U.S. Could Profit From Fannie Mae Bailout, CEO Mayopoulos SaysClea Benson
U.S. taxpayers could see a net gain from their bailout of Fannie Mae as the housing market rebounds, Chief Executive Timothy J. Mayopoulos said today.
“I do think, given the strength of our future profitability, that it is possible that we will be able to pay dividends that would be equal to or greater than the amount of money that we’ve received from the Treasury Department,” Mayopoulos said in an interview that will air on Bloomberg Television’s “Capitol Gains” with Peter Cook.
Washington-based Fannie Mae was seized by the U.S. in 2008 after investments in risky loans pushed it to the brink of insolvency. Since then, it has taken $116.5 billion in aid from the Treasury and has sent back more than $35 billion in dividends, which count as a return on the government’s investment and not as a repayment.
The company packages mortgages into securities on which it guarantees payments of principal and interest. President Barack Obama and members of both parties in Congress have said they want to wind the company down and shrink the government role in the mortgage market.
Fannie Mae reported a profit of $17.2 billion for 2012 on April 2, the largest annual return in the company’s history. Common and preferred shares have soared since then as investors have bet there’s a chance lawmakers will allow the company to become independent again now that it’s profitable.
“I’m not sure those investments are being made on the basis of business fundamentals,” Mayopoulos said in the interview, which airs in full April 14 on “Capitol Gains.” “There might be bets on really what people think the political outcome is going to be.”
Under the terms of an agreement with Treasury that went into effect this year, Fannie Mae will be allowed to retain only $3 billion in net worth. Any profits beyond that amount will go to taxpayers.
“The company hasn’t been capitalized,” Mayopoulos said. “So whatever the future of housing finance is going to be, there are still some major issues to be decided.”