Opinion: Morning Examiner

Sunshine Week is a good time for Congress to be honest about real costs of Fannie and Freddie

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Beltway Confidential,Opinion,Mark Tapscott,Morning Examiner,Heritage Foundation,Fannie Mae and Freddie Mac,Spending

It's Sunshine Week, so there will be more attention to government transparency and accountability in the nation's capital than usual, right? Actually, no, especially as long as there is such a thing as "off-budget" federal spending.

Most Americans likely don't realize it but the federal government spends billions of dollars every year "off-budget." Two of the worst examples of such spending are Fannie Mae and Freddie Mac.

Freddie Mac is the Federal National Mortgage Association and Fannie Mae is the Federal Home Loan Mortgage Corporation. Both were formed years ago as GSEs -- government-sponsored entities -- and were taken over following the Great Recession of 2008.

The real deficit

Fannie and Freddie provide taxpayer-backed guarantees for the vast majority of mortgages issued each year in this country, including millions that are subprime (i.e. given to customers with below-average credit records and thus more likely to default).

Some years these two entities make money and some years they don't. In all years, their costs are kept off the government's books.

If the actual costs of Fannie and Freddie were disclosed to taxpayers on the federal budget, the annual deficit would increase by about $100 billion, according to Heritage Foundation economist Romina Boccia.

Truth-in-lending for government?

Because they're kept off-budget, Fannie and Freddie "appear to be a boon for taxpayers because they reduce the reported federal deficit," Boccia said in a new report from Heritage.

"This fiscal illusion encourages higher federal spending today while putting taxpayers on the hook for future bailouts," she said.

House Financial Services Committee Chairman Jeb Hensarling has introduced the Budget and Accounting Transparency Act of 2014 to require honest and public accounting of Fannie and Freddie costs to taxpayers.

A good first step

Hensarling's measure wouldn't end government ownership of Fannie or Freddie, but honestly accounting for their costs to taxpayers would be "an important first step," according to Boccia.

Any time federal officials are forced to give taxpayers the truth about what their government is spending, borrowing and guaranteeing is a positive move.

Sunshine Week would be the perfect time for Congress to move Hensarling's bill forward toward passage and leveling with taxpayers about the true costs and risks of Fannie Mae and Freddie Mac.

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