In a letter dated March 1, Rep. Darrell Issa, ranking member of the Committee on Oversight and Government Report, and Jim Jordan, ranking member of the Subcommittee on Domestic Policy, criticized Treasury Secretary Timothy Geithner's statement last week that specific legislative proposals to overhaul the two companies were unlikely before 2011.
"The taxpayer bailout of Fannie Mae and Freddie Mac will almost certainly be the most expensive of the financial crisis," they said in the letter to Edolphus Towns, Chairman of the House Committee on Oversight and Government Reform and Dennis Kucinich, chairman of the House Subcommittee on Domestic Policy.
The government seized control of the two largest purchasers of U.S. home loans in September 2008, as the deepest housing crisis since the Great Depression forced a tidal wave of mortgage delinquencies and foreclosures that have eaten away at their capital.
On Christmas Eve 2009, the Treasury extended its support by opening wide the credit spigots for both companies for three years.
On Friday, Fannie Mae reported a fourth-quarter loss of more than $16 billion and said it would tap the Treasury for $15.3 billion in cash. Fannie Mae has now asked for $76.2 billion from the Treasury's unlimited credit line.
Freddie Mac, which reported a fourth-quarter loss of $7.8 billion last Wednesday, said it did not require a capital draw from the government last quarter but would need more funds this quarter as defaults raised credit-related costs. Freddie Mac has so far drawn more than $50 billion from the Treasury.
Concern about the size of the companies' mortgage investment portfolios and executive compensation were also cited in the letter as reasons to urgently investigate the administration's backing.
A plan to unwind the "ever-growing commitment" to the two companies was expected in the fiscal 2011 federal budget but has still not been forthcoming, Issa and Jordan said in the letter.
With much of the private markets shut down, the government has relied heavily on Fannie Mae and Freddie Mac to buy home loans and repackage them as securities to keep funding flowing in the fragile housing market.
"The ongoing bailout of Fannie and Freddie and the Administration's lack of an exit strategy have profound implications for the future health of the U.S. economy and the fiscal solvency of the federal government," the letter said. (continues here)