In a letter to Rep. Richard Baker, the Fed Chairman acknowledges taxpayer cost of subsidy. 

(Washington, D.C.) – In a letter today to Rep. Richard Baker (R-La.), chairman of the House Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises, Federal Reserve Chairman Alan Greenspan criticized implicit taxpayer subsidies to government sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac.  The Council for Citizens Against Government Waste (CCAGW) praised Greenspan for his comments on the issue.

“Chairman Greenspan has added his respected voice to those of other budget authorities like the General Accounting Office and Congressional Budget Office,” said CCAGW President Thomas Schatz.  “GSEs like Fannie Mae and Freddie Mac receive billions of dollars in special government benefits which end up enriching GSE stockholders instead of promoting affordable homeownership.”

Greenspan wrote that the GSEs’ subsidies come “at the expense of other federal or private sector initiatives and hence are ultimately financed by households, either through taxes or through the reduced accumulation of wealth.”

“Fannie Mae and Freddie Mac try to have it both ways.  Their stockholders are addicted to double-digit growth rates and enormous profits, while they spend millions on Washington lobbyists and public relations firms to preserve their government-subsidized status, “ Schatz continued.  “As Chairman Greenspan wrote today, the American people are ultimately paying the bill for Fannie and Freddie’s two-faced practices.”

Schatz noted that Citizens Against Government Waste recently released a report on political cronyism at GSEs entitled Corporate Welfare for the Politically Connected: The Story of Fannie Mae and Freddie Mac.  “We share Chairman Greenspan’s view that the GSEs have served an historically important purpose,” Schatz concluded.  “However, now that they show symptoms of that age-old Washington malady, mission creep, Congress must act to ensure that their non mission-related activities and exploding debt load do not put taxpayers at risk.”

CCAGW is the lobbying arm of Citizens Against Government Waste, a nonpartisan organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.  CCAGW is a member of HomeEC, a coalition of taxpayer groups who want greater accountability of GSEs.