Would Require Fannie Mae and Freddie Mac to comply with SEC disclosure rules

(Washington, D.C.) – The Council for Citizens Against Government Waste (CCAGW) today released excerpts from a recent letter to members of Congress regarding the Shays-Markey Fannie Mae and Freddie Mac reform proposal.  The bill currently has eight co-sponsors.  The letter was co-signed by CCAGW's Leslie Paige, John Berthoud of the National Taxpayers Union, Fred Smith of Competitive Enterprise Institute, Danielle Brian of the Project on Government Oversight, and Frank Torres of Consumers Union.

We write to encourage your co-sponsorship of H.R. 4071, the Uniform Security Disclosure Act, which would require the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac, two of the nation’s largest publicly-traded stockholder-owned corporations, to register with the Securities and Exchange Commission and comply with the reporting and disclosure rules administered by the SEC.

At a time when the issue of corporate governance and the lack of full public disclosure are high on the public’s agenda, we believe that Fannie Mae and Freddie Mac should no longer be exempt from SEC regulation.  The Shays-Markey legislation would protect investors and increase transparency by requiring these two companies to do what every other company with publicly-traded stock in the United States does.

In view of the fact that Fannie Mae and Freddie Mac provide voluntary disclosure and claim to disclose more information than the SEC requires of publicly-traded companies, submitting to SEC regulation should be a simple matter for these multi-billion dollar companies.  More importantly, the time has long since past when two companies of the size of Fannie Mae and Freddie Mac can choose to voluntarily comply with regulations aimed at protecting shareholders and debt holders, while thousands of other companies – offering goods and services at least as important as those provided by the GSEs – are required by law to comply with these rules.

There is ample precedent for rescinding the exemptions of Fannie Mae and Freddie Mac. Congress required Farmer Mac, another GSE with publicly-traded stock, to register with the SEC, pay registration fees, and comply with the disclosure and reporting requirements.  Fannie Mae and Freddie Mac claim that registration and payment of fees would somehow increase housing costs.  This claim is sheer nonsense.

Fannie Mae and Freddie Mac continue to want to have the best of both worlds – free enterprise and government protection.  These companies are no longer part of the government.  The CBO calculates that Fannie Mae and Freddie Mac receive federal subsidies amounting to $10.6 billion annually.  These companies have publicly traded stock and issue billions of dollars of debt annually.  Registration and regular reporting will provide investors, Congress and taxpayers with better information on how these companies do business, what financial risks they face, and how they manage those risks. Since the 1930s, Congress has recognized the need for a standardized system of mandatory and continuous disclosure of material information by securities issuers.  Fannie Mae and Freddie Mac should be subject to the same rules, and their disclosures should not be dependent upon their voluntary interpretation of what should be disclosed.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.