Whether on Wall Street or in Washington, the biggest frauds often are the perfectly legal ones hidden in broad daylight. And in terms of dollars, it would be hard to top the accounting scam that Obama’s budget wonks are trying to pull off now. The ploy here is simple. They are keeping Fannie Mae and Freddie Mac off the government’s balance sheet and out of the federal budget, along with their $1.6 trillion of corporate debt and $4.7 trillion of mortgage obligations.
Never mind that the White House budget director, Peter Orszag, in September 2008 said Fannie and Freddie should be included. That was when he was director of the Congressional Budget Office and the two government-backed mortgage financiers had just been seized by the Treasury Department.
The White House is already forecasting a $1.3 trillion budget deficit for 2011, which is about $3 of spending for every $2 of government receipts. By all outward appearances, it seems Obama and his budget wizards decided that including the liabilities at Fannie and Freddie would be too much reality for the world to handle. So they left the companies out, in a trick worthy of Enron’s playbook, except not quite so hidden.
