(CNSNews.com) – Rep. Jeb Hensarling (R-Texas) says the Obama administration is using an accounting “gimmick” in its budget by not including the debt owed by mortgage firms Fannie Mae and Freddie Mac.
“The accounting gimmicks that are used today would make an Enron and WorldCom accountant blush,” Hensarling told reporters. “The American people know that under the policies of this administration-under the policies of this Congress-we are drowning in a sea of red ink.”
Hensarling, a member of the House Financial Services Committee, joined a group of House Republicans Tuesday in announcing the introduction of a bill that would require President Obama’s Office of Management and Budget to include the liabilities of Fannie and Freddie in the national debt calculation.
The two companies are defined as government-sponsored enterprises (GSEs) whose portfolios include trillions of dollars in American mortgages, many of which are now “under water.” The federal government took control of the mortgage giants in 2008, as they neared financial collapse.
Billions of taxpayer dollars ($61 billion for Fannie Mae and $51 billion for Freddie Mac) has been spent so far to keep the GSEs solvent. Just this week, Freddie Mac reported a $7.8 billion loss in the final three months of 2009, but said it will not require another taxpayer infusion at this time.
Hensarling on Tuesday suggested that the administration is under-reporting the nation’s debt by failing to account for the potential liability incurred if Fannie and Freddie go deeper into the red.
The potential liabilities incurred by Fannie and Freddie, Hensarling said, would amount to “the mother of all bailouts.”
“When the final chapter is written on the history of our financial debacle, it will show that the cause was the government policies that cajoled, incented (sic) and mandated financial institutions to lend money to people to buy homes that, ultimately, they could not afford,” Hensarling said. “At the epicenter of those federal policies was Fannie Mae and Freddie Mac, and before all the dust settles in the final accounting, they will prove to be the mother of all bailouts.”
Rep. Spencer Bachus (R-Ala.), the ranking member of the House Financial Services Committee, estimated that the unfunded liabilities of Fannie and Freddie could exceed $5 trillion.
Under Republican’s proposed bill, the White House Office of Management and Budget would have to treat the GSEs’ estimated liabilities as part of the federal debt, and those liabilities along with the rest of the debt would have to remain under the debt ceiling.
Congress recently voted to raise the debt ceiling above $14 trillion dollars for the first time to accommodate other spending.