Fannie Mae and Freddie Mac, the federally backed mortgage titans, have cost US taxpayers as much as a small war. Last summer, the CBO estimated the cost of bailing out the two agencies at $317 billion. Administration proposals to write down principal on troubled mortgages backed by the two agencies could add $100 billion or more to the cost.These are all estimates; depending on the housing market and other factors like interest rates, the costs could go up or down from here.But don’t worry; none of that shows up on the official US budget deficit numbers. The Wall Street Journal reports that Republicans in the House have passed a measure that would add federal expenditure on Fannie and Freddie to the federal budget:
The Congressional Budget Office has long supported bringing the companies onto the government books, accounting for their operations in the federal budget as if they were federal agencies.But the Obama and Bush administrations have resisted doing so. When the government took over Fannie and Freddie through a legal process known as conservatorship, the Bush administration opted against incorporating the companies’ obligations into the federal budget, citing the arrangement’s “temporary nature.”
From the Via Meadia perspective, Bush and Obama are both wrong, and the CBO and House Republicans are right.The decision to keep them off the government books despite their de facto status as federal agencies is a naked attempt to hide the cost of a controversial program. Since the beginning of his administration, President Obama has stated his desire to add transparency to the way the federal government conducts its business. Now is his chance to prove he was serious.There is nothing to be gained by covering up our debts. Wars, bailouts, liabilities: the federal government should produce as clear a set of books as possible. Voters deserve accurate information about unfunded liabilities as well as the costs of current programs.Better accounting would have made it harder for the Bush administration to cut taxes while fighting two wars, and it will now make it harder for the Obama administration to promote domestic spending increases without paying for them. Too bad: let the chips fall where they may. Honest, no-gimmicks accounting is a necessary condition for good governance in a democratic society. Let the people see clearly what things cost and make their decisions about what to do.It’s time to put Fannie and Freddie where they belong: on the books.