Fannie Mae finally profits Uncle Sam
Now will they start paying shareholders?
Fannie Mae is paying the U.S. Department of Treasury $7.2 billion, bringing its total dividend payments now to a level exceeding the total bailout it received.
“Obviously, it’s good news for taxpayers that Fannie Mae is profitable,” Chief Executive Officer Timothy Mayopoulos said during the earnings conference call.
He added that he doesn’t think there should be any delay in housing reform just because of the firm’s performance.
Fannie Mae will have paid the Treasury $121.1 billion when this dividend payment is made. Since 2008, Fannie received $116.1 billion in government bailouts.
What Fannie has not done is pay a dime to shareholders. In fact, it appears the shareholders were never going to be repaid.
A Dec. 20, 2010, Treasury Department memo to then-Secretary Timothy Geithner from domestic finance undersecretary Jeffrey Goldstein, said the Obama administration had a “commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.’s (sic) in the future.” (Read the story here.)
Fannie, still under federal conservatorship, reported annual net income for 2013 of $84 billion, which includes the release of the company’s valuation allowance against its deferred tax assets, and annual pretax income for 2013 of $38.6 billion.
“For the last five years, the employees of Fannie Mae have come to work with the goal of reaching this accomplishment for the taxpayers. I’m very proud of what our employees have achieved,” Mayopoulos said. “I’m very happy for the taxpayers.”
Perry Capital and Fairholme Funds, among other stakeholders, have brought suit against the government’s negotiated deal wherein the federal government counts the money from quarterly profits as dividends instead of as a repayment of the bailout.
As of Sept. 30, 2013, the GSEs returned $185 billion to the Treasury and none to shareholders.
“People disagree about what should happen to the GSEs….But if the plan is to wind them down, Congress provided a means to do that in the 2008 law — it’s called receivership, and it provides a host of procedural protections to claimants,” said Matthew D. McGill, a lawyer at Gibson, Dunn & Crutcher in Washington who represents Perry Capital, a GSE investor suing for its alleged share of profits.
“What the Treasury cannot do is abuse its conservatorship powers to nationalize the companies and then, when it deems convenient, wind them down without the protections enacted by Congress," McGill added.
On Tuesday, activist Ralph Nader – no natural ally of investors – sent a letter to Treasury Secretary Jack Lew, a copy of which was obtained by HousingWire.
“What legal authority does the Administration have, as this section of the memo intimates, to completely wipe out shareholders – even after taxpayers have been repaid (as is likely to happen soon)?” Nader writes. “It seems to be setting a precedent for using and abusing the GSEs’ shareholders.”