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To deal with the root cause of the current economic crisis, Rep. Jeb Hensarling (R-Texas), Chairman of the Republican Study Committee, has introduced the GSE Free Market Reform Act. The Government Sponsored Enterprises (GSE's), Fannie Mae and Freddie Mac, were private, federally chartered companies that used their implied federal guarantee to borrow at bellow market values and amass a catastrophically large amount of debt. They failed to adequately asses the risk of their investments, and now they are the taxpayers’ responsibility. On September 7, 2008, Freddie and Fannie were placed in conservatorship by the Federal Housing Finance Agency, placing hundreds of billions, if not trillions, of taxpayer dollars at risk.
Congressman Hensarling's GSE Free Market Reform Act would be a long term solution to the GSE problem that would avoid such meltdowns in the future by returning Fannie and Freddie to a competitive marketplace.
FreedomWorks President and CEO Matt Kibbe commented: “We have learned from this crisis that government sponsored enterprises like Fannie and Freddie are bound to fail because they socialize risk while privatizing profits. Rep. Hensarling's GSE Free Market Reform Act allows Congress to gracefully accept this lesson and must be part of any acceptable crisis related legislation.”
Kibbe continued: "Rep. Hensarling's GSE Free Market Reform Act accepts the fact that the special privileges bestowed by the government on Fannie and Freddie, and the incentives created by their government charters, drove the unsustainable housing boom the market is now trying to correct. This bill would ensure Fannie and Freddie do not drag us down this treacherous path again.”
Kibbe concluded: “Rep. Jeb Hensarling’s GSE Free Market Reform Act absolutely must be part of any acceptable legislation dealing with the current financial crisis. While it is important that Congress addresses the immediate crisis, it is equally important that any proposed legislation also fixes the problem in the long term, which Rep. Hensarling’s bill does in spades. Now is the time for such comprehensive reform that will send clear signals to the market.”