In 2008 taxpayers, yes you and I, propped up Freddie Mac with $71.3 billion and Fannie Mae with $116.1 billion after the U.S. housing market collapse. Now the two government sponsored enterprises (GSE) are in conservatorship and are required to pay the U.S. taxpayer quarterly dividends. At this point they have paid back the U.S. taxpayer, yes you and I, a total of $225.5 billion and counting. The current conservatorship agreement has no exit strategy, so the GSE must keep paying the government quarterly dividends and cannot keep funds in reserve for a rainy day.

This is one of many reasons sited in a recent report by the Federal Housing Finance Agency, warning that the GSE’s “future profitability is far from assured.” (FHFA an agency created in 2008 to oversee the two GSE’s) Another challenges facing Freddie and Fannie stem from legal requirements to reduce the size of their investment portfolios, which has been one of their largest sources of incomes. These along with other issues are casing concern of a possible future bailout by the taxpayers as pointed out by FHFA report this week and the CEO of Fannie Mae last month.

Are you thinking what I’m thinking.......

What happened to the dividend payments and why are the Freddie and Fannie still in conservatorship?Like previously mentioned, there were no exit strategy mechanisms put in place in 2008 so Freddie and Fannie could come out of conservatorship, and Congress is in no rush to decide their future. Why?

First> – There are some in Congress that would like to abolish both Fannie and Freddie and surprise surprise they cannot come to a consensus. I have no doubt this would be the death of the 30 year fixed mortgage since this length of time is to long for banks without GSE support.

Second– As reported byThe Heritage, a think tank, “federal spending was under reported” over the last two years as “GSE profits are counted as offsetting receipts, which reduce the reported outlays.” This has allowed lawmakers to spend an additional $225.5 billion of taxpayer’s dollars over the last two years with an accounting slight of hand. Seems to me Washington only knows how to spend.

When the time comes for Freddie and Fannie to be bailed out, this will be do to structural challenges and not necessarily an indication of economic issues. The GSE’s are being used as a giant piggy bank for Washington, and my concern is what the ripple effect this will cause because of the perception of the health of the economy it creates?