The regulator of Fannie Mae and Freddie Mac said it isn’t his job to worry about the two companies’ shareholders.
“I don’t lay awake at night worrying about what’s fair to the shareholders,” Melvin L. Watt, director of the Federal Housing Finance Agency, said in an interview taped today for C-SPAN’s “Newsmakers” television program. “My responsibility is to think about how can I do what is responsible for the taxpayers.”
Investors including Bruce Berkowitz’s Fairholme Capital Management and hedge fund Perry Capital LLC have been pushing the U.S. to return the companies to private ownership. They’ve also challenged an arrangement in which the FHFA and the Treasury Department require the companies to pay 100 percent of their profits to the U.S.
In the interview, which will air on Sunday, Watt said he’s “comfortable” operating under that arrangement.
“I assume that Treasury believes this is reasonable compensation for saving Fannie Mae and Freddie Mac,” he said.
The companies, which buy mortgages and package them into bonds, were seized by regulators in 2008 as they neared bankruptcy. Taxpayers provided $187.5 billion in aid to keep the firms afloat. By the end of June, Fannie Mae and Freddie Mac will have sent $213.1 billion of their earnings to the Treasury.
It’s not important for the companies to use profits to build a capital cushion because they are backed by taxpayers, according to Watt.
“Capital is important for a private corporation, but this is a corporation that is in a conservatorship with the taxpayer having committed to back it,” he said.
Watt said he didn’t create the arrangement directing Fannie Mae and Freddie Mac’s profits to the U.S. “so it’s not my job to worry about whether it’s fair or not fair.”
Shares of Fannie Mae closed at $4.21 in New York, down 1 percent from $4.26 at Thursday’s close and up 40 percent from $3.01 on Dec. 31. Freddie Mac shares ended the day at $4.22, a loss of less than 1 percent percent from Thursday’s close and up 46 percent for the year.