By Erik Paulsen

As Congress continues to debate new regulations as part of the financial reform package, it is extremely important that we focus on the problems that led to the financial crisis in the first place.  Unfortunately, one of the biggest factors has been completely ignored under the current proposals: the role of Fannie Mae and Freddie Mac.

Fannie and Freddie are government sponsored enterprises (GSEs) that receive taxpayer support and essentially function as federal agencies.  Both Fannie and Freddie were at the center of the mortgage crisis that triggered the larger financial crisis we are still digging out from.

Yesterday, these two firms requested an additional $10.6 billion in bailout funds!  This is on top of the $126 billion already lost bailing them out.  This is alarming, particularly when the current regulatory reform proposals do nothing to address the inherent problems of Fannie and Freddie.

We cannot continue to throw more borrowed taxpayer money at these two institutions without reforming them.  True financial reform would include much needed restructuring of Fannie and Freddie.  As the Wall Street Journal put it today, “Reforming the financial system without fixing Fannie and Freddie is like declaring a war on terror and ignoring al Qaeda.”

As the Senate continues debating this issue, I hope that reform of these two institutions will be paramount to ensure that we protect taxpayers in the future.

Cross-posted at Erik Paulsen’s Blog.