Fannie Mae Will Beat Bailout Payback by $5 Billion
The bailouts the U.S. Treasury made of the financial, auto, and housing industry continue to be a hot-button issue for both political parties, but there is no gray area with respect to the money the government invested and saw returned. It was a profitable enterprise. In the case of the Treasury’s bailout of troubled housing lender Fannie Mae, The Washington Post reports the U.S. will get back $5 billion more than it invested in the company after taking a controlling interest in 2008.
Fannie Mae will make a payment of $7 billion to the U.S. Treasury in March as part of a scheduled system of dividend offerings paid also by Freddie Mac. Until now, the mortgage mammoth had paid the government back $114 billion of the $116 billion in bailout funds received after the housing crisis of 2008. By the time the next payment is made, the Treasury will count profits of $5 billion. The system will continue as is, meaning Treasury coffers may continue to swell with funds provided by the bailed-out lenders.
According to CNN Money, private investors who maintain about 20 percent of Fannie Mae and Freddie Mac are suing to end the payment system, which could continue to funnel profits of the companies to the government indefinitely. Most observers of the political scene consider the windfall not worth expecting for the long term. If the companies were to experience renewed troubles, the financial burden would fall upon U.S. taxpayers once again. President Obama, among other politicians, would like the see the lenders overhauled for this reason.
Fannie Mae’s chief executive celebrated the payout as a great day for taxpayers while cautioning not to use the profits as a case for keeping the system in place, The Washington Post reports. There is bipartisan support for restructuring the mortgage institutions in the Senate, though the ever-obstructive House of Representatives opposes any significant government role in the housing industry.
Nonetheless, the uptick in housing prices combined with profits from Fannie Mae going to the government allow supporters of restructuring the too-big-to-fail lenders some leeway. Government control isn’t essential when the market is taking care of itself. However, the devil is always in the details of these plans, while pushing legislation through both chambers of Congress is nearly impossible.
Viewing the scorecard for bailouts, the housing industry will join AIG and big banks as sectors that returned more to the government than it invested, while the auto industry will be one of the losers on the backs of the $10 billion General Motors did not pay back. Thus far, it’s been a major win with respect to taxpayer money.
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