Why Fannie Mae, Freddie Mac Continue To Cost US Taxpayers Billions

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Ben Protess

Of all the companies bailed out by the federal government, mortgage finance giants Fannie Mae and Freddie Mac are shaping up as the deepest money pits. A close look at their past and recent financial filings shows why their losses continue to mount.

Fannie and Freddie effectively became wards of the government in 2008. The Obama administration had promised to reveal its plans for the agencies last month, but Washington's focus on reforming the banking system pushed them to the bottom of the to-do list. Fannie and Freddie aren't mentioned in either the Senate or House financial regulatory reform bills.

Treasury Secretary Timothy Geithner may reveal some of the administration's ideas on Tuesday when he testifies before Congress about Fannie and Freddie. But in general, the companies' troubles have drawn less attention than the rest of the financial industry. For example, unlike bonus announcements made on Wall Street, Fannie and Freddie's recent disclosures of about $40 million in executive compensation and bonuses for 2009 caused little stir on Main Street.

Together the two firms have already tapped $125 billion from government lifelines and the Congressional Budget Office predicts they ultimately will drain $380 billion. That would far exceed the final tabs for rescuing the big banks, the automakers or even insurance behemoth American International Group (AIG).

"These calls on taxpayer funds are troubling to all of us," Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said in a letter to congressional leaders last month.

Why Fannie Mae, Freddie Mac Continue To Cost US Taxpayers Billions

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