Wednesday, April 6, 2011

New Legislation Seeks to End Taxpayer Funding of Fannie Mae and Freddie Mac

Government-controlled Fannie Mae and Freddie Mac may soon have to find a different source of funding if Republican congressmen get their way. Fannie and Freddie have already cost taxpayers $150 BILLION.

Senators John McCain (R-AZ) and Orrin Hatch (R-UT) introduced legislation yesterday that would permanently end federal support for the GSEs. The bill, called the GSE Bailout Elimination and Taxpayer Protection Act is the Senate companion to similar House legislation (HR 1182) introduced by Spencer Bachus (R-AL) and Jeb Hensarling (R-TX). The bill is intended to end the GSE’s federal conservatorship within two years and accelerate the timeline for privatization. The bill not only repeals Fannie and Freddie’s affordable housing goals mandate, but will cap maximum portfolio size at $700 billion and reduce that cap over five years to $250 billion.

Critics of the move say that eliminating these two entities so quickly could destabilize the “fragile housing market,” but McCain disagrees, saying that “the events of the last three years have made it clear that never again can we allow the taxpayer to be responsible for poorly managed financial entities who gamble away billions of dollars”. Many republicans are facing tough opposition to their support of this bill from members of the real estate industry such as the National Association of Realtors (NAR), which wants to keep Fannie and Freddie operating – just under tighter regulations – in order to prevent rising interest rates and another lending crunch

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