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.