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Legislation forces Congress to account for billions in Fannie, Freddie bailouts

Congresswoman Virginia Foxx has cosponsored legislation that will ensure the federal government is accounting for taxpayer money that is used to prop up the failing finance institutions, Fannie Mae and Freddie Mac.  The legislation, the Accurate Accounting of Fannie Mae and Freddie Mac Act, aims to account for the real cost of federal bailouts for the two government-run entities.

“Fannie Mae and Freddie Mac are burning through billions and billions of taxpayer dollars, but this bailout money is being kept off the government’s books,” Foxx said.  “North Carolina taxpayers deserve to know the full cost of the bailouts of Fannie and Freddie.” 

In 2008, Congress initially put a $200 billion limit ($100 billion each for Fannie Mae and Freddie Mac) on federal bailouts for the failing institutions. But last year the Treasury Department raised the cap to $400 billion, and then on Christmas Eve 2009, Treasury quietly lifted the cap altogether, so that federal assistance is now virtually unlimited for the next 3 years.  

As a result of the federal government’s stealth bailout, Fannie Mae and Freddie Mac losses effectively added $291 billion to the federal deficit in 2009 and will add $99 billion to the deficit for the 2010–2019 period, for a total 10 year cost of $389 billion, according to Congressional Budget Office estimates.  But these costs are currently treated as “off budget,” essentially sugar-coating the real price paid by taxpayers.

“Pretending that the unlimited bailout for these two failed institutions isn’t costing taxpayers a fortune is wrong,” Foxx said.  “It’s just the sort of big-spending, bad government that North Carolina taxpayers are tired of seeing.  Congress needs to stop the legerdemain and shed some light on what Fannie and Freddie are costing the American people.”

The Accurate Accounting of Fannie Mae and Freddie Mac Act (H.R. 4653) will move Fannie Mae and Freddie Mac “on budget.”  Under the bill their losses would have to be accounted for in the budget process and their debt would be subject to the statutory debt limit.  To learn more about H.R. 4653 you can read a short white paper available here.