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As the stocks of Freddie Mac and Fannie Mae fall dramatically downward this week, the U.S. Senate is resuming votes on a bill that contains a direct raid on the GSEs’ shrinking capital base.
The Dodd-Frank mortgage bailout creates a new housing trust fund that will collect an estimated $530 million a year through a new levy on Fannie Mae and Freddie Mac. The levy must be paid whether Fannie Mae and Freddie Mac make a profit or not.
The tax increase is part of broader housing legislation that gives $300 billion in new taxpayer loan guarantees through the FHA. The new program allows banks to cherry-pick the worst loans in their portfolio and shift the liability to U.S. taxpayers.
FreedomWorks President Matt Kibbe commented, “Rome is burning, and the Senate is adding lighter fluid. The GSEs represent a profound systemic risk, and investors are clearly concerned, yet Congress is moving to pass a bill that may make matters worse. This bill is advertised as strengthening regulation of the GSEs, yet it imposes a permanent new levy that will materially undermine Fannie Mae and Freddie Mac.”