Senator Bob Corker, a member of the Senate Banking Committee, released the following statement on Tuesday after a Federal Housing Finance Agency (FHFA) stress test concluded that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac could require a taxpayer-funded bailout of over $125 billion in the case of a severe economic crisis.
"This stress test is another reminder of our housing finance system's failed model: taxpayers are on the hook during bad times, but investors benefit greatly during good times," said Senator Corker.
"Reforming Fannie and Freddie remains the last major piece of unfinished business of the financial crisis, and this news highlights the need for comprehensive housing finance reform."
Legislation first introduced by Senator Corker and Senator Mark Warner (D-Va.) in June 2013, the Housing Finance Reform and Taxpayer Protection Act (S.1217), passed the Senate Banking Committee in May 2014 by a vote of 13 to 9. The bill would strengthen America’s housing finance system by replacing government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac with a privately capitalized system that preserves market liquidity and protects taxpayers from future economic downturns.
During the 2008 financial crisis, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. As a result, the private market almost completely disappeared, and nearly every loan made in America today comes with a full government guarantee.