Fannie may, a company that sells mortgage-backed securities, posted a $17.2 billion profit for the 2012 year. The profit, which is more than Wal-Mart’s or General Electric’s, is the largest that Fannie Mae has ever had, doubling the 2003 profit of $8.1 billion. The mortgage financier reported profits throughout all quarters of 2013, resulting in the first full year profit since 2006. Additionally, Fannie Mae has completely turned its finances around from the previous year; in 2011, they reported a loss of $16.9 billion.
Four years ago the federal government had to take control over Fannie Mae, which was nearly ruined after the housing bubble burst. The financial improvement is the result of the machinations of the housing market, which has been characterized by low mortgage rates, less foreclosures, and a limited supply of homes on the market as of late. The company also received a boost from Bank of America last year. Bank of America paid Fannie Mae half of what it owed them from a settlement over Countrywide lending, which was sold to Fannie Mae during the housing bubble and subsequently purchased by Bank of America. The two companies settled for $3.6 billion, and Fannie Mae received half of the sum in 2012.
Of course, the major issue surrounding Fannie Mae’s newfound profitability is in regards to their federal bailout at the peak of the financial crisis. Four years ago, the US government bailed out Fannie Mae to the tune of $116 billion. The company has since been responsible for paying out dividends on the shares that the government owes, with $11.6 billion paid to the US Treasury in 2012. Since the beginning of 2013, Fannie Mae has paid already paid $4 billion in dividends, and they have tendered $35.6 billion in total.
Now that the financier has begun posting profits, they are set to begin paying back the US Treasury for their bailout at any time, which has a direct benefit to tax payers. Now that Fannie Mae is again a revenue-generating company, they are able to put nearly $60 billion of past tax credits back into the budget, which is money that can be used to pay off their bailout. Terms negotiated with the Treasury that take effect this year stipulate that Fannie Mae (as well as other companies in their situation) cannot retain over $3 billion of net worth. Anything that the company makes above $3 billion must be paid back to the taxpayers. This rule only began this year because it was not expected that Fannie Mae and others would begin turning a profit again so quickly.
After reporting the largest profit in company history, Fannie Mae’s Fannie Mae President and Chief Executive Officer Timothy Mayopoulos commented, “We expect to remain profitable for the foreseeable future.” He went on to state that “It’s a very good thing for taxpayers, but there’s still an important task in front of policy makers to determine what structure they want to have for the future housing finance system, what institutions they want to have playing the various roles in that system and then figuring out how to attract private capital.”
Fannie Mae, along with its sibling corporation, Freddie Mac, was the recipient of some of the largest taxpayer bailouts in 2008. The bailout policy has been contested since its inception; however, economists are generally relieved to find that a company that received such a large bailout has once again become profitable and in a position to repay its taxpayer-funded loan. Unfortunately, a complete repayment of the bailout is still not a realistic goal for the immediate future.