April 20, 2014

Taxpayers Aren't Done Bailing Out Fannie and Freddie

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

The Federal Housing Finance Agency (FHFA) recently released projections showing that Fannie Mae and Freddie Mac could require between $73 billion and $215 billion in additional help from the U.S. Treasury through 2013.

The FHFA oversees Fannie Mae and Freddie Mac, which were chartered by Congress to provide liquidity, stability, and affordability to the secondary market for residential mortgages. They purchase loans and package them as mortgage-backed securities that are then sold to investors with a guarantee that the mortgages will be paid. During the 2008 financial crisis, the federal government took control of both entities and continues to operate them with federal funds.

To date, the government bailout of Fannie and Freddie has required $148 billion. Under three different scenarios, the new report projects that total funding requirements would range between $221 billion and $363 billion through 2013. The assumptions used for housing prices in these scenarios range from a strong near-term recovery to a deeper second recession in the housing market.