CCAGW foretells of Fannie Mae and Freddie Mac’s doomed future 

(Washington, D.C.) – The Council for Citizens Against Government Waste (CCAGW), America’s largest taxpayer watchdog group, reports that Fannie Mae and Freddie Mac, two government sponsored enterprises (GSE’s) are travelling down a road that will lead to trouble.  Their current ventures are following a similar path as the Savings & Loan’s (S&L’s) in the 1980s. 

Fannie Mae and Freddie Mac are supported by government subsidies that reached up to $6.5 billion in 1995.  They are also freed from regulatory burdens that the private competitors carry.  In 1999, these expemptions saved Fannie and Freddie $690 million.  This is not the only perk received by Fannie and Freddie.  They each have $2.25 billion line of credit with an interest rate that is nearly as low as that of the Treasury itself.

“The short term debt to buy long term mortgages of Fannie Mae and Freddie Mac will bring economic ruin if the economy hits a slump,” says CCAGW  president Thomas Schatz.  “Taxpayers would be faced with bailing out Fannie Mae and Freddie Mac, at a cost of hundreds of billions of dollars.”

Fannie and Freddie are on a doomed road if they continue with their actions.  Recently, the Office of Federal Housing Enterprise Oversight (OFHEO) who oversees Fannie and Freddie have required them to hold more capital.  This means Fannie and Freddie must take on more risk.  The more risk that they adopt, the more chance occurs of defaulting loans.  This is the pattern taken with the 1980 default of the S&Ls. 

“We should be wary of the actions taken by Fannie and Freddie,” says Tom Schatz.  “The political ties that are connected with them are large and can be disasterous.”  Fannie and Freddie have numerous direct connections to the government.  Five of eighteen directors are appointed by the President, and because Fannie and Freddie were created in Congress, the government will do what they can to make sure they do not fail, probably at any expense, especially to the taxpayer. 

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