Fannie, Freddie May Cost U.S. $53 Billion Over Next 10 Years

elmendorf Fannie, Freddie May Cost U.S. $53 Billion Over Next 10 YearsIn a series of forecasts that vary to an astounding degree, the Congressional Budget Office estimates that Fannie Mae and Freddie Mac could cost the government $53 billion over the next decade — or, the two mortgage entities could produce savings of as much as $44 billion.

Tasked by Congressman Barney Frank with providing guesses as to the potential budgetary impact of the government-sponsored entities, the CBO used different accounting methods to try to determine the fiscal value of the companies. 

The Congressional Budget Office also recommended that, because “the government operates them to fulfill the public purpose of supporting the housing and mortgage markets,” the government should incorporate Fannie and Freddie into its budget. The CBO thinks that the government stands to gain $8 billion by 2020 by buying preferred stock and taking dividends from the GSEs, but before we ring the victory bell, the agency warns:

That budgetary treatment, however, does not reflect the governmental nature of the GSEs’ activities, nor does it capture the full cost of the risks associated with them.

Meanwhile, bankers are urging the government to put Fannie and Freddie out to pasture. The regulators in charge of Fannie and Freddie are clawing at banks for refunds over bad mortgages the GSEs bought. And Fannie and Freddie have racked up $150 billion in government support.

(h/t Reuters)