That not only lowered rates on mortgages purchased or guaranteed by Fannie and Freddie, but helped boost the publicly traded companies’ profits, the report said.
Now that the commitment to stand behind Fannie and Freddie’s obligations has become explicit, the cost of subsidizing their operations should be included in the federal budget, CBO argues.
Substantial losses on $5 trillion in mortgages held or guaranteed by Fannie Mae and Freddie Mac means that the government provided a subsidy worth an estimated $248 billion when it placed the companies into conservatorship and allowed them to continue operating, the CBO report said.
That’s how much it would have cost to pay a private company to take on the risk of Fannie and Freddie’s commitments without federal backing, CBO said.
The value of government backing as Fannie and Freddie continued to buy and guarantee mortgages after they were placed in conservatorship totals an additional $43 billion, and will amount to another $99 billion in the next decade, CBO said.
Some Republicans are pushing for the Obama administration to adopt CBO’s approach in accounting for federal support of Fannie and Freddie in the budget. Assistant Treasury Secretary Michael Barr told the Wall Street Journal the Obama administration has no plans to do so.
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