Remarks of June E. O'Neill Director Congressional Budget Office before the Conference on Appraising Fannie Mae and Freddie Mac, Washington, D.C.
CONGRESSIONAL BUDGET OFFICE (U S CONGRESS) WASHINGTON DC
Pagination or Media Count:
On several occasions, the Congress has asked the Congressional Budget Office CBO to analyze the cost to taxpayers of federal credit assistance, including the implicit credit support provided to government-sponsored enterprises. Two years ago, in response to a statutory request, CBO, along with the General Accounting Office GAO and the Departments of the Treasury and Housing and Urban Development HUD, prepared separate reports on the desirability and feasibility of privatizing Fannie Mae and Freddie Mac. Those studies provide estimates of the size and allocation of federal subsidies received by the enterprises. In my remarks today, I will make two main points 1. Government sponsorship reduces the operating costs of Fannie Mae and Freddie Mac by billions of dollars each year. Much of those savings arises from the perception of an implicit federal guarantee of the enterprises obligations. 2. Fannie Mae and Freddie Mac pass along about two-thirds of their federal subsidies to mortgage borrowers by lowering interest rates, and they retain about one-third for other purposes. The enterprises have broad discretion under the law to decide both the magnitude and the allocation of their subsidies. It is inherently difficult for the government, through regulation, to affect their decisions.
- Economics and Cost Analysis
- Government and Political Science