Faced with growing losses on the value of its combined $1.5trn mortgage books, government-sponsored enterprises (GSEs) Fannie Mae (FNM: 0.00 N/A) and Freddie Mac(FRE: 0.00 N/A) added $291bn in subsidy costs to the Federal deficit by mid-year, according to the Congressional Budget Office (CBO) the agency tasked with recording costs incurred by the government.

That number may reach as high as $389bn over the course of this decade. The agencies' combined net worth deteriorated from a $7bn surplus in June 2008 to a $258bn deficit in June 2009, according to the CBO report (download here). However, the CBO expects the overall cost to dwindle to a projected $99bn between 2010-2019.

The Fannie and Freddie numbers come from the CBO's August baseline estimate [pictured above] of federal outlays for fiscal year 2009. According to the just-released CBO "Budgetary Treatment of Fannie Mae and Freddie Mac" report, loan losses on defaults are typically in the range of 30-50% of outstanding balance. With a housing market in decline, the loss rates are expected to be much higher.

"The total amount that CBO projected for the Treasury’s cash infusions from 2009 to 2019—$163bn—falls well short of the $389bn in subsidy outlays projected in CBO’s baseline for that period," the report states.

The higher projected costs of the GSEs come as regulators are cracking down on bonuses paid to employees of financial firms and the Administration is proposing a tax to repay the Troubled Asset Relief Program (TARP).

Further, today Representative Darrell Issa (R-CA), a House Committee on Oversight and Government Reform member joined with Reps. Dennis Moore (D-KS), Judy Biggert (R-IL) and Chairman Edolphus Towns (D-NY) to introduce H.R. 4450, or the Federal Housing Finance Agency Inspector General Technical Corrections Act of 2009.

The group is calling for the immediate appointment of an inspector general for the Federal Housing Finance Agency (FHFA), which holds jurisdiction over the GSEs.

“Fannie and Freddie have become the largest taxpayer bailout in American history it defies common sense to leave them without proper oversight while the federal government keeps giving them unlimited access to its ATM card,” Issa said in a statement today. “This bipartisan bill should be voted on as soon as humanly possible so that we can put in place some mechanism of accountability and independent oversight at the FHFA because at this moment – there is none.”

The previous Inspector General, Edward Kelly, was stripped of his independent oversight in November 2009.

At any rate, the CBO expects the portfolio size of the GSEs to remain stable through 2010, regardless of the activity in the secondary market: "New purchases are assumed to be confined to conforming mortgages and to MBSs issued by the two entities or by Ginnie Mae, rather than subprime or Alt-A securities," the report states, assuming that "subprime and Alt-A mortgages that terminate early would default, be refinanced privately, or be refinanced through the Federal Housing Administration."

Write to Diana Golobay.

President Barack Obama is proposing a "Financial Crisis Responsibility Fee" to tax large financial institutions that received government funds through the Troubled Asset Relief Program (TARP). The news comes in the midst of reports that the government may earn billions of dollars on bailouts.

The proposed fee would last for at least 10 years, until all taxpayer dollars are repaid. The fee would apply to the debt of financial institutions with more than $50bn of consolidated assets.

The fee would be assessed at about 15 bps of covered liabilities – or assets, less Tier 1 capital and deposits already covered by Federal Deposit Insurance Corp. (FDIC) assessments – per year, according to a White House fact sheet (download here).

Regulators would report covered liabilities and the Internal Revenue Service (IRS) would collect the fee. Revenues would be paid into the general fund, to reduce the national deficit.

The President said Thursday his decision to propose the fee is spurred by reports of "massive profits and obscene bonuses at the very firms who owe their continued existence to the American people."

In a statement, he added: "That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.”

The fee would take effect June 30, 2010 and would expire after 10 years unless costs are not recouped by that time. The proposed fee would raise $117bn in about 12 years, and $90bn over the next 10 years. More than 60% of revenues will be paid by the 10 largest firms.

"By levying a fee on the liabilities of the largest firms – excluding FDIC-assessed deposits and insurance policy reserves, as appropriate – the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt," the White House said in a statement.

The President's move to speed up repayment of bailout funds follows a move by Rep Peter Welch (D-VT) to introduce legislation to levy new taxes on yearly employee bonuses at financial institutions that receive financial assistance from TARP.  Under the bill, bonuses above $50,000 in either cash or stock would be taxed at a rate of 50%.

Write to Diana Golobay.

Mortgage securitization agency Freddie Mac (FRE: 0.00 N/A) is offering another round of structured pass-through certificates, or K Certificates, that consist of multifamily mortgage-backed securities (MBS).

