Fannie Mae-No Politics (FNMA)

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Fannie Mar , Freddie Mac too profitable to shut down .

Well before the subprime housing market crash, the companies had financial problems that included questionable accounting practices in the early 2000s. But it was the housing market crash, which precipitated the Great Recession in late 2007, that seemed to seal their fate.
Many conservatives blame Fannie and Freddie for causing the subprime bubble as they purchased questionable mortgages to meet home ownership goals set by Congress and Democratic and Republican presidential administrations.
In a sign of the unpopularity of Fannie and Freddie in Washington, the 2008 bailout was structured so that the dividend payments do not reduce the amount owed on the bailout.
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The move was designed to prevent the companies from technically paying back the money and emerging again as private firms. The Treasury holds preferred shares and has the option to buy 79.9% of the common stock in both companies.
Treasury officials made the bailout even more favorable to the government in 2012, changing the terms so that Fannie and Freddie must ship all their profits to Washington instead of simply paying a 10% dividend. Remaining investors in the company responded with lawsuits.
The new terms have boosted the flow of money to the Treasury from Fannie and Freddie. But that hasn't impressed many lawmakers.
"Any investor who puts up $188 billion in the middle of a crisis should expect a lot more than a 1-to-1 return on your money before you're made whole," Warner said.
A bipartisan bill from Warner and Sen. Bob Corker (R-Tenn.) would shut down Fannie and Freddie over five years and replace them with a new government agency funded by industry fees.
The new entity would play a significantly smaller role in guaranteeing mortgage debt, leaving the heavy lifting up to the private sector. Warner said he hopes the Senate will pass the bill this year.
A Republican bill approved by the House Financial Services Committee last summer also would gradually wind down Fannie and Freddie over five years. But the bill would not replace their role with any new government mortgage guarantee.
Although there's broad consensus Fannie and Freddie should be closed as part of an overhaul of the housing finance system, the longer it takes the harder it gets, Cecala said.
"Very soon they will pay the government back everything they were bailed out or lent," he said. "That makes it very difficult to talk about closing them down."


http://www.latimes.com/business/la-fi-fannie-freddie-future-20140103,0,7476895.story?page=2&utm_medium=feed&utm_campaign=Feed%3A%20latimes%2Fbusiness%20(L.A.%20Times%20-%20Business)&utm_source=feedburner&track=rss#ixzz2pLTYMS7z