CBO Report, Analysis Misses the Mark

Recent press has taken note of the Congressional Budget Office’s report on the budgetary implications of Johnson-Crapo on the taxpayer. Unfortunately, many of these releases and articles miss glaring omissions in the CBO’s report and assert the CBO’s conclusion without evaluating how both the CBO analysis was conducted or how Johnson-Crapo will fail to protect the taxpayer and threaten the housing market and our overall economy.

First, many of these accounts (Corker’s and Johnson’s press releases) assume the CBO’s model of calculation which is inaccurate due to its static projections. It fails to take into account the value of the government’s 79.9% equity stake which could account for billions over the next 10 years.

Another article that ran in The Hill fails to mention that by liquidating the two GSEs, Johnson-Crapo will add $5 trillion on the balance sheet and onto the taxpayer’s back. Additionally, the article makes no mention of the fact that the Fannie and Freddie have repaid the government back in full and did so in record time. They are now making the government billions in profit. This article and other accounts of the CBO report miss the fact that by recapitalizing Fannie and Freddie and releasing their shares into the marketplace, the government would be making the best investment in history; sending taxpayers back billions more than the $58 billion the CBO projects.

Finally, these reports do not note the detrimental effect Johnson-Crapo will have on the economy at large by liquidating the GSEs, producing market uncertainty for what amounts to a fifth of our domestic economy. This harm to the taxpayer would be incalculable.

The CBO report tries to compare apples to oranges and reports on CBO’s analysis do not recognize the economic realities of Johnson-Crapo. Both are inaccurate projections of what our housing industry will become if this legislation passes.

We encourage the press to recognize that there is more than meets the eye in regards to this CBO report. We hope that in the future, they will apply more scrutiny to these issues and investigate the far-reaching implications this bill will have on taxpayers and our economy as a whole.