Fannie Mae, the nation's biggest mortgage finance company, said Thursday it will pay $59.4 billion in dividends to the US Treasury after a record profit in the first quarter that reflected a multi-billion-dollar tax-related windfall. The report from Fannie Mae, which recorded pre-tax income of $8.1 billion, came just a day after its smaller rival and fellow state ward Freddie Mac said it would be making a $7 billion dividend payment to the government.
The latest payments from the two government-controlled companies will slash the net cost of their nearly $188-billion taxpayer-funded bailout to just $55.8 billion. That could drop by another $30.1 billion soon if Freddie Mac follows Fannie Mae in recognising deferred tax assets it had written down. Both the Obama administration and Congress want to eventually wind the companies down, but there is little agreement on what structure should replace them and their return to profitability has undercut the urgency for change. "There is a risk that policymakers might look at our profitability and conclude that they do not need to take any action with respect to housing finance reform. I believe that would be a mistake," Fannie Mae Chief Executive Officer Timothy Mayopoulos told reporters on a conference call.
Fannie Mae booked a gain of $50.6 billion by reversing a write-down on certain tax assets, which vaulted it to an overall profit of $58.7 billion. In the same three months a year earlier, it had net income of $2.7 billion. Both its pretax income and net income were records. Fannie Mae has now turned a profit for five straight quarters, while Freddie Mac has been profitable for six. Given their return to profitability, they have had to consider counting potential tax credits as part of their net worth, a step Fannie Mae took on Thursday.
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