It marks the third series of K Certificates backed by multifamily mortgages originated through Freddie's Capital Markets Execution (CME) product, the agency said, and the first of half a dozen planned for the new year as successful past offerings continue to spark life within Freddie's multifamily pipeline for securitization. If the new offering is successful, it will add liquidity to the multifamily market.

Freddie expects to offer $1.1bn of these certificates – backed by 70 recently-originated multifamily mortgages that Freddie guarantees – which should price around January 27 and close by February 3, according to a statement. Goldman Sachs (GS: 111.77 +2.96%) and JP Morgan Securities will act as co-lead mangers on the transaction.

"While this is our first deal in 2010, given our pipeline we expect to come to market every other month throughout 2010 with new deals, and thereby continue to provide greater liquidity to the multifamily housing market," said David Brickman, vice president of multifamily and commercial mortgage-backed securities (CMBS) capital markets at Freddie, in a statement.

Freddie's first offering of these certificates settled in June 2009. Then, in October, the most recent offering oversubscribed at $101 per certificate, indicating growing investor support at a time of few multifamily deals.

Mail to Diana Golobay.

The author holds no relevant investment positions.

The securitization advocacy group, the American Securitization Forum, is parting administrative ways with the global trade body, the Securities Industry and Financial Markets Association (SIFMA).

"The Forum will now function as a completely independent organization exclusively focused on serving its members and all facets of the securitization markets, as well as the critically important task of restarting the vital flow of credit to American consumers and businesses," read a statement from the ASF board today.

In another statement, the ASF added, "we unanimously selected Tom Deutsch to be the Executive Director of the American Securitization Forum after a comprehensive search process." Deutsch served as the deputy executive director previously.

Formed in 2002, the ASF is author of “Project RESTART,” an initiative in the secondary market geared toward restoring investor confidence in mortgage- and asset-backed securities. Recent actions within Project RESTART include a final release of residential MBS disclosure and reporting packages.

The forum also created a loan-level tracker for bonds, called LINC. The ultimate goal being to increase transparency to an extent where investors are drawn back in to the market, but issuers are not overly stifled with regulation.

Ralph Daloisio, Chairman of the ASF Board and a managing director for the French bank Natixis said, “The ASF is dedicated to restoring mortgage, consumer and small business credit to Main Street and our new organizational structure will help us exclusively focus on achieving that goal. Without question, the American economy requires a viable securitization market for maximum sustainable growth.”

While the ASF maintains that its operations with SIFMA were always of an independent and strategic nature (emails from ASF staff often carried the sifma.org domain), the news will help the organization to develop its role as a central player in the US securitization markets.

"Our new stand-alone structure will provide even more organizational focus on these fundamental goals,” said Deutsch. "I’m confident we’ll collectively succeed in reopening the securitization markets and getting the U.S. economy back on track.”

Write to Jacob Gaffney.

Rep. Peter Welch (D-VT) introduced legislation this week to levy new taxes on yearly employee bonuses at financial institutions receiving assistance from the Troubled Asset Relief Program (TARP). Under the bill, bonuses above $50,000 in either cash or stock would be taxed at a rate of 50%.

Under the Wall Street Bonus Tax Act, H.R. 4426, which Welch announced at a press conference this week at the Burlington International Airport in his home state, all proceeds from the bonus tax would fund a new direct-lending program administered by the Small Business Administration (SBA). The program would offer low-interest, government loans to healthy businesses having trouble finding lines of credit for expenses and expansion.

According to the New York Times, Goldman Sachs (GS: 111.77 +2.96%) is expected to pay employees an average of $595,000 for 2009. Those at JPMorgan Chase (JPM: 37.21 -0.75%) could collect $463,000 on average, although the report isn't clear if that compensation is in salary plus bonuses, or bonuses alone.

The bill follows actions in other Western economies, notably in the UK, to heavily tax bonuses. The 50% tax on bonuses above £25,000 ($40,668) in the UK should generate more than £2bn in revenue, though investment banks there say it will greatly undermine their ability to stay competitive by drawing in the most talented employees with the prospect of unburdened financial incentives.

Nonetheless, Welch believes that large bonuses from bailed-out Wall Street firms to their employees would highlight the potential inequities against what the stimulus is trying to accomplish: “Fifteen months after the American taxpayer threw Wall Street a life preserver, its biggest firms are about to break their own records of lavish, excessive and unearned bonuses. Paid for by hardworking Americans who continue to struggle through tough economic times, these bonuses are Exhibit A that Wall Street has not learned its lesson,” said Rep. Peter Welch. “When you see a bank being robbed, you try to stop it. My bill will put an end to this breathtaking heist.”

Write to Jon Prior.