For all those clamoring that their debt has been repaid (hoping others will make their bad bets pay):
"In September 2008 Treasury bailed out Fannie and Freddie,
promising to shore up each with as much as $100 billion. In return, they forced the companies to give Treasury
1 million shares of preferred stock, worth a total of $1 billion. These shares required the companies to pay quarterly cash dividends to the Treasury, and they included a protection device called a liquidation preference. This device means that the companies cannot raise new equity capital without first paying back the liquidation preference (now approximately $200 billion).
In May of 2009, the companies were still struggling, so
Treasury promised to provide each with
up to $200 billion.
In December 2009 the companies were still struggling, so Treasury
changed its commitment formula, allowing it to provide
more than $200 billion.
Even after these three bailouts, Fannie and Freddie were still struggling in 2012—so much, that they faced the prospect of borrowing from Treasury just to pay the dividends they owed Treasury.
Papering over this problem, Treasury amended the agreement once again,
this time taking any profit that Fannie and Freddie managed to earn in order to satisfy the dividend payments.
It is true that, between 2008 and 2018, Fannie and Freddie
paid back about $300 billion to Treasury, roughly $100 billion more in dividends than they
received from Treasury. But this fact merely addresses the cash flows. It overlooks that Fannie and Freddie were able to pay these dividends only with the aid of successive bailouts, and
it also ignores the risk that taxpayers were forced to take on through these bailouts.
Of course, these four bailouts are separate from the additional help that Fannie and Freddie received when the Fed and Treasury
purchased trillions of dollars of Fannie’s and Freddie’s bonds and mortgage backed securities, thus staving off further losses that could have required even more bailouts."
On the heels of reiterating that the federal government should have wiped out Fannie and Freddie’s shareholders in 2008, Calabria recently warned members of the Mortgage Bankers Association that “Today’s status quo poses significant risk to taxpayers, homeowners, renters, and the entire financia...
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