Free Congress Weighs in on Fannie Mae, Freddie Mac

0 Comments | Insight on the News, May 21, 2001 | by Catherine Edwards, | Stephanie K. Taylor

Despite the size and political clout of Fannie Mae and Freddie Mac, the scrutiny continues. One of the oldest of Washington's conservative think tanks, the Free Congress Foundation, has joined the watchdogs, harnessing up with the Homeowners Education Coalition (HomeEC). HomeEC is a coalition of free-market groups that advocates more oversight and regulation of the quasi-private Federal National Mortgage Association (Fannie Mae) and Federal Home Mortgage Corp. (Freddie Mac), which it notes has a combined debt greater than $1 trillion.

Other members of the HomeEC coalition include Citizens Against Government Waste, the National Taxpayers Union, the 60 Plus Association and the Competitive Enterprise Institute.

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) created by Congress to expand home ownership by providing liquidity in the secondary mortgage market. Chartered by Congress, they are authorized to sell their stock on Wall Street but are not subject to Securities and Exchange Commission oversight.

Founded in the 1970s by activist Paul Weyrich, the Free Congress Foundation is a culturally and economically conservative think tank dedicated to preserving traditional American values. Free Congress doesn't think that Fannie Mae and Freddie Mac, with their tax-free status and implied government subsidies through lines of credit with the U.S. Treasury Department, are good for America.

"Fannie Mae and Freddie Mac have continued to exploit their GSE status and pose a significant risk to the American taxpayer" says J. Bradley Jansen, director of Free Congress' Center for Technology Policy.

He also is disturbed that the GSEs have carved out an exemption to the privacy protections in current law. "Given our long-standing commitment to privacy, we are particularly concerned. This loophole is just one of the many ways the GSEs receive special treatment," says Jansen.

Insight reported last week that Rep. Richard Baker, R-La., had introduced a bill that would curb the mortgage giants and appoint the Federal Reserve to regulate the housing GSEs that enjoy government benefits but trade privately in the stock market (see "Fannie & Freddie in the Hot Seat," May 14).

Peter Wallison, a resident fellow at the American Enterprise Institute, thinks the Baker bill doesn't go far enough. He believes that Fannie Mae and Freddie Mac should be privatized and have their lines of credit with the government severed.

"They have outlived their usefulness," Wallison tells Insight. He adds that a lot of banks would like the opportunity to get into the secondary mortgage market, in which Fannie Mae and Freddie Mac now have a monopoly.