Monday, February 1, 2010

Obama Keeps Fannie, Freddie Off U.S. Budget, Counts Dividends (FNM; FRE)

That's an interesting approach to GAAP.
From Bloomberg:
President Barack Obama’s budget blueprint for the next fiscal year excludes the $6.3 trillion in liabilities of government-controlled Fannie Mae and Freddie Mac and delays for a second time a decision on restructuring the mortgage-finance companies that were seized 17 months ago.

The companies may need $54.4 billion in U.S. Treasury Department preferred stock purchases to stay afloat in the current fiscal year, and $23 billion more for the year beginning in October, according to calculations made from the Obama administration’s fiscal 2011 budget proposal to Congress today.

“The administration continues to monitor the situation of the GSEs closely and will continue to provide updates on considerations for longer-term reform of Fannie Mae and Freddie Mac as appropriate,” the Obama administration said.

White House budget director Peter Orszag delayed a decision on whether to bring the companies’ $1.6 trillion in corporate debt and $4.7 trillion mortgage obligations onto the federal budget. As the director of the Congressional Budget Office, Orszag criticized the Bush administration for keeping Fannie Mae and Freddie Mac’s 2008 rescue off budget.

At the time, Orszag said “the degree of federal control over Fannie and Freddie is so strong, we are incorporating them into the federal budget.”

Obama’s budget plan classifies the GSEs as “non-budgetary” items and excludes from being counted as federal liabilities because “they are privately owned and controlled.” The administration counts $110.6 billion in taxpayer support already paid to the companies and $225 billion in GSE mortgage bonds purchased by the Treasury.


So far, the companies have paid $6.8 billion in dividends to the Treasury on their borrowings....MORE

From Reuters:

Fannie, Freddie seen tapping $153 bln from Treasury

Mortgage finance giants Fannie Mae and Freddie Mac are seen tapping about $153 billion from the Treasury Department by September of next year and then begining to repay about $7 billion per year thereafter, the White House said in its fiscal year 2011 budget proposal....