A new Congressional Budget Office report says taxpayers are on the hook for Fannie Mae and Freddie Mac at over twice the amount the Obama administration claims. The Obama administration counts only the $130 billion in cash paid to bail out the two government sponsored enterprises (GSE’s) while ignoring “the cost of the federal government guaranteeing the loans bought and securitized by the GSEs.” The CBO says the total is really closer to $317 billion.

In a report delivered to the House Budget Committee on June 2, the CBO said a “fair value” accounting of guaranteeing the two defunct mortgage companies – known as Government Sponsored Enterprises (GSEs) – was more than twice as high as the Office of Management and Budget had accounted for.

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The total of those cash payments is $130 billion, and is normally reported as the cost of the bailout of the GSEs to date. However, the CBO said that merely counting the cash payments, and not the cost of federal subsidies granted to the GSEs, obscures their real costs.

Essentially, the CBO is accounting for the cost of the federal government guaranteeing the loans bought and securitized by the GSEs.

Say again?

The GSEs have a fair-value deficit between assets and liabilities that total to $187 billion. Combined with the $130 billion in cash infusions given by the federal government to Fannie and Freddie, the taxpayer is on the hook now for $317 billion. The CBO predicts that the liability will increase each year by slightly more than $4 billion over the next ten years as well.

Taxpayers might have to eat it all in the near term in order to shed the liabilities. If Congress gets around to ending the government guarantees for Fannie and Freddie, it will almost certainly have to resolve the deficit. That is why the CBO calculation is so important, and likely why Congress and the White House avoided addressing the issue in 2009 and 2010.

The government-sanctioned monopolies that securitize the majority of all mortgages in the U.S. are among the major players in the real estate collapse and the subsequent recession. As political instruments, politicians over the years made demands of these GSE’s to securitize more and more loans and ones that were riskier and riskier — eventually under the Clinton administration demanding more risky, subprime loans.

And when that risk is realized, who’s on the hook? The people who agreed to take on the risk? The politicians who built the system? Of, course not. Us taxpayers are the ones to pay the bill.

If these GSE’s weren’t too big to fail — ie, if they weren’t government sanctioned monopolies — they a) would be more difficult to become political play things and b) could fail and other enterprises could move into their place. Instead, as blunt political tools (and ones that give generously to the very political candidates who oversee them [Obama, Dodd, Frank, R’s too…]) they remain instruments of social engineering that we taxpayers must prop up when they and their political cronies fail.

Fannie / Freddie are the poster children for why governments should not play puppet masters in the marketplace.