Treasury

Subsidies to Fannie Mae and Freddie Mac

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.

CBO Estimates of the Net Subsidy Cost for Fannie Mae and Freddie Mac (by Fiscal Year)

  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009–2019
  (in billions of dollars)
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
Subsidies to the Troubled Asset Relief Program (TARP)
Projected subsidy as of March 2009
336
20
0
0
0
0
0
0
0
0
0
356
Source: subsidyscope.com using data from the Congressional Budget Office.
  1. Congressional Budget Office. "The Budget and Economic Outlook: Fiscal Years 2009-2019." January 2009, p.15.
  2. Congressional Budget Office. "A Preliminary Analysis of the President's Budget and an Update CBO's Budget and Economic Outlook." March 2009, p.7.