Housing Hysteria: Will Fannie and Freddie Get Another Free Pass?

Monday, August 16, 2010 10:48 AM by Lauren Forbes

Government officials, economists, academics and mortgage-industry executives will be meeting tomorrow to discuss the future of Freddie Mac and Fannie Mae. The behemoth of government lending, comprised of these two lenders and the Federal Housing Administration, back 9 out of 10 new home loans. Since 2008 over $148 billion of taxpayer’s dollars have gone towards keeping the two afloat. We have paid a great deal of attention to the problems associated with the government serving as the insurer of last resort – this ultimately amounts to taxpayer-funded risk that homebuyers know will be guaranteed. Last year, in our Cost of Government Day Report, we discussed how both TARP and the prospective Financial Regulatory Reform effort would codify taxpayers as perpetual backers of mortgage lending. This year, it seems these fears are even closer to coming true – the passage of the Dodd-Frank bill perpetuates the bailout cycle and noticeably absent from the bill was any attempt to address the growing insolvency of Fannie and Freddie. As the two year anniversary of the bank bailout approaches, the White House has still yet to offer any solutions to getting the housing market back on track and in the hands of the private sector. What’s more, the financial overhaul stands to cost taxpayers a great deal more than in its initial price tag, given the administration’s apathy towards reforming the most virulent problem of the public guarantee of the mortgage market. Stay tuned for the release of the 2010 Cost of Government Day report to see just how this latest fumble on financial reform will impact taxpayers in the coming years.

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