Lawmakers Want Freddie, Fannie On Budget

(Wall Street Journal) - House lawmakers passed legislation Tuesday to put the operations of Fannie Mae and Freddie Mac on the federal budget and change how the government calculates the cost of several federal loan programs.

Fannie and Freddie, companies that provide funding for US home loans, have been under federal control since September 2008 at a cost of $151 billion to taxpayers. Republicans argue putting them on the federal budget would more accurately reflect the costs of their rescue.

A Republican-backed bill to do so passed in a 245-180 vote, largely on party lines. The bill, however, appeared unlikely to advance further, as the issue has not been a priority for lawmakers in the Democratic-controlled Senate.

The Congressional Budget Office has long supported bringing the companies onto the government books, accounting for their operations in the federal budget as if they were federal agencies.

But the Obama and Bush administrations have resisted doing so. When the government took over Fannie and Freddie through a legal process known as conservatorship, the Bush administration opted against incorporating the companies' obligations into the federal budget and the Obama administration maintained that policy.

Critics, however, argue that this arrangement does not reflect reality. "Fannie and Freddie have become the explicit financial responsibility of all of us and the federal government," said the bill's author, Rep. Scott Garrett (R-N.J.). "It only makes sense ... that we treat them the same that we would treat any other obligation of the federal government by formally bringing them on to the budget."

In addition to Fannie and Freddie, the bill would also change how the government accounts for several federal loan programs, including the Department of Education's student-loan programs and mortgage-guarantee programs run by the Federal Housing Administration and Department of Veterans Affairs. Doing so would have increased the budgeted cost of those programs for about $55 billion in fiscal 2012, according to the CBO.

Democrats focused their objections on the impact on these programs, rather than Fannie and Freddie. They argued the changes sought by Republicans would overstate the cost of those loan programs and reduce the government's ability to support vital parts of the economy.

Rep. Chris Van Hollen (D-Md.) said he was "particularly concerned about the impact it would have on the affordability of going to college."

Read more: Wall Street Journal