Fannie Mae and Freddie Mac, the nation's two biggest mortgage buyers, receive as much as $164 billion in implicit federal subsidies but have done little to increase homeownership or reduce the cost of home loans, according to a draft study by the Federal Reserve.
The study, released late last month, probably will intensify debate about the companies, which have come under heavy fire for their accounting practices and for the special treatment they receive as government-sponsored corporations.
Fannie Mae and Freddie Mac, which buy home mortgages and bundle them into large securities, were created by Congress to help expand the market for home loans and are now among the largest financial institutions in the country. They hold $1.6 trillion in assets between them, and their stocks are publicly traded.
The two companies receive little direct federal assistance, but they are able to borrow money at cheaper rates than other financial institutions because investors think - perhaps incorrectly - that the federal government would bail them out of a financial crisis.
The Fed study estimated that this "implicit subsidy" was worth $119 billion to $164 billion to the two companies combined, far bigger than the companies themselves have estimated. But the study estimated that about half of that benefit goes to stockholders rather than to homebuyers in the form of lower mortgage rates.
The study estimated that the loan-repackaging programs of the two companies have reduced mortgage rates by only seven basis points (a basis point is one-hundredth of a percentage point), meaning that a standard mortgage with a rate of 6 percent would be 5.93 percent through Fannie Mae.
The "implicit subsidy does not appear to have substantially increased home ownership or homebuilding," wrote the study's author, Wayne Passmore.
Arne Christenson, Fannie Mae's senior vice president for regulatory policy, disputed those estimates, calling them "extremely low, highly theoretical and completely unsubstantiated by anything you see in the market."
Christenson said the best measure of Fannie Mae's impact on mortgage rates was to compare the rates on loans that it was allowed to purchase and the so-called jumbo mortgages above $323,700 that it was prohibited from buying. The jumbo rates, he said, are often one-quarter to one-half of a percentage point higher.
The Fed study is the latest salvo in a prolonged political battle over how to regulate the two financial institutions, which are based in Washington.
Competitors in the financial industry complain that the companies receive unfair competitive advantages from their special ties to the federal government.
The companies are exempt from many standard disclosure rules imposed on other financial institutions, and the Treasury has the legal authority - which many view as a backdoor guarantee in case of trouble - to buy up to $2.25 billion in their mortgage-backed securities.
Congress and the Bush administration have been embroiled for months in debate about how best to regulate the two companies, in part because a growing number of experts worry that the companies are too exposed to a meltdown in the event interest rates rise sharply or the housing boom suddenly collapses.
Fannie Mae and Freddie Mac have come under criticism for engaging in questionable accounting.
Freddie Mac is under investigation by both the Justice Department and the Securities and Exchange Commission for having understated its earnings by billions of dollars, apparently to smooth out variations between good years and bad.
The Treasury Department has proposed putting both companies under its supervision, but the companies are fighting the plan.
A growing number of experts contend that the two companies should not enjoy a special government status because it exposes the government to potentially big liabilities even if the companies do not officially have any federal loan guarantees.
Alan Greenspan, chairman of the Federal Reserve Board, testified last year in Congress that the two companies should not be treated differently from other institutions.
But the companies wield considerable influence in Congress, and lawmakers have shied away from proposals to curtail their special status.