Fannie and Freddie Federal Subsidies Soar

Federal subsidies going to Fannie Mae and Freddie Mac jumped by more than 80% over the past three years to $19.9 billion in 2003, according to an update by the Congressional Budget Office. CBO director Douglas Holtz-Eakin said the subsidy going to borrowers in the form of lower mortgage rates increased from $7 billion in 2000 to $13.6 billion in 2003. At the same time, the subsidies retained by Fannie and Freddie and their shareholders jumped from $3.9 billion in 2000 to $6.3 billion in 2003, he told a meeting of the Women in Housing and Finance in Washington. The subsidies, according to CBO, come from the government-sponsored enterprises exempt from state and local taxes, favorable borrowing status and other privileges due to their government charters. Fannie Mae claims the CBO subsidy concept is flawed and misleading. "It's important to recognize that Fannie Mae does not receive a penny in subsidy payment from the federal government," Fannie spokesman Chuck Greener said. The federal subsidy enjoyed by the third housing GSE - the Federal Home Loan Banks - increased from $2.7 billion in 2000 to $3.1 billion in 2003.