In Letter to President Obama, Casey Seeks Accountability for Organizations That Have Received $169 Billion from Taxpayers
WASHINGTON, DC – U.S. Senator Bob Casey (D-PA) today sent a letter to President Obama expressing outrage at the recently reported investment practices of Freddie Mac, the taxpayer-owned mortgage company.
Recent NPR reports indicate that Freddie Mac, which along with Fannie Mae has received over $169 billion in taxpayer funds, bet against homeowners’ ability to repay their mortgages while simultaneously making it more difficult to refinance, an apparent conflict of interest and contrary to the organization’s mission to encourage refinancing.
“I am outraged that Freddie Mac is reportedly betting against homeowners, especially at a time when supporting the housing market is so essential to the economic recovery,” said Senator Casey. “By saying one thing and doing another, Freddie Mac has put into doubt its commitment to keeping families in their homes and propelling the economic recovery forward.”
Economists have advocated for policies that encourage refinancing higher rate mortgages to take advantage of historic lows to stabilize the housing market and bolster the economic recovery. Freddie Mac stated as recently as December that it was committed to this goal, but recent reports indicate that it has simultaneously bet against wide-spread refinancing in direct opposition to the policy recommendation that is viewed to be essential to the recovery.
“I question the leadership that would position the government-backed organization to bet against homeowners,” Senator Casey wrote in his letter to President Obama.
The full text of Senator Casey’s letter to the President is below:
Dear Mr. President:
I am writing to express my outrage at recent NPR reports about the investment practices of Freddie Mac.
It is my understanding that in 2010 and 2011 Freddie Mac, a government-sponsored organization, took an investment position betting against wide-spread refinancing for homeowners. If this is the case, Freddie Mac embraced a position in direct opposition to a policy recommendation that is widely viewed to be essential to our recovery and advocated by your Administration as recently as the State of the Union.
Today, mortgage rates are at historical lows. As you know, for many homeowners, refinancing can save thousands of dollars over the course of a year. Wide-spread refinancing keeps families in their homes and injects money into households that can be spent broadly across the economy. It is for these reasons that economists advocate for policies that encourage refinancing higher rate mortgages to take advantage of historic lows.
On the surface, Freddie Mac has embraced this policy prescription. As recently as December 2011, the organization’s chief executive assured Congress that it was dedicated to assisting homeowners to refinance. It is now suggested that Freddie Mac was simultaneously betting against that very goal. While it is plausible that a firewall keeps the investment arm of the organization from speaking to the refinancing department, the head of the organization should be plainly aware of the activities of each department. I question the leadership that would position the government-backed organization to bet against homeowners.
Freddie Mac must embrace the most stringent transparency standards. Broad investment goals and strategies must be plainly available and specific information must be available to taxpayers wishing to understand Freddie Mac and Fannie Mae’s investment decisions. Taxpayers have invested over $169 billion in these organizations to date. As we try to work with the private sector to incentivize refinancing, we must ensure that these government-sponsored organizations support this effort.
I ask you to put an end to these practices immediately and ensure that the investment decisions made by Freddie Mac are in line with the intent of Congress and the greater needs of our economy.
Thank you for your attention to this issue.
Robert P. Casey, Jr.
United States Senator
cc: Edward DeMarco, Acting Director, Federal Housing Finance Agency