Despite the fact that taxpayers have already contributed more than $145 billion to bailing out Fannie Mae and Freddie Mac, Secretary of Treasury Timothy Geithner refuses to follow the Congressional Budget Office’s (CBO) recommendation that these two entities be considered part of the federal government. At this point in time, taxpayers own about 80 percent of the GSEs, and the CBO believes that this essentially makes them government bodies.
However, Geithner has refused to incorporate them into the government as official federal entities, stating that “We do not think it is necessary to consolidate the full obligations of Fannie and Freddie onto the nation’s budget.” There’s the rub. It is not that he does not think that these are government bodies; we all know that they are and so does the federal government. This is simply posturing designed to keep the bailouts of Fannie and Freddie, which are ever-growing and show no real signs of slowing or particular effectiveness, from hitting the books.
Fortunately for Geithner, there is little chance of the two GSEs being declared federal entities, since Chairman of the Financial Services Committee in the House of Representatives Barney Frank has banned consideration of amendments to the financial reform bill that would change the way that Fannie and Freddie are run.
How do you think Fannie and Freddie should be classified? Does it matter?
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