Nov. 2 (Bloomberg) -- The U.S. Treasury is considering whether to allow Goldman Sachs Group Inc., the most profitable securities firm in Wall Street history, to pay Fannie Mae for tax credits that could lower Goldman Sachs’ tax bill.

“Treasury is reviewing and will not let it proceed unless it is clearly in the taxpayers’ interest,” said Andrew Williams, a Treasury spokesman in Washington. The Wall Street Journal reported the possible deal late yesterday.

Fannie Mae, the mortgage-finance company under government control, accumulated tax credits for investing in low-income housing, according to company filings. The Washington-based company has reported eight consecutive quarterly losses and noted in a recent filing that it is “not currently recognizing a majority of the tax benefits associated with tax credits.”

In the first nine months of this year, Goldman Sachs set aside $4.02 billion, about 32.2 percent of pretax earnings, to pay taxes. The New York-based company, which repaid $10 billion in U.S. aid plus dividends in June, has drawn fire after setting aside $16.7 billion for compensation through Sept. 30.

Goldman Sachs paid $14 million in worldwide taxes, less than 1 percent of pre-tax earnings, in fiscal 2008 when it earned $2.3 billion and received a $10 billion capital injection from the U.S. Treasury. Lloyd Doggett, a Texas Democrat who serves on the tax-writing House Ways and Means Committee, said at the time the low tax bill was a cause for concern.

“Fannie Mae is owned and controlled by the federal government,” said Michael DuVally, a spokesman for Goldman Sachs in New York. “The only basis on which approval for any transaction would be given would be if it was clearly in the taxpayers’ best interests.”

DuVally declined to comment on a possible transaction. Fannie Mae spokesman Brian Faith and spokeswoman Stefanie Mullin of the Federal Housing Finance Agency, Fannie Mae’s regulator, didn’t immediately reply to requests for comment.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Rebecca Christie in Washington at rchristie4@bloomberg.net

Last Updated: November 2, 2009 11:56 EST