News Column

Fannie Mae to Write Large Check to U.S. Government

May 10, 2013
Dollars

Mortgage giant Fannie Mae saw record profits in the first quarter as home prices rose, allowing it to make a large repayment to the US government for the 2008 bailout.

Fannie Mae, which along with the smaller firm Freddie Mac guarantees most US mortgages, will send 59.4 billion dollars back to the government, bringing it closer to repaying its bailout.

The funds come during a crunch for the US budget, with the extra money likely to give lawmakers breathing room on the debt ceiling, which is set to hit its limit later this month. The added funds would give the Treasury more flexibility with accounting measures now set to extend a fight over the debt limit until October, according to an analysis by the Bipartisan Policy Center think tank.

The move comes amid 58.7 billion dollars in profit in the quarter, largely from deferred tax benefits. Without the benefits, profits stood at 8.1 billion dollars.

The payment will bring to 95 billion dollars the amount the company has repaid of its 117-billion-dollar loan.

Fannie and Freddie were seized by regulators in September 2008 as the US financial system stood on the brink of collapse. The crisis was caused by increasingly risky financial investment schemes based on bundling of low-quality - so-called subprime - mortgages.

The risky practice prevailed throughout the financial investment system, brought down major US financial firm Lehman Brothers and triggered an 800-billion-dollar taxpayer rescue effort for banks and mortgage companies. It also set off a world-wide recession.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH. Distributed by MCT Information Services


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters