Subsidies to Fannie Mae and Freddie Mac
April 29, 2010 — New Estimates of Subsidy to Fannie and Freddie
As Subsidyscope has reported previously, most of the cost of subsidizing Fannie Mae and Freddie Mac was incurred when the government put the two institutions into conservatorship in fiscal year 2009. The Congressional Budget Office (CBO) released updated estimates in January 2010 projecting lower than previously projected subsidy costs for FY2010 through FY2017. These estimates change the total projected cost to the government of bailing out Fannie Mae and Freddie Mac to $370 billion from FY2009 to FY2019, down from the August 2009 estimate of costs of $389 billion over that same time period. The total cost over the FY2009-FY2020 period is projected to be between $373 billion and 376 billion.
CBO Estimates of the Net Subsidy Cost for Fannie Mae and Freddie Mac by Fiscal Year
|Subsidies to Fannie Mae and Freddie Mac|
|Projected subsidy as of January 20091||238||20||14||8||6||3||4||4||4||4||4||309|
|Increase in projected subsidy between January and March 20092||52||5||7||8||8||2||1||0||-1||-1||-1||80|
|Projected subsidy as of March 2009||290||25||21||16||14||5||5||4||3||3||3||389|
|Change in projected subsidy between March 2009 and January 2010||1||-4||-8||-6||-6||1||1||1||1||-||-||-19|
|Projected subsidy as of January 20103||2914||21||13||10||8||6||6||5||4||3||3||370|
- Congressional Budget Office. "The Budget and Economic Outlook: Fiscal Years 2009-2019." January 2009, p.15.
- Congressional Budget Office. "A Preliminary Analysis of the President's Budget and an Update CBO's Budget and Economic Outlook." March 2009, p.7.
- Congressional Budget Office. "The Budget and Economic Outlook: Fiscal Years 2010 to 2020." January 2010, p. 52-53.
- Congressional Budget Office. "CBO's Treatment of Fannie Mae and Freddie Mac." January 2010, p. 8. CBO notes that this estimate includes all mortgage commitments made before FY2009 and new commitments in 2009, and is based on the August 2009 estimate of FY2009 subsidy costs, which were not fully updated in the January 2010 report.
April 28, 2009 — Subsidies to Fannie and Freddie Exceed Those to TARP
Federal subsidies to Fannie Mae and Freddie Mac are projected to reach $290 billion in fiscal year 2009 and total $389 billion between fiscal years 2009 and 2019. Using numbers from the Congressional Budget Office (CBO), Subsidyscope finds that the projected costs of subsidizing Fannie and Freddie exceed the aggregate subsidies provided by the Treasury's Troubled Asset Relief Program (TARP), which are expected to total $356 billion over the same 2009-2019 period. Fannie Mae and Freddie Mac are government-sponsored enterprises that purchase mortgages and guarantee pools of mortgages. TARP is a U.S. Treasury program that purchases preferred stock and warrants from banks and other financial institutions, provides asset guarantees and makes loans to automotive companies.
Most of the cost of subsidizing Fannie Mae and Freddie Mac was incurred when the government put the two institutions into conservatorship. However, the government faces additional and ongoing subsidy costs that stem from the two GSEs’ new business after the takeover. In January 2009, CBO estimated that Fannie Mae and Freddie Mac would receive $309 billion of subsidies between 2009 and 2019. Since January, CBO has raised the total subsidy cost over that period by $80 billion. The upward revision stems from a deterioration of the two GSEs' financial condition.