U.S. taxpayers on hook for $5.1 billion bailout of Fannie Mae, Freddie Mac

It’s 2008 all over again.

As part of the White House’s draft budget on Monday, the Treasury Department is expected to fork over a $5.1 billion bailout to Fannie Mae and Freddie Mac.

There is essentially nothing left in the coffers of the government-sponsored enterprises (GSEs). The entities have held billions of dollars worth of deferred tax assets on their balance sheets, which have tumbled in recent months amid the corporate tax cut. Congress has been mandating the organizations to reduce the amount of capital they have and transfer quarterly balances to the Treasury.

More from MarketWatch:

Mel Watt, the head of the Federal Housing Finance Agency, told lawmakers that more certainty was necessary, not just to avoid a taxpayer draw, but also to ensure the smooth functioning of financial markets.

Fannie is scheduled to report fourth-quarter and full-year earnings on Wednesday, and Freddie on Thursday. A budget appendix shows that Treasury is budgeting a payment of $4.7 billion for Fannie, which is much more exposed to the deferred tax assets, and $400 million for Freddie.

A December agreement between the Treasury Department and FHFA allowed the enterprises to keep a slim capital buffer, a step both parties said could help buy time for Congress to reach an agreement on next steps.

The White House budget also forecasts increasing the fees charged by the two enterprises on mortgages they guarantee.

In Washington, history keeps repeating itself.

Like this article? Get ECN delivered to your inbox daily. Subscribe here.

Leave a Comment