Treasury Department: Fannie, Freddie Bailout Wasn’t a Loan

April 22, 2015

When U.S. Senator Charles Grassley (R., Iowa) asked the U.S. Treasury Department about terminating its arrangement with the FHFA because the agency has paid off its loan, he found it wasn’t a loan to begin with.

The Wall Street Journal reports that Acting Assistant Secretary for Legislative Affairs Randall DeValk, who answered Senator Grassley’s letter, wrote that the government “did not make an ordinary loan” to Fannie and Freddie. Instead, it “took on an enormous risk when rescuing the enterprises in the middle of a financial crisis – a risk for which any private investor would have demanded substantial compensation.”

In sum, according to the Treasury, the dividends paid so far should be treated as compensation for that risk rather than as a repayment for the $187.5 billion bailout. To date, both Fannie and Freddie have paid the government more than $228 billion, $40 billion more than they took in the bailout.

Read more

Comments

expand_less