Matthew C Klein, Columnist

The Big Risk of Fannie & Freddie's Big Profit

Fannie Mae and Freddie Mac, the U.S. government-owned mortgage-finance giants, are finally back in the black.

April 2, 2013 at 7:51 PM UTC

Matthew C. Klein writes for Bloomberg View about the economy and financial markets. He previously wrote for the Economist magazine and its economics blog, Free Exchange. Before that, Klein was a research associate at the Council on Foreign Relations, where he spent more than two years studying the history of the Federal Reserve and the intellectual history of monetary economics for an upcoming book by Sebastian Mallaby. He also worked at Bridgewater Associates, where he studied the economies of Central and Eastern Europe and advised institutional investors on asset-liability management. Klein has a bachelor's degree in history from Yale University. Originally from Chicago, he lives in New York.

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Fannie Mae and Freddie Mac, the U.S. government-owned mortgage-finance giants, are finally back in the black. The two companies earned a combined net income of $28.2 billion in 2012 -- their most profitable year ever.

Fannie and Freddie will probably enjoy several more banner years now that they seem to have finished working through their portfolios of toxic subprime securities. Almost all of those profits will go to the U.S. Treasury, which would allow lawmakers to claim credit for reducing the budget deficit without having to raise taxes or cut spending.