In light of the market crash in 2008, the government took over mortgage companies Fannie Mae and Freddie Mac, promising to return the companies to the shareholders when they were able to stand on their own again, according to an article by Gretchen Morgenson for The New York Times.
As part of a lawsuit filed against the government, sealed documents were revealed that contains the truth about the White House’s involvement in the U.S. Treasury’s profit sweep of the companies in 2012, according to the article.
From the article:
The newly released documents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone entities.
An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.”
The documents also show the Treasury moving to modify the terms of the mortgage finance giants’ $187.5 billion bailout shortly after a July 2012 meeting when the Federal Housing Finance Agency, Fannie’s and Freddie’s regulator, learned that they were about to enter “the golden years” of profitability.
Actually, in the years since the federal government modified its conservatorship agreement with Fannie Mae and Freddie Mac to sweep all the profits from the government-sponsored enterprises into the government’s coffers, many observers, including those with a serious financial interest, have questioned whether the so-called “Third Amendment sweep” was even necessary.
Read more about that here.
Back in July 2015, Judge Margaret Sweeney in the Federal Claims Court in Washington granted a motion that will force the U.S. Treasury to release all discovery document materials in its possession that pertain to the decision to take Fannie Mae and Freddie Mac into conservatorship.