How Misleading Government Accounting Leaves Taxpayers on the Hook

3/22/14
 
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by Katie Nielsen,

from Heritage Foundation,
3/21/14:

The federal government reports hundreds of billions of dollars in revenue from mortgage giants Fannie Mae and Freddie Mac off the federal budget. In what might be considered creative accounting, Washington subtracts this revenue from spending and subsequently undereports federal spending. Even worse, trillions in taxpayer liabilities are completely off the books.

“Profits paid to the Treasury in 2013 alone have resulted in federal spending and deficits being underreported by more than $100 billion,” Heritage Foundation expert Romina Boccia explains.

Since they were taken over by the federal government in 2008, Fannie and Freddie have paid more than $203 billion in profits to the U.S. Treasury — all of which the Treasury is keeping off the federal budget.

The Treasury’s accounting methods distort Fannie and Freddie’s real costs. While these government-sponsored enterprises are sending cash to the Treasury, they’re also taking on huge liabilities that put future taxpayers at risk for a future bailout, as Boccia explains

Failure to consider the GSEs’ mortgage guarantees in budget reporting puts taxpayers on the hook for a taxpayer bailout of mortgages in the future without accounting for those risks today. Taxpayers are ultimately responsible for the nearly $4 trillion in GSE guarantees.

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