Why Does Sen. Isakson Want to Add $5 Trillion to the National Debt?
- March 9, 2015
Right-wing purists will likely cheer recent calls by Sen. Johnny Isakson to liquidate Fannie Mae and Freddie Mac. That is, until they find out that the Senator’s new bill would assign all of the current liabilities of Fannie and Freddie – some $5 trillion – to the U.S. taxpayer, and dramatically increase our national debt.
Last month, without any fanfare, Isakson introduced S.1048, the Mortgage Finance Act. The bill would place Fannie Mae and Freddie Mac into receivership under the authority of a new government-controlled Mortgage Finance Agency. Isakson’s legislation envisions a new securitization program and a payback for the taxpayers over 10 years for their 2008 rescue of the GSEs. (Never mind the fact that Fannie and Freddie have already paid back in excess of $40 billion more than they were loaned).
The fact that these two companies currently own or guarantee about half of all U.S. mortgages, worth about $5 trillion, is not insignificant. As receiver, the government would assume this massive portfolio. That sum is equal to about one third of nation’s GDP.
And aside, from the question of how loading up the government with $5 trillion in obligations, Isakson’s bill should also raise concerns about future access to mortgages for millions of middle class Americans because it obliterates Fannie and Freddie without a credible alternative. Fannie and Freddie have made the dream of homeownership a reality for millions of Americans. Isakson wants to throw all of that away and replace them with an untested new securitization platform. Is this how to run for Governor of Georgia? We think not!