You have to give Treasury Secretary Tim Geithner some credit for spin: today the Treasury announced
“Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac.”
The only problem is that the steps announced largely put the taxpayer at
greater risk in order to protect holders of Fannie and Freddie debt.
Essentially, the Treasury has amended its agreements with Fannie and Freddie so that the companies no longer have to pay a fixed dividend to the U.S. taxpayer, but instead “every dollar of profit” from the companies to the taxpayer. The problem is that the Government Sponsored Enterprises (GSE) have never had a year where their profits would have covered the dividend payments, so while we can debate if the taxpayer will recover anything from the GSEs, shifting to just collecting profits definitely means the taxpayer’s potential recoupment is lower.
The GSE’s regulator, the Federal Housing Finance Agency (FHFA) was at least a little more honest in its announcement of the changes, stating that, “as Fannie Mae and Freddie Mac shrink, the continued payment of a fixed dividend could have called into question the adequacy of the financial commitment contained in the PSPAs.” Read “financial commitment” to mean protecting debtholders from loss.
Read more: http://finance.townhall.com/columnists/markcalabria/2012/08/19/geithner_favors_fannie_mae_debtholders_over_taxpayers__again
Essentially, the Treasury has amended its agreements with Fannie and Freddie so that the companies no longer have to pay a fixed dividend to the U.S. taxpayer, but instead “every dollar of profit” from the companies to the taxpayer. The problem is that the Government Sponsored Enterprises (GSE) have never had a year where their profits would have covered the dividend payments, so while we can debate if the taxpayer will recover anything from the GSEs, shifting to just collecting profits definitely means the taxpayer’s potential recoupment is lower.
The GSE’s regulator, the Federal Housing Finance Agency (FHFA) was at least a little more honest in its announcement of the changes, stating that, “as Fannie Mae and Freddie Mac shrink, the continued payment of a fixed dividend could have called into question the adequacy of the financial commitment contained in the PSPAs.” Read “financial commitment” to mean protecting debtholders from loss.
Read more: http://finance.townhall.com/columnists/markcalabria/2012/08/19/geithner_favors_fannie_mae_debtholders_over_taxpayers__again
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