Lawmakers consider next steps following Fannie Mae losses
UPDATED: 9:10 am
A government-controlled company could be in need of another bailout. It’s been reported that a $6.5 billion dollar loss last quarter has the mortgage company Fannie Mae in need of some cash to the tune of $3.7 billion. A South Dakota senator says something needs to change.
“You want them to be able to succeed on their own,” said Senator John Thune (R-SD).
Many say recent changes to the tax code created uncertainty in the housing market, leading to losses. It is the first time they are looking for a bailout since being pulled from the ashes of the housing crisis after going under.
When the government completely took over Fannie Mae lawmakers put it under strict regulations forcing the company to hand over its earnings. Some argue, that had Fannie Mae been allowed to build up capital, another bailout may not be necessary.
Thune voted for the original bailout package. He was not explicit about how he would vote on another.
“They’ve had their problems in the past and we’ve tried to correct those. And it sounds like we’re in the process of seeing what we can do to make some additional reforms,” said Thune.
The company was on its own before the government took over following the crisis. Now that it relies on taxpayer funds, Thune says it shouldn’t be draining wallets.
“You don’t want to have these entities operating in a way that draws into question whether or not they’re going to be able to pay their bills,” said Thune.
The longer taxpayers keep Fannie Mae alive, economists like Sumit Agarwal say the more opportunity the company has to engage in risky behavior.
“We keep bumping in, like a trickling effect of money. And the harder decisions that the government needs to make, they’re not making,” said Agarwal.
Like letting them go at it alone says Agarwal. Instead he says Fannie Mae does not deserve another Band-Aid fix like a bailout. He says they need to fight for survival like other businesses.
“Next time you fail. You’ll fail and nothing will be done,” said Agarwal.
As of now it is not clear exactly how Congress will address the Fannie Mae losses. Fannie Mae was not available for comment.