Pottery Barn and Freddie/Fannie

You break it, you bought it. That’s the Pottery Barn rule, at least as channeled by ex-Secretary of State Colin Powell. Apparently Peter Orzag at the Congressional Budget Office lives by an accounting variant of the same thing:

Given the steps announced by the Treasury Department and the Federal Housing Finance Agency on September 7, it is CBO’s view that the operations of Fannie Mae and Freddie Mac should be directly incorporated into the federal budget. The GSEs’ revenue would be treated as federal revenue and their expenditures as federal outlays, with appropriate adjustments for the manner in which credit transactions (like a mortgage guarantee) are reflected in the federal budget.

While rational, that can’t be what Treasury was hoping for here.

[via CBO]