May 17, 2011

Crapo: Taxpayers Have A Right To Know About Bailouts

Amendment to include Fannie, Freddie's debt fails

Washington, D.C. -Idaho Senator Mike Crapo attempted to bring transparency to taxpayers by requiring that Fannie Mae and Freddie Mac be included in calculations of the national debt as long as either institution is under conservatorship or receivership. Crapo filed an amendment to S. 3217, the Restoring American Financial Stability Act of 2010. In addition to pointing out the debt increases, the Crapo Amendment would have reestablished the $200 billion bailout cap per entity.

Last Christmas Eve, Treasury announced that it was lifting the $400 billion loss cap on the two companies, creating a potentially unlimited liability, and effectively providing the full faith and credit of the government in support of their debt. Although a majority of Senators voted in the affirmative (47 to 46), the effort failed to waive a budget point of order which required 60 votes.

The Crapo Amendment was co-sponsored by Senators Judd Gregg (R-New Hampshire), Richard Shelby (R-Alabama), John McCain (R-Arizona), David Vitter (R-Louisiana), Kay Bailey Hutchison (R-Texas), and Bob Corker (R-Tennessee).

"How can we say that we are addressing the problems of the housing and credit crisis if we ignore reforming two institutions that played a key role in the 2008 credit crisis-Fannie Mae and Freddie Mac?" Crapo asked. "Last week the Senate voted against reforming these two institutions and tonight it voted against being honest to the taxpayer by putting Fannie Mae and Freddie Mac on the Federal budget."

The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that have resulted, the government's cost to bail out Fannie Mae and Freddie Mac will eventually reach $381 billion. To put into perspective how large these entities are, their combined total books of business are nearly $5.5 trillion.

The National Taxpayers Union has been critical of efforts to hide public debt to Fannie and Freddie, saying "American families and businesses both present and future have paid out nearly $300 billion to keep the entities afloat, with many more billions to come. Not one penny of the cost associated with these subsidies has been reflected in the budgets prepared by the President's Office of Management and Budget (OMB). Hiding the losses associated with Fannie and Freddie in such a disingenuous manner betrays a fundamental disrespect for the hard-working taxpayers who now fund their existence."

Debate continues this week on the overall financial reform bill.