Yeah, that’s my new special post category, in honor of CM, which try as he might, seems to only use vague and generalized personal attacks to dispute my points, and makes the case that I am exaggerating how bad things are. Well, in honor of that I have this juicy revelation for today:
(CNSNews.com) – The Congressional Budget Office (CBO) says the real cost of the federal government guaranteeing the business of failed mortgage giants Fannie Mae and Freddie Mac is $317 billion — not the $130 billion normally claimed by the Obama administration.
That’s more than double the real risk/cost that they told us was involved here. Remember that Fannie Mae and Freddie Mac where the key instruments of the idiotic policy that forced lenders to give loans to bad risk, then guaranteed those risk at the tax payer’s expense, and pushed for the regulations to create the disastrous credit swap scheme. Neither organization, nor their role in causing this recession, was addressed by all the new regulation passed by Barney Frank and Chris Dodd, two of the key players behind the policies that allowed the shenanigans to go on. We already poured millions into these two to bail them out, and we might not be done at all, since Bloomberg predicted that the actual bailout amount for this disaster might even top a trillion dollars back when: a number I wouldn’t be surprised ends up being the low end. But back to the article in question.
In a report delivered to the House Budget Committee on June 2, the CBO said a “fair value” accounting of guaranteeing the two defunct mortgage companies – known as Government Sponsored Enterprises (GSEs) – was more than twice as high as the Office of Management and Budget had accounted for.
“Specifically, CBO treats the mortgages guaranteed each year by the two GSEs as new guarantee obligations of the federal government,” the CBO report said. “For those guarantees, CBO’s projections of budget outlays equal the estimated federal subsidies inherent in the commitments at the time they are made.”
“In contrast, the Administration’s Office of Management and Budget continues to treat Fannie Mae and Freddie Mac as nongovernmental entities for budgetary purposes, and thus outside the budget,” the report stated. “It records as outlays the amount of the net cash payments provided by the Treasury to the GSEs.”
The total of those cash payments is $130 billion, and is normally reported as the cost of the bailout of the GSEs to date. However, the CBO said that merely counting the cash payments, and not the cost of federal subsidies granted to the GSEs, obscures their real costs. Essentially, the CBO is accounting for the cost of the federal government guaranteeing the loans bought and securitized by the GSEs.
What this says in short is that the Keynesians have purposefully underestimated the debt they have straddled us tax payers with, because while they claim Freddie & Fannie are non governmental agencies, we the tax payers still are on the hook for their risk taking ventures, which I must again stress, remain untouched and ongoing. But don’t take my word for it: here is the CNS article:
Currently, Fannie and Freddie rely on explicit federal guarantees to continue to secure below-market financing rates. Because Fannie and Freddie are insolvent, the federal government must make up their losses when the loans they have guaranteed lose money in default.
However, the CBO counts not only the amount of federal funds spent to keep the GSEs operating but the cost to the federal government to subsidize the mortgage guarantees issued by Fannie and Freddie. In other words, the CBO counts as a federal spending commitment the subsidy given by the government to the GSEs.
And the CBO has to count that in, because our government, well we the tax payers, are responsible for those risky loans. And it gets better:
However, this subsidy cost could grow if the housing market continues to be weak. While the CBO expects it to recover, the difference between the agency’s own 2009 and 2011 estimates show that this may not be the case.
We haven’t heard the true numbers yet. Me, I wouldn’t e surprised that in the end it is closer to a trillion dollars of risky loans that will need to be written off and paid for by the tax payers, because in my personal experience the number of people that never should have been given a loan far surpasses those of us that didn’t buy more than we could afford, or worse, promptly took out 125% or more of the value of the homes they owned out to do other frivolous things.
Don’t worry though: Freddie & Fannie are in good hands. And don’t forget that we the tax payers are paying for the lawsuit by the government against the Freddie & Fannie execs too. Joy! All hail the Keynesians! Things aren’t all that bad….