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October 22, 2010

Relax. Fannie and Freddie Should Only Cost Us $238 Billion

An article on CNBC's website yesterday discussed a new study released by a government overseer group charged with managing the bailout of Fannie and Freddie. The Federal Housing Finance Agency (FHFA) stated that the bailout should cost under $300 billion to taxpayers. That's a relief considering early estimates were around $500 billion to $1 trillion, right?

Well, in the concept of the entire bailout, Fannie and Freddie still represents the costliest "investment" the taxpayer has made. So far, taxpayers have sent $148 billion into the mortgage giants. This money is designed to balance the companies' balance sheets (keeping assets equal to liabilities). In the event that both companies are liquidated, the taxpayers get the equivalent of each company's equity. $0

So, each time Fannie and Freddie states earnings and asks for more money from the government, we are essentially writing a check for cash we aren't going to get back. Liberals touted about the $25 billion in profits the government made from the bank portion of TARP. So, how does the Fannie and Freddie bailout size up to the others?

Fannie and Freddie bailout: $148 billion ($0 returned)

TARP- bank portion: $309 billion ($334 billion returned)

Auto bailout- $70 billion (unknown amount returned)

AIG bailout- $185 billion (unknown returned (likely $0), $190 billion owed as of 9/30)

Out of this group, the taxpayer has "invested" $712 billion and gotten $334 billion back. Does this still sound like a good "investment?"


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