TAXPAYER GROUP BLASTS EXPLODING GSE SUBSIDIES | Citizens Against Government Waste

TAXPAYER GROUP BLASTS EXPLODING GSE SUBSIDIES

Press Release

For Immediate ReleaseContact:  Sean Rushton or Melissa Naudin
May 18, 2001(202) 467-5300

 

Washington, D.C. – America’s premier taxpayer watchdog group, Citizens Against Government Waste (CAGW) today reacted strongly to recent media reports that the value of the implied subsidies received by the nation’s two mortgage giants, Fannie Mae and Freddie Mac, has exploded by 74 percent since 1995 and that 37 percent of the subsidies are pocketed by Fannie Mae and Freddie Mac shareholders. 

“This Congressional Budget Office (CBO) analysis confirms what so many, including representatives of the U.S. Treasury Department and Federal Reserve Chairman Alan Greenspan, have suspected,” said CAGW president Tom Schatz.  “Fannie Mae and Freddie Mac have used their lucrative government charters, and the huge subsidies that come with them, to accrue monumental amounts of debt, reap above-market rates of return, invade and undercut other financial services sectors, all the while shifting the risk to taxpayers.  Congress and President Bush must turn their attention to this problem before the taxpayers are bailing out another out-of-control financial institution.”

Advance word on the content of the long-awaited CBO study reveals that the two government-sponsored enterprises (GSE), which, by 1998 owned or guaranteed nearly 74% of all conventional conforming home mortgages, hovers close to $10.6 billion annually.  The portion that is withheld by the GSEs, enriching stockholders and GSE executives, has also risen, from one-third in 1995 to 37 percent today.

CAGW is a member of the HomeEC coalition, an ad hoc coalition of taxpayer and consumer groups committed to drawing much-needed attention to the escalating debt load of the housing GSEs, the absence of either true market discipline or congressional and regulatory oversight of their activities, and the mounting risk these activities pose to taxpayers.  Other members of HomeEC include the National Taxpayers Union, Competitive Enterprise Institute, 60 Plus, and the Free Congress Foundation.  HomeEC sounded the alarm during the 106th Congress, when House Financial Services Chairman Richard Baker (R-Ala.) introduced a bill to reform the GSEs and requested an update to the CBO’s 1996 analysis of their subsidies. 

“We support Chairman Baker’s foresight in requesting this CBO update,” said Schatz.  “Since the GSEs lack meaningful transparency and accountability to the taxpayers, studies like this provide a rare window into the workings of these quasi-governmental entities.  We applaud Chairman Baker’s determination to shed light on the activities of Fannie Mae and Freddie Mac, their astronomical debt load, and the systemic risk their actvities could pose to taxpayers and the economy as a whole.” 

CAGW is a nonpartisan, nonprofit organization with over a million members and supporters, dedicated to eliminating waste, fraud, and abuse in government.

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