policy and regulatory decisions played an enormous role in the crisis and we urge the Commission to fully explore those actions as well.”   

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

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