Dear Secretary Geithner:
We are distressed to learn of the continued taxpayer bailouts of Fannie Mae and Freddie Mac by this Administration, for which there appears to be little to no accountability. These two catalysts of the mortgage meltdown over the last several years have now cost the taxpayers upwards of $148 billion. And given the Administration's decision to avoid addressing this enormous problem during consideration of the larger financial regulatory overhaul, this figure is expected to rise in the coming months, with no end in sight.
It is estimated the federal government provides financing for roughly 90 percent of home loans issued in the U.S. This is yet another example of this Administration's seemingly endless desire to extend its reach into all facets of our economy, maintaining a steering-grip on the wheel of free markets. Recent news from these two bailout-behemoths of more quarterly losses, and the inevitable subsequent call for additional billions in taxpayer assistance, demonstrates that simply maintaining the current structure of Fannie and Freddie moving forward - and the government's current role in the mortgage business - is destructive to the rebuilding of a stronger economic foundation, and ignores the lessons of the financial collapse.
The announcement that this Administration has seen fit to walk in the footprints of the unsustainable path that led to the housing collapse by enabling Fannie and Freddie to extend financing to homeowners with up to 25 percent negative equity all but ensures further losses for these already hemorrhaging institutions. Continued subsidization of the housing market by placing these underwater mortgages on the government's books in an attempt to temporarily resuscitate the economy will only lead to an artificial economic recovery, destined to collapse yet again, and further ensnare the taxpayer.
This puzzling practice of repeating past mistakes which contributed to the housing bubble and the current state of our economy must end. Real ideas for reform exist and must be considered immediately.
Like many of our colleagues, we are extremely disappointed to see the lack of commitment by this Administration and Democrats in Congress to deal seriously with the giant drain these two entities place on our economic recovery. The Treasury Department has failed to acknowledge that the continued operation and organization of these two entities under the status quo prevents the market correction necessary to emerge from the recent economic downturn stronger, and more stable. Further, the persistent treatment of the issue of the government's role in the housing industry of this country as a political football has only exacerbated the economic volatility rampant in our capital markets.
With repeated losses by both Government Sponsored Enterprises -- 12 consecutive quarters - what rationale is behind this Administration's belief this pattern will cease? The Congressional Budget Office estimates that bailing out Fannie and Freddie will cost taxpayers $389 billion between 2009 and 2019. As we approach the two year mark since Fannie and Freddie were placed in conservatorship, and with concerns growing over our nation's record level debt, how much longer will this Administration ignore the budgetary effects of continuing to extend taxpayer assistance to these GSEs by refusing to account for their expenditures in federal budget projections? What is this Administration's timeframe for implementing significant reform of these two entities? In the interim, what kind of restrictions is Treasury placing on Fannie Mae and Freddie Mac as a condition of receiving more and more taxpayer dollars?
We look forward to your timely responses to the above questions.