Gse Data Privacy

GSE Data Privacy J. Bradley Jansen March 29, 2001 Recent allegations have been made that Fannie Mae and Freddie Mac have been abusing their government privileges by intimidating private sector competitors. Apparently the current special, government-sanctioned privileges are not enough. The GSEs always want and expect more special treatment. These bullying allegations are serious and deserve to be investigated—either to pursue an injustice to the private companies or to clear Fannie Mae’s name. Would Fannie Mae really threaten to refuse to do business with companies involved with FM Watch, a lobbying association trying to rein in the GSE’s special privileges? On the face of it, there is little reason to think well respected CEOs of such companies as AIG, Wells Fargo and GE Capital Services would make unsubstantiated charges of such severity. Fannie Mae and Freddie Mac already receive unfair advantages over their private sector competitors: a line of credit at the Treasury implying a government guarantee to bail them out, an exemption from SEC rules and registration, lower capital standards, an exemption from state and local taxation (which hurts DC schools the most), etc. As if these current government-granted perks were not enough, the GSEs routinely lobby Congress for more. Despite only passing on one-third of their government subsidies to homebuyers and keeping two-thirds for themselves, Fannie and Freddie successfully lobbied to get an exemption from the privacy rules their private competitors must follow under privacy provisions of the Gramm-Leach-Bliley Act that reregulated the financial sector. Fannie and Freddie lured millions of Americans into refinancing their homes with artificially low interest rates. Many of them put that money in technology stocks only to find themselves with more debt but without the anticipated gains. Fannie and Freddie now know all of their sensitive financial information but are immune from the rules governing the use and exchange of that data. Fannie Mae caused a political furor last Congress when boxes of petitions allegedly from constituents were sent to some Representatives. Most of the constituents surveyed knew nothing of the petition. Image what the GSEs can do with our personal financial data. Do we need subsidized GSEs that can violate our financial privacy?