Fannie Mae says it, Freddie Mac face new fees Clinton budget proposal reported by company

Budget

December 31, 1998|By BLOOMBERG NEWS

WASHINGTON -- Fannie Mae said yesterday that it has learned that the Clinton administration's proposed federal budget would raise at least $500 million a year by slapping new fees on Fannie and its sister mortgage concern, Freddie Mac.

Both companies are government-sponsored enterprises, or shareholder-owned entities created by Congress to help ease funding in the housing market. Due to this status, Congress exempted both companies from Securities and Exchange Commission rules that require public companies to register securities and pay fees.

Fannie Mae spokesman John Buckley said the budget plan would assess a total of $500 million a year on Fannie and Freddie, divided equally between the two, to make up for the revenue the government doesn't receive due to their SEC exemption.

"This would be a $500 million tax on two companies that already pay $2 billion in federal income taxes," Buckley said. Fannie Mae learned of the proposed fee from sources within the administration, he said.

The Office of Management and Budget, which prepares the Clinton administration's budget plan, declined to comment.

The White House usually releases its budget proposal in early February and it almost always proposes some fees or taxes that are rejected by Congress.

Fannie Mae has successfully fought attempts to levy new taxes or fees. It can draw from a deep bench of well-connected executives, such as the incoming chief executive, Franklin Raines, who headed the OMB until earlier this year.

Fannie Mae is mounting a lobbying push to kill the fee, arguing that it would amount to a "homeownership tax."

"This is a significant retreat from long-standing government policy in favor of homeownership," Buckley said. "We are quite confident this won't survive, because a homeownership tax is unsupportable."

Fannie Mae and Freddie Mac buy mortgages from lenders and package them as securities either to hold in their own portfolios or sell to investors.

Pub Date: 12/31/98

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