From Rep. Scott Garrett’s opening statement at today’s Fannie/Freddie hearing:
The total bailout costs of Fannie and Freddie are expected to climb much higher. When the Housing and Economic Recovery Act was passed, an arm-twisted CBO scored the GSE titles of the bill at $25 billion and said there was less than a 50% chance that the bailout authority would ever be used and less than a 5% chance that the costs would ever run over $100 billion. The Chairman of the committee, Chairman Frank chastised Republicans on the floor who said that the costs would likely go well over the CBO estimate saying, “It is the most inflationary arithmetic I ever heard.” Of higher cost estimates being used by Republicans he stated, “these numbers that are being thrown around are simply inaccurate and misleading.”
Well, speaking of inaccurate and misleading, the CBO recently updated their scoring of those titles and the cost estimates increased by over 1,500%.
The GSEs have used $85 billion of the $400 billion in capital Treasury has made available, but the Treasury and Fed have put hundreds of billions more into buying up Fannie and Freddie’s mortgage-backed securities — and their share of the mortgage market is growing, not shrinking. This bailout is just getting started.