- ISIL creates all-female brigade to terrorize women into following Sharia law
- ISTOOK: Obama wants to be impeached
- Obama to Latin leaders: Help with border
- Military bans troops from Baptist church event honoring ‘God’s Rescue Squad’
- ‘Pocket drones’: U.S. Army developing tiny surveillance tools for the next big war
- Belgian cafe posts sign: Dogs allowed, but Jews stay out
- Gen. Dempsey: Pentagon studying Russian readiness plans not viewed ‘for 20 years’
- John McCain: Botched, two-hour execution of murderer is ‘torture’
- House GOP ready to move border bill
- Bomb squad called after live WWII artillery washes on Cape Cod beach
Fannie, Freddie close to paying off taxpayer bailout bill
Treasury reaps revenue from 2 mortgage giants
Question of the Day
Fannie Mae and Freddie Mac, the housing giants whose combined $188 billion bailout dwarfed all others during the 2008 financial crisis, announced Thursday that they will return another $39 billion in dividends to the U.S. Treasury next month, bringing them close to fully repaying the taxpayers who rescued them.
Fannie Mae said it plans an $8.6 billion dividend that will bring its total payments to the Treasury in the past two years to $114 billion — $3 billion shy of its total $117 billion bailout — while Freddie Mac said a payment of $30.4 billion in dividends will more than complete the repayment of its $71 billion bailout.
Further dividends from both mortgage giants at the beginning of next year almost certainly will make taxpayers whole and turn their rescue operations into once-unimaginable cash cows for the government.
Although the two mortgage guarantee agencies technically cannot expunge their debts to the taxpayers and are still owned and controlled by the Treasury under the terms of their bailouts, the near break-even point they have achieved marks a symbolic closing of a major chapter in U.S. economic history as their bailouts were among the most dramatic, controversial and far-reaching events during the tumultuous financial crisis.
The large dividend payments to be reaped by the Treasury also highlight the important role the two mortgage giants have played in helping to sharply reduce the federal budget deficit in the past year to less than half of its $1.4 trillion peak during the crisis.
Just as the financial bailouts contributed in a big way to unprecedented budget deficits in 2008 and afterward, the return of taxpayer funds is now helping to quickly deflate them. All of the major banks have returned their bailout funds, with interest, and the Treasury is slowly recouping money shelled out to smaller banks.
Only the bailout of General Motors Co. remains as a significant loss for taxpayers, although the Treasury is expected to recoup another big chunk of the $50 billion in funds it paid two of Detroit’s Big Three automakers when it completes the sale of its remaining GM stock later this year.
“We are quickly approaching the point when taxpayers will receive a positive return on their investment in this company,” Fannie Mae Chief Executive Tim Mayopoulos said in announcing a seventh straight quarter of profitability and earnings for the once-insolvent leviathan. “That’s obviously very good news for taxpayers.”
The mortgage giants owe their profitability to the robust recovery in the housing market and refinancing boom in the past two years, which dramatically lifted sales and prices and sharply increased the fees they earn for packaging individual mortgages into mortgage-backed securities and providing a guarantee to investors.
Defaults on mortgages also are way down, meaning that the once-gigantic losses sustained by Fannie and Freddie are waning and leaving them with more profits. They also are enjoying better returns on sales from their large portfolios of foreclosed homes.
Since being burned by the crisis, Fannie and Freddie have become much more selective about the mortgages they guarantee. Because they provide backing for the lion’s share of all mortgages made today, the stricter requirements they have imposed on borrowers have quickly become standard for much of the rest of the mortgage industry.
“We’re a stronger and better-run company than we have been in years,” said Donald Layton, chief executive of Freddie Mac.
Dilemma for Congress
The growing profitability of the mortgage giants poses a dilemma for Congress and the administration.
President Obama and congressional leaders all say they want to phase out Fannie and Freddie, given their notoriety during the crisis, and turn over most of their functions to the private sector. But the sizable dividend payments streaming out each quarter pose a temptation for lawmakers who are still groping for ways to reduce huge budget deficits.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
- Economists see signs of another market bubble
- Crude oil will head north of the border to Canada
- S&P: Boeing to suffer if Ex-Im Bank killed
- U.S. job gains, unemployment dip push markets into record territory
- Unemployment falls to 6.1 percent amid U.S. hiring surge
Latest Blog Entries
TWT Video Picks
President wants everyone but himself to pay more
- ISTOOK: Obama wants to be impeached
- 'We're coming for you, Barack Obama': Top U.S. official discloses threat from ISIL terrorists
- NAPOLITANO: What if our democracy is a fraud?
- 'Pocket drones': U.S. Army developing tiny spies for the next big war
- Russia shipping sophisticated weapons systems to Ukraine separatists
- Michelle Obama says money in politics is bad, asks donors for 'big, fat check'
- CARSON: Costco and the perils of politicizing business
- Ohio university quiz implies atheists are naturally smarter than Christians
- EDITORIAL: Detroit's water 'spigot bigots'
- Brian Kelly, Notre Dame ready for different route to title
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq