03/18/2010 05:12 am ET Updated May 25, 2011

Administration Asleep at the Wheel on FHA Oversight

Have you heard? Wall Street -- stoked by never-ending taxpayer largesse -- is again chugging down the rails. Destination: raising its own stock prices in the midst of a jobless recovery. But don't be fooled: the engineers of this paper recovery are still asleep at the wheel, allowing runaway mortgage giants Fannie Mae and Freddie Mac to burn through billions more tax dollars without an Inspector General or independent oversight.

Meanwhile, the capital reserves of the Federal Housing Administration (FHA) have dropped dangerously low, raising the specter of another taxpayer bailout of a federal housing agency. As these Casey Joneses watch the next economic train wreck pick up steam, Congress should slam on the brakes and take a long hard look at whether it makes sense to continue pouring public money into a broken federal housing bureaucracy without holding it accountable for every tax dollar it receives.

We recently learned that the Justice Department ruled in September that the Inspector General of the Federal Housing Finance Agency (FHFA) -- the regulator of Fannie Mae and Freddie Mac - could not continue as an independent overseer of the mortgage giants. Instead, IG Ed Kelley has been relegated to the position of "internal auditor," lacking independence and reporting to a political appointee.

Fannie and Freddie were at the heart of the financial crisis and were responsible for trillions of dollars of high-risk lending that inflated the housing bubble. They have already consumed billions, yet Congress and the Obama administration seem comfortable allowing these mortgage behemoths to operate without sufficient independent oversight -- absurd.

In spite of the bailout bonanza, the Federal Housing Administration's capital reserves have plummeted 30 percent as a percentage of its assets in just one year, even as the number of loans FHA supports has increased dramatically. FHA's reserve capital fund has fallen to 0.53 percent, well below the 2 percent required by law. If total reserves fall below zero, FHA will receive an automatic taxpayer bailout. FHA Commissioner David Stevens has promised to turn down the automatic taxpayer cash infusion. I'll believe that when I see it.

This all adds up to a Congress and an administration addicted to using taxpayer subsidies to prop up the flailing U.S. housing market. Yet it was precisely this negligent behavior -- lenders pushing taxpayer-subsidized, low-down payment lending to people who couldn't afford to pay their mortgage -- that got us into this mess. For as you read this, Fannie, Freddie, the FHA and the Veterans Administration stand directly behind more than 50 percent of all American mortgages. That is a shocking amount of money for which the public is already on the hook. Congress, however, continues to run up more mortgage debt on the taxpayers' tab, hoping the next bailout will get America out of this housing mess -- all without independent oversight, transparency and accountability.

Congress can begin fixing this today by putting the brakes on taxpayer money headed into a failed federal housing system until real oversight by an Inspector General is reinstated and an investigation into the congenital lack of transparency and accountability in the federal housing bureaucracy begins. Independent oversight should be the locomotive driving reforms of the federal housing bureaucracy. Instead, many in Congress and the White House have stuck transparency and accountability back in the caboose, an unconscionable mistake for which the American people should not have to pay...again.

Rep. Darrell Issa
(R-CA) is the Ranking Member of the House Committee on Oversight and Government Reform.