Fannie and Freddie Make the U.S. Look a Lot Like Greece

[JBeukema]

As Americans shake their heads at the Greek debt crisis, they think, "Well, that could never happen here." Greece was hiding their debt so that investors didn't know the full extent of their fiscal problems. The U.S. wouldn't do something like that, would it?
The government's current policy to leave a great deal of its liabilities off-balance sheet makes the U.S.'s current debt levels look a lot more favorable than they really are. Future entitlement costs, for example, are already accrued, but remain included as unfunded liabilities, so aren't taken into account when the government talks about its debt.
Today, in his New York Times column, David Leonhardt examines the problem this poses for the future, saying:

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece's debt, by comparison, equals about 115 percent of its G.D.P. today.
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But this is more than just a future problem. George Mason University real estate finance professor and Mercatus Center senior scholar Anthony Sanders says the government sponsored entities Fannie Mae and Freddie Mac should be added into the debt equation. He testified before the House Financial services Committee back in March on housing finance reform. Even though the Treasury refuses to classify the GSE debt as sovereign debt, any distinction is nonsensical, since the government has promised to stand behind the agencies until at least 2012.
Here's a chart he created to show how the total U.S. debt changes if you add in Fannie and Freddie:

Fannie and Freddie Make the U.S. Look a Lot Like Greece - Business - The Atlantic

 

[chanel]

Standing up for American taxpayers, CNBC’s on-air editor, Rick Santelli teed off on Rep. Paul Kanjorski’s (D-PA) claim that Democrats’ couldn’t reform Fannie & Freddie in their financial regulation bill because it was “too complicated,” asking: “It’s too complicated? You think taxpayers that go to work to pay the money you are subsidizing, it will end up a half a trillion, do you think they think complicated is an excuse?”

CNBC?s Rick Santelli Rips Key Democrat For Ignoring Fannie/Freddie Reform | Republican Leader John Boehner

[ame=http://www.youtube.com/watch?v=zf6s7HTmtyM&feature=player_embedded]YouTube - Fannie and Freddie: Too Complicated To Address?[/ame]