Fannie, Freddie Don’t Deserve Capital Punishment

April 3 (Bloomberg) -- The rebound in the real estatemarket has breathed some life back into Fannie Mae and FreddieMac, the giant mortgage financiers that have been wards of thestate since their near-collapse in 2008. The government shouldseize the opportunity to put them on a path to recovery, ratherthan killing institutions that, properly managed, could helpstabilize U.S. housing finance for generations to come.

This week, Fannie Mae reported net income of $17.2 billionfor 2012, the largest annual profit in company history. FreddieMac earned $11 billion over the same period. Oddly, not a dimeof that money will go toward paying back the $188 billion thefederal government has lent the two companies over the pastseveral years. Instead, at the government’s behest, about $11billion will go toward sky-high interest payments on the debt,which the Treasury holds in the form of preferred shares. Theonerous payments will leave the mortgage giants thinlycapitalized and undermine the investment of U.S. taxpayers, whohold 80 percent of the companies’ stock.