(CNSNews.com) – Rep. Jeb Hensarling (R-Texas) says the Obama administration is using
an accounting “gimmick” in its budget by not including the debt owed by
mortgage firms Fannie Mae and Freddie Mac.

“The accounting gimmicks that are used today would make an Enron and
WorldCom accountant blush,” Hensarling told reporters. “The American
people know that under the policies of this administration—under the
policies of this Congress—we are drowning in a sea of red ink.”

Hensarling, a member of the House Financial Services Committee, joined
a group of House Republicans Tuesday in announcing the introduction of
a bill that would require President Obama’s Office of Management and
Budget to include the liabilities of Fannie and Freddie in the national
debt calculation.

The two companies are defined as government-sponsored enterprises
(GSEs) whose portfolios include trillions of dollars in American
mortgages, many of which are now “under water.” The federal government
took control of the mortgage giants in 2008, as they neared financial
collapse.

Billions of taxpayer dollars ($61 billion for Fannie Mae and $51
billion for Freddie Mac) has been spent so far to keep the GSEs
solvent. Just this week, Freddie Mac reported a $7.8 billion loss in
the final three months of 2009, but said it will not require another
taxpayer infusion at this time.

Hensarling on Tuesday suggested that the administration is
under-reporting the nation’s debt by failing to account for the
potential liability incurred if Fannie and Freddie go deeper into the
red.

The potential liabilities incurred by Fannie and Freddie, Hensarling said, would amount to “the mother of all bailouts.”
“When the final chapter is written on the history of our financial debacle,
it will show that the cause was the government policies that cajoled,
incented (sic) and mandated financial institutions to lend money to
people to buy homes that, ultimately, they could not afford,”
Hensarling said. “At the epicenter of those federal policies was Fannie
Mae and Freddie Mac, and before all the dust settles in the final
accounting, they will prove to be the mother of all bailouts.”

Rep. Spencer Bachus (R-Ala.), the ranking member of the House Financial
Services Committee, estimated that the unfunded liabilities of Fannie
and Freddie could exceed $5 trillion.

Under Republican’s proposed bill, the White House Office of Management
and Budget would have to treat the GSEs’ estimated liabilities as part
of the federal debt, and those liabilities along with the rest of the
debt would have to remain under the debt ceiling.

Congress recently voted to raise the debt ceiling above $14 trillion dollars for the first time to accommodate other spending.

“The president has often spoken about accountability and transparency,”
Hensarling said. “This is an opportunity to engage in the deed as
opposed to words to actually achieve that, and I would hope…that this
legislation wouldn’t be necessary—that the president would direct the
Office of Management and Budget to have honest accounting for the
American people about the amount of debt that is attached to Fannie Mae
and Freddie Mac.”

The bill – the Fannie Mae and Freddie Mac Accountability and
Transparency for Taxpayers Act of 2010 -- specifically directs the
inspector general of the Federal Housing Finance Agency to submit
quarterly reports to Congress during the conservatorship of the Federal
National Mortgage Association (Fannie Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac).

Each report would have to include the dollar amount of the GSEs’ total
liabilities, with “a detailed breakdown of the potential level of risk
to the Federal Government” and an explanation of how the risk to the
federal government has changed from the previous reporting period.

The report also would have to include an explanation of all
compensation and bonuses paid to Fannie and Freddie executive officers,
among other items.

Treasury Secretary Tim Geithner told the House Budget Committee on
Wednesday there’s no need for such reporting requirements: "We do not
think it is necessary to consolidate the full obligations of Fannie and
Freddie onto the nation's budget,” Geithner said.

In addition to comparing the administration’s budget to the manipulated
Enron balance sheet, Hensarling said the United States was heading down
the same path as Greece, which now needs financial assistance from
other European Union members.

“In fact, if you look at the rules of the E.U., when you look at our
debt-to-GDP ratio—our deficit-to-GDP ratio, using our honest
accounting, we couldn’t even get into the E.U. Now why are E.U.
countries getting into trouble? Because of accounting gimmicks that
they used to trick their people.”

H.R. 4581,
the Fannie Mae and Freddie Mac Accountability and Transparency for
Taxpayers Act, has been referred to the House Committee on Financial
Services. In a Democrat-controlled House, it is not expected to advance.

, February 25, 2010