In the last week, the government-backed mortgage finance giants Fannie Mae and Freddie Mac asked the taxpayer for $19 billion to stay afloat. Add that to the $127 billion in bailouts they have already received since September 2008, and we are now talking about a whopping $146 billion of your hard-earned tax dollars being used to prop up these failed entities. In more than a year and a half we have heard nothing from the Administration about a plan to implement real reforms to stop the bleeding. This Democratic Congress, in the midst of a debate on financial regulatory reform, is completely silent on the issue.
Instead of showing leadership on this issue, the Democrat Majority in Congress has chosen to duck Fannie and Freddie reform, putting off hard decisions for later. According to Senator Christopher Dodd, reform will have to wait until the “next wave” of legislation.
The most substantive action we’ve seen from the Administration dealing with the mortgage finance giants was the little-noticed Christmas Eve decision to lift the limit on the amount of bailout money the Administration is willing to sink into these two. As if $400 billion was not enough, the Administration lifted the limits on the same day they announced lucrative pay packages for the executives. And now, as Fannie Mae and Freddie Mac are hemorrhaging taxpayer dollars, Treasury Secretary Timothy Geithner said a plan that has been a long time in the making is still six months away, perhaps conveniently after November’s election.
Rather than address an issue that will be fundamental to the recovery and long-term growth of the housing market, the Democrat Majority is keeping their head in the sand. President Obama himself said in his inaugural address that “our time of standing pat, of…putting off unpleasant decisions – that time has surely passed.”
Make no mistake: no true financial reform bill will be complete until it deals with reform of Fannie Mae and Freddie Mac and their $5.4 trillion in liabilities. Republicans have been standing ready to work across the aisle on this issue, introducing a number of measures over the past 18 months that would phase out taxpayer subsidies and sunset their conservatorship. I myself offered a simple, common-sense bill to ensure that, while they are under government control, compensation for their executives is no more than any member of our Armed Forces. So long as Fannie Mae and Freddie Mac are effectively owned by the government, there is no reason any of their employees should be compensated more than the Chairman of the Joint Chiefs.
With a massive national debt set to exceed $13 trillion this year, the American people can ill afford the Democrat Majority’s procrastination. The point of financial reform legislation, and its great opportunity, is to address the fundamental problems that caused the economic collapse of 2008 and to protect the American taxpayer from this ever happening again.
We can do better. We owe it to the American people to do better. True financial reforms means reforming Fannie Mae and Freddie Mac.
The views expressed by guest bloggers on the Foundry do not necessarily reflect the views of the Heritage Foundation.