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Ending Taxpayer Bailouts for Fannie Mae and Freddie Mac
Posted by Randy | May 19, 2011

Last year, Fannie Mae and Freddie Mac spent over $28 billion in taxpayer money. Since then, Fannie Mae has reported a net loss of $6.5 billion and requested an additional $6.2 billion in taxpayer funds from the Treasury. To date, the failures of the two government-sponsored enterprises (GSEs) have directly cost taxpayers more than $150 billion. The Congressional Budget Office (CBO) estimates that total federal subsidy outlays to Fannie and Freddie could total nearly $400 billion through 2019.

The housing crisis of 2008 revealed how the two GSEs were irresponsibly lending billions of dollars to homebuyers who ultimately could not afford houses. This irresponsible lending led to one of the worst housing crises in American history, and hardworking American taxpayers paid the price, not Fannie and Freddie.

We must enact fundamental reform of these entities and of the entire housing finance system. I have cosponsored the Government Sponsored Enterprise (GSE) Bailout Elimination and Taxpayer Protection Act to end the taxpayer-funded bailouts of Fannie Mae and Freddie Mac and put the two GSEs on a path towards privatization. This bill begins implementing important reforms upon enactment, puts a hard two-year end date on conservatorship, and eliminates the government charters after five years.

To protect taxpayers, the bill immediately implements several fundamental reforms:

  • Repeals the GSEs’ misguided affordable housing goals mandate and the Affordable Housing Trust Fund;
  • Starts shrinking the size of the GSEs by capping their maximum portfolio size at $700 billion and gradually reducing that cap to $250 billion over five years;
  • Reduces the GSEs’ market share by returning the conforming loan limit to its pre-housing crisis standard limit of $417,000;
  • Increases guarantee fees to eliminate the GSEs’ competitive advantage and bring more private capital into the market; and
  • Prohibits any reduction to the senior preferred stock dividends the GSEs contractually agreed to pay taxpayers under their conservatorship.

By privatizing Fannie and Freddie over a five-year transition period and gradually eliminating taxpayer subsidies in the secondary mortgage market, the bill requires the GSEs to eventually stand on their own two feet and compete with private sector competitors.

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  • Ron Alldaffer commented on 5/19/2011
    Dump them asap and do not guarantee any dividends!!!
  • Frank Wagner commented on 5/20/2011
    When we re-financed just before the mortgage crash and again after the crash, we were required to show proof of income and assests. Bailing out irresponsible businesses should NOT be the duty of the Ferderal Government. Stockholders must learn that there returns are based on performance not Federal protection. It's a shame we did not do this before the banks sucked us dry.
  • roy ruf commented on 5/22/2011
    i think you should go ahead and shrink their capital size . the available fund should be directed to grant the people fast loans to solve the job and mortgage crisis .
  • alan sandler commented on 6/5/2011
    this is a good blog. in fact, have to admit that this is the informative one. this could be used as a help by many students out there in finding the financial assistance. moroever, if they are in a financial crisis they should take your tips as well. well thank you for sharing this post to us. http://www.directloans-consolidation.com/
  • CYRUS G Murphy commented on 12/2/2011
    I pray you keep on top of HUD in helping fully disabled voters with more assistance in Housing, $200 a month is not enough and I talked to my landlord and our side needs cost of living raises. The $200 against $550 is only the tip of the iceberg. PLEASE send more assistance!!!
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