By John Berlau, Special for USDR
- The bill proposes to create a new federal mortgage company would assume all of the current liabilities of the government-sponsored enterprises Fannie Mae and Freddie Mac. That’s $5 trillion added to our deficit right off the bat. It creates huge new risk for taxpayers by doing this, and by putting taxpayers on the hook for 90 percent of losses from mortgage instruments insured by the new Federal Mortgage Insurance Corporation (Feddie Mic).
- The bill violates shareholder rights and the Constitution by codifying an Obama administration policy to empower the U.S. Government to sweep all of the profits of Fannie and Freddie into the Treasury in perpetuity — even after the taxpayers have been paid back.
- The bill creates new housing “trust funds”, and has very little safeguards to keep those funds from being diverted for political purposes. Recall that ACORN misused housing funds for political activity before it was eventually folded due to multiple scandals. This is a real risk.
- From my recent piece at National Review:
After years of minimizing the role Fannie and Freddie played in the crisis, many liberals as well as longtime housing “subsidy suckers” (in the parlance of the intrepid Washington Examiner columnist Timothy P. Carney) in the real-estate and construction industries are hailing the Johnson-Crapo “reform” and saying the GSE model has “failed.” But it’s important to understand why they believe it has failed. Incredible as it may seem, they believe the GSEs are being too stingy and see Johnson-Crapo’s proposed Feddie Mic as a way of prying open government-backed credit spigots even further.