Rescue for Fannie and Freddie Should Protect Taxpayers Before Wall Street Shareholders (Sen. Kit Bond)
September 10th, 2008
In my home state, Missourians are no strangers to the housing crisis – thousand of Missouri families have been delinquent on their mortgages, struggling to stay in their homes.
This week the housing crisis will once again touch taxpayers in Missouri and across the nation.
On Sunday, our government seized control of Fannie Mae and Freddie Mac – two financial institutions that together, provide three-fourths of new home mortgages.
As the ranking member of the Senate Appropriations subcommittee that funds our nation’s housing programs, I have a number of troubling concerns with this latest government bailout of Fannie and Freddie.
My first concern is ensuring that any rescue plan first protects American taxpayers, not Wall Street shareholders.
While Treasury’s plan includes some good steps – like firing the failed leadership at Freddie and Fannie – the long-term cost to taxpayers is unclear.
When taxpayers hear about some elements of Treasury’s plan they are going to be shocked about how the government plans to use their hard earned money.
For instance – the failed executives at Fannie and Freddie are going to receive multi-million dollar severance packages, all subsidized by taxpayers!
It is unacceptable for tax dollars to be used for fat compensation packages for failed executives and I know that American tax payers will agree!
Also, in my book, it is only common sense that every taxpayer dollar used to bail out the GSE’s should result in a dollar of preferred stock to maximize the benefits and lessen the cost to taxpayers.
Yet for some reason, as much as $200 billion taxpayer funds will be spent on Fannie and Freddie and taxpayers will only get $1 billion back of preferred shares.
Doesn’t seem like a fair return to me!
One of the most important considerations as we move forward, it how to protect taxpayers in the future.
Key to protecting taxpayers is long-term reform and strong oversight, something I have been calling for.
Clearly the Office of Federal Housing Enterprise Oversight failed at their job to conduct oversight of Freddie and Fannie.
While Congress acted to create a new regulator earlier this year, it is unclear how effective this regulator will be.
The bottom line is this – I agree that action to help a failing Freddie and Fannie may be necessary, but this plan raises too many important and unanswered questions about the effectiveness of the new regulator, long-term reform, and how to break this cycle of taxpayer funded bailouts.
The cost to taxpayers is too high for these questions to remain unanswered.
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