NCPA - National Center for Policy Analysis


October 5, 2005

A new bill, H.R. 1461, is said to reform housing-finance giants Fannie Mae and Freddie Mac, instead, it actually allows them to take an even bigger bite from taxpayers, says the National Taxpayers Union (NTU).

H.R. 1461, or the Federal Housing Finance Reform Act, was created to reform the regulation of certain housing-related government-sponsored enterprises (GSEs), like Fannie Mae and Freddie Mac. However, it just provides another way for GSEs to gum up financial markets and gulp more tax dollars, says NTU.

Furthermore, an NTU study gave 10 reasons why H.R. 1461 deserves rejection by both chambers of Congress:

  • The legislation ignores warnings from Treasury Secretary Snow, Federal Reserve Chairman Greenspan and other analysts that Fannie and Freddie must be downsized in order to avoid a taxpayer bailout.
  • Anecdotal evidence increasingly indicates that the "democratization of credit" underwritten by Fannie and Freddie is contributing to local real estate speculation instead of simply making housing more accessible.
  • The "Affordable Housing Fund" will only further distort free market principles; if left alone, our housing finance process could rank among the best in the world.
  • The bill would boost the limit on individual Fannie/Freddie home loan purchases to $540,000 in some areas of the country; even in pockets of high prices, consumers who can afford half-million-dollar homes do not require federal housing subsidies.

Overall, H.R. 1461 is the just the wrong legislation at the wrong time, says NTU.

Source: Editorial, "New Legislation Will Only Fatten 'Fannie & Freddie,' Study Concludes," Dollars and Sense, July/August 2005; based upon: Paul Gessing, "Ten Reasons Why the 'Federal Housing Finance Reform Act' is Bad News for Taxpayers," National Taxpayers Union, June 22, 2005.


Browse more articles on Tax and Spending Issues