Fannie Mae-No Politics (FNMA)

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NEWS
http://blogs.wsj.com/moneybeat/2013/11/06/why-fannie-and-freddie-are-paying-back-uncle-sam/?mod=yahoo_hs

Of course, Fannie and Freddie aren’t allowed to “repay” the money they’ve borrowed from the U.S. Treasury. Here’s how their agreement works: The government in 2008 agreed to inject massive sums of aid so that Fannie and Freddie would stay solvent, allowing mortgage markets to operate smoothly. In exchange, the Treasury took a new class of “senior preferred” shares in the companies that originally paid a 10% dividend; they also received warrants to acquire up to 80% of the firms’ common shares.

The agreement doesn’t provide any mechanism for Fannie and Freddie to buy back the government’s senior preferred shares, which now total $188 billion. If it sounds like Fannie and Freddie are making interest payments on a loan that can’t ever be repaid, that’s because they are. So any discussion of “repayment” needs this disclaimer: Even once Fannie and Freddie have paid $188 billion in dividends, they’ll still owe $188 billion.

This makes any “repayment” of taxpayers a mostly symbolic event—one that doesn’t change whether the companies can be freed from government control. And the political ramifications are altogether unclear. At a housing forum last month, Sen. Mark Warner (D., Va.) brushed away the idea that Fannie and Freddie should be returned to their former ownership simply after paying as much in dividends as they had borrowed. “I was a venture capitalist for a lot longer than I’ve been a politician. If I had put $180 billion into Fannie and Freddie back in 2009, I’d expect more than a one-to-one return on that,” he said. “So once I got a 30-to-one return…talk to me about Fannie and Freddie making money.”