Fannie Mae and Freddie Mac preserve their privileged status through a multi-million-dollar lobbying effort that includes massive “soft money” campaign contributions and the payment of exorbitant salaries to politically connected executives and lobbyists. The GSEs also protect their government-sponsored empire through millions of dollars of charitable donations to Washington advocacy groups.
Because of their quasi-governmental status, there is a market perception that Fannie Mae and Freddie Mac mortgage-backed securities and debt carry an implicit federal guarantee against default. Hence, the GSEs expose the federal taxpayer to an ever-increasing potential contingent liability that could ultimately cost tens of billions of dollars to rectify.
The Cato Institute
December 29, 1997