WASHINGTON Jan 19 Six Republican senators took aim at the Obama administration's Christmas eve decision to give mortgage companies Fannie Mae FNM.N and Freddie Mac FRE.N unlimited access to a Treasury credit line.
The senators called on Senate Banking Committee Chairman Chris Dodd to hold public hearings and scrutinize the decision to turn the government-sponsored enterprises into "public utilities."
"The current status of the GSEs is untenable ... and we feel that it would be irresponsible for the committee to fail to investigate Treasury's drastic action with regard to what could be the next chapter in our financial crisis," Senator Jim DeMint of South Carolina wrote to Dodd, a Connecticut Democrat who recently announced his decision not to seek re-election in November.
DeMint was joined by Kentucky's Jim Bunning, Nebraska's Mike Johanns, Idaho's Mike Crapo, Utah's Robert Bennett and Kay Bailey Hutchison of Texas.
On Dec. 24, the Obama administration announced it was extending an unlimited credit line to mortgage finance agencies Fannie and Freddie, which would keep them afloat no matter how high their losses.
Many analysts and some lawmakers on Capitol Hill see the move as a backdoor way to help banks.
Representative Dennis Kucinich, a Democrat who heads the domestic policy subcommittee of the House Committee on Oversight and Government Reform, has already called for an investigation.
The original bailout program, devised by former Treasury Secretary Henry Paulson, was a plan to help the banks restore their capital position by buying bad assets at and above market price.
The Treasury's announcement said the unlimited credit line for the two government-controlled companies would be in place through the end of 2012, weeks after President Barack Obama would face voters if he seeks a second term.
The Treasury also said it was scrapping plans for the two companies, which play a role in funding three-fourths of all U.S. residential mortgages, to reduce the size of their investment portfolios. The 2010 limits on their portfolios, in fact, would allow their investment holdings to grow.
"In total, U.S. taxpayers are on the hook for more than $2 trillion of bailouts of Fannie Mae and Freddie Mac. This latest action by the Treasury could make that number seem penny ante," the Republican senators wrote. (Reporting by Corbett B. Daly; Editing by Kenneth Barry)