Fannie Mae and Freddie Mac, the two government-backed loan groups at the center of the mortgage housing collapse, remain the collective 800-pound gorilla that lawmakers refuse to acknowledge.
How bad are they? For all the bailouts the federal government has conducted, for the trillions spent on everything from Bear Sterns to General Motors to today, Fannie and Freddie are, according to an investigative piece by the Huffington Post, “the deepest money pits.”
Because the groups had government backing, they made decisions about housing that wouldn’t have been conducted in any sane, real-world housing-loan scenario. Within the first three months of this year alone, they had to purchase more than 163,000 homes — more than the entirety of Seattle.
Fannie and Freddie have already sucked up hundreds of billions in government bailouts, and now, reports the Washington Post, they may need an additional $200 billion or more over the next three years. This is unprecedented:
“The federal bailout for Fannie Mae and Freddie Mac could more than double in size during the next three years, according to projections from the companies’ federal regulator. Fannie and Freddie… will likely need at least another $73 billion and perhaps as much $215 billion from taxpayers in the next three years to meet their financial obligations, the Federal Housing Finance Agency said.”
For the past two weeks, as Battle ‘10 has reported, Pat Toomey has been making the case that not only has his opponent, Joe Sestak, helped re-enforce Fannie and Freddie’s culture of dependence by opposing new regulation for the groups, but Sestak even tried to extend those bailouts further:
Sestak, Toomey charged, voted against a “measure that would have imposed limits on the size of Fannie Mae and Freddie Mac’s loan portfolio in 2007.” Sestak ”voted against a measure that would have allowed fannie and freddie to pour money into affordable housing funds only if … their regulator determined that it would not contribute,” explained Toomey, “to the enterprise’s financial instability.” And Sestak “voted against the amendment that would have increased the minimum down payment required for an FHA loan from 3.5 to 5 percent.” “But it gets worse,” Toomey intoned. “Joe Sestak even introduced his own mortgage bailout bill in 2009,” he said, that would have ”the government would bail out underwater mortgages” at a cost of $93 billion.
Contrast Sestak’s refusal as a lawmaker to address these “deepest money pits” with Toomey’s position:
“I think we’re much better off moving in the direction where we scale down and sell off Fannie and Freddie,” said Toomey, “and get away from this quasi-public, quasi-private arrangement.” “It became very clear that as an arrangement where private shareholders got all the upside, and the taxpayer had all the risk,” Toomey told Battle ‘10.
They choice, as they say, could scarcely be clearer.