http://thehill.com/homenews/house/96053-payments-burden-fannie-freddie
Really does this even make sense?
Fannie Mae and Freddie Mac see the billions in dividends they must pay annually to the Treasury Department as a significant burden that cripples any hope they have of returning to profitability.
A strict lobbying ban prevents Fannie and Freddie from airing much of a critique of the agreement, but it is clear from their annual reports that they think the dividend payments are unfair.
The $7.6 billion Fannie will pay in dividends “exceeds our reported annual net income for all but one of the last eight years, in most cases by a significant margin,” Fannie Mae said in its 10K report issued in February.
“The amounts we are obligated to pay in dividends on the senior preferred stock are substantial and will have an adverse impact on our financial position and net worth and could substantially delay our return to long-term profitability or make long-term profitability unlikely,” Freddie’s annual report says.
That either company would even be thinking about profitability might come as a surprise to some.
The two government-sponsored mortgage enterprises at the center of the housing and financial crisis are in conservatorship and heavily indebted to the government. People still hold publicly traded stock in the companies, but the shares are worth little. Both were trading at a little more than $1 on Tuesday.
The dividend payments were set up in 2008 when the George W. Bush administration’s Treasury provided a $100 billion backstop to ensure the companies remained solvent. The backstop was increased to $200 billion by the Obama administration in 2009.
In exchange, the administration received senior preferred stock from the two companies that pays an annual 10 percent dividend in cash, or 12 percent in stock.
The two companies have drawn down a total of $126.9 billion from the Treasury.
The dividend payments add to Fannie and Freddie’s debt, giving the exchanges a peculiar circular nature. Fannie and Freddie are essentially paying money to the government from money the government loans to the two companies.
