Six Republican senators are demanding a hearing by the Senate banking committee on the Treasury's little-noticed move Dec. 24 to remove caps on the amount of taxpayer aid given to Fannie Mae and Freddie Mac in the next three years.
Calling the move "the Christmas Eve Taxpayer Massacre," the conservatives said it amounted to giving the mortgage goliaths, which are rapidly losing tens of billions of dollars each quarter, a "blank check" that could eventually eclipse the amount spent on bailouts thus far.
"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," the senators said in a letter Tuesday to Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the Senate Banking, Housing and Urban Affairs Committee.
The Treasury's action, which was accomplished when Congress was out of town with little explanation, "seems to solidify Fannie Mae and Freddie Mac as public utilities," said the letter, signed by Sens. Jim DeMint of South Carolina, Jim Bunning of Kentucky, Mike Johanns of Nebraska, Kay Bailey Hutchison of Texas, Mike Crapo of Idaho and Robert F. Bennett of Utah.
"The effective nationalization" of two firms that have dominated the mortgage market for the last two years could have far-reaching effects, which should be examined, they said, calling their current status as wards of the state "untenable."
The Republicans estimated that taxpayers already have provided $110.6 billion of direct support to Fannie and Freddie, while the Treasury and Federal Reserve have provided an additional $1.2 trillion of assistance through purchases of the mortgage giant's debt and mortgage-backed securities in the last year.
"This latest Christmas Eve action by the Treasury could make that number seem penny ante," they said.