Fannie and Freddie: No Free Lunch

The WSJ gives us the perfect example in Fannie and Freddie of why it's impossible to believe the federal government when it comes to budget matters.

It seems a lifetime ago, but it's only been six months since the Congressional Budget Office put a $25 billion price tag on the legislation to bail out Fannie Mae and Freddie Mac.

So much for that. In the past few days Fannie and Freddie have requested a combined $51 billion from the Treasury to compensate for losses in their loan portfolios. This comes on top of the $13.8 billion that Freddie needed in November.

The latest requests take the tab to $70 billion or so -- but that's not the end of the story by a long shot. Earlier this month, CBO released its biannual budget outlook. And largely ignored underneath the $1.2 trillion deficit estimate for fiscal 2009 was the little matter of a $238 billion charge for rescuing Fan and Fred. To put that in perspective, $238 billion is more than the entire federal budget deficit in fiscal 2007.

The bigger picture here is that politicians like Mr. Frank have been telling us for years that Fannie and Freddie's federal subsidy was a free lunch. We are now slowly, and painfully, learning the price of Mr. Frank's famous desire to "roll the dice" with Fan and Fred. Keep that in mind the next time you hear a politician propose a taxpayer guarantee. The only sure thing is that the taxpayers will pay.