Fannie, Freddie Threaten Taxpayers Again

Financial Crisis: While "Occupy Wall Street" tries to live up to its name, the real causes of our financial woes remain on America's balance sheet, unreformed and threatening trillions of dollars more in losses.

Fannie Mae and Freddie Mac, the two government-run mortgage enterprises, weirdly were never included in President Obama's supposed financial reform.

Now, looking at a federal debt growing by nearly $1.5 trillion a year, many of the same foreign investors who fueled our housing boom are wondering if they'll ever get their money back.

Even as the White House continues to try to expand the role the government-sponsored enterprises (GSEs) have in home lending, central banks and sovereign wealth funds across Asia and the Middle East are beginning to sell off their Fannie and Freddie holdings, according to a report from the Financial Times.

Already, the National Pension Service of Korea and the Kuwait Investment Authority have liquidated their holdings. Others, including the Bank of Japan, say they're treading carefully — and hint they may soon be following the lead of Korea and Kuwait.

"The GSEs are not safe," one Asian central bank official told the Financial Times. At one point, foreign sources owned half of all the debt issued by the GSEs. Now that's down to about 20%, or about $724 billion, according to Bloomberg Research estimates.

Too bad, you say? They bought the debt, they took their chances. It's not that simple. As an American taxpayer, that means you will be left holding the bag for the inevitable bankruptcy of Fannie and Freddie.

Worse still, the White House harbors a frightening fantasy not just of keeping Fannie and Freddie alive, but actually expanding their role in the mortgage market.

Through something called "HARP" — yes, the echo of "TARP" is intentional — it's duplicating many of the most egregious errors behind our financial meltdown.

HARP, or the Home Affordable Refinance Program, requires both Fannie and Freddie to "forgo borrower income verification and detailed home appraisals" for loans. Isn't that what caused our financial crash?

This creates a huge risk of which American taxpayers are not aware. If they were, they're the ones who might be marching on Washington — instead of the unwashed unemployables who now "Occupy Wall Street."

The financial threat is substantial. The Congressional Budget Office forecasts our national debt will surge from about $14.8 trillion now to $23 trillion by 2021.

That may be an understatement. Fannie and Freddie, now wards of the state, have an estimated $7.5 trillion in debts. These are carefully kept off the government's books — though, as we've seen, because of "too big to fail," U.S. taxpayers are on the hook for their mistakes.

So instead of $23 trillion you may be shelling out $30 trillion — or more. Remember, the GSEs have already racked up nearly $250 billion in losses, and private estimates say the toll could reach $1 trillion.

The alarm bell is ringing. Foreigners know there's something rotten at the heart of our mortgage system, and it's Fannie and Freddie. It's time to privatize and dismantle the two mortgage giants before they do even more damage to our once-mighty economy.