Fannie, Freddie to Be Kept Off Federal Budget

Saturday, September 13, 2008; D02



The White House budget office said yesterday that it has decided not to 
incorporate mortgage-finance giants Fannie Mae and Freddie Mac into the 
federal budget, citing the temporary nature of the Treasury Department's 
takeover and "the level of federal ownership" of the firms.

The decision affects the way public expenditures on the two companies will 
be reflected in official budget projections. Treasury Secretary Henry M. 
Paulson Jr. has pledged to invest as much as $200 billion to keep the firms 
solvent.

On Tuesday, two days after the takeover, officials at the Congressional 
Budget Office announced that the deal had bound the government so tightly to 
the firms that their business operations, assets and liabilities should be 
included in the government's balance sheets.

Yesterday, Office of Management and Budget director Jim Nussle said he had 
decided differently, but may "reevaluate their budgetary status in the 
future, should conditions change."

In the meantime, Nussle said in a statement: "We will ensure the 
government's financial relationship with the [the firms] is transparent in 
the budget and Financial Statements of the U.S. Government, including 
details on the implementation of the current conservatorship and any federal 
assistance, the financial health of the entities involved, and the current 
and projected fiscal impact on government finances."

Fannie Mae, established as a government agency, was converted into a public 
company in 1968 in an effort to remove its activities from the federal 
financial statement and balance the budget. Two years later, Congress 
created Freddie Mac to provide competition in the secondary mortgage market.


-- Lori Montgomery