The same but different

29 January 2010 By Agnes Crane

The two U.S. mortgage giants are escaping public wrath and much in the way of accountability, despite their 12digit bailout and open spigot of taxpayer cash. Failing to address the downside of government subsidizing home ownership means the housing time bomb is still ticking.

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The government seized Fannie Mae and Freddie Mac and put them into conservatorship in September 2008 after losses on risky mortgages crippled the housing financing companies. Their regulator, the Federal Housing Finance Agency (FHFA), was newly constituted at the time of the bailout and is charged with overseeing and conserving the assets of the two companies.

Originally, Treasury extended a $100 billion equity line to each of the companies and called for a 10 percent reduction in their massive mortgage portfolios in 2010. That was increased to $200 billion each. Then on Christmas Eve, the Treasury removed the cap altogether, announcing that Fannie and Freddie would have unlimited access to government funds for three years and that portfolios would be permitted to grow in 2010.

At the end of December, Fannie's portfolio stood at $772 billion while Freddie's was $755 billion, according to the respective companies. Under the revised guidelines, the portfolios would be permitted to grow to $810 billion each in 2010.

Fannie and Freddie also guarantee $2.8 trillion and $1.9 trillion of mortgagebacked securities, respectively. Netting out some guarantees relating to mortgages they also own, their combined on and offbalance sheet exposure is some $5.3 trillion.

Under the Housing and Economic Reform Act of 2008, the FHFA is mandated to set up an Office of the Inspector General. The White House still hasn't nominated anyone to head the independent watchdog.

Some Republican senators have recently called for a hearing on Fannie and Freddie, the Washington Times reported on Jan. 21.

Treasury release Dec. 24.

Treasury statement Sept. 7, 2008.

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