Surprise: Fannie and Freddie Are Set to Pay Taxpayers Back

[babylonsister]

Surprise: Fannie and Freddie Are Set to Pay Taxpayers Back
By Rick Newman | U.S.News & World Report LP – 2 hrs 32 mins ago


It was the most eye-popping bailout of all: $187 billion in taxpayer money to rescue the wrecked housing agencies Fannie Mae and Freddie Mac. Those two agencies alone soaked up 31 percent of the $606 billion in bailout funds disbursed by the Treasury Department to dozens of organizations.

The Fannie and Freddie bailouts symbolized everything wrong with a housing boom that was fueled by funny money and implicitly backed by the federal government. Yet as the housing market has recovered from a six-year bust, so have the prospects for Fannie and Freddie. In fact, they're now set to do something that once seemed implausible: Pay back all the taxpayer money they drained, with interest.

After five years of losses totaling an unprecedented $164 billion, Fannie Mae earned a $17 billion profit in 2012, its most profitable year ever. Freddie Mac, which racked up $94 billion in losses between 2007 and 2011, earned $11 billion in 2012. Both agencies have stopped drawing taxpayer money, and through the end of 2012 they had remitted $55.2 billion worth of dividend payments to the Treasury.

It's now possible to foresee the point at which the two agencies will pay back all the taxpayer money they required. Moody's Analytics estimates that on their current course, Fannie and Freddie will return everything they owe by 2019. The break-even date could occur much sooner--perhaps just a couple of years from now--if the agencies are permitted to claim a tax break allowing them to deduct some portion of past losses.

In fact, Treasury now seems likely to earn a profit on its entire bailout regime, which once seemed so large it made the whole financial universe quake. Treasury has so far recouped $362 billion of the $606 billion it disbursed, plus another $115 billion in dividends and interest payments, according to the ProPublica bailout tracker. If Fannie and Freddie pay back everything they owe, the whole program will be in the black. The biggest deadbeats are General Motors (with about $22 billion of bailout funds not repaid), Ally Financial (formerly GMAC, with $10.5 billion unrepaid), CIT Group ($2.3 billion) and Chrysler ($1.3 billion).

more...

http://news.yahoo.com/surprise-fannie-freddie-set-pay-200148693.html

[dkf]

1. If not for the bailouts things would have been even worse for individuals...

Without the two agencies, the flow of loans to home buyers would have almost completely dried up, with hardly any sales occurring. Home prices would have fallen much more than they did and the housing bust would probably still be ongoing

[babylonsister]

2. It sure would have;

according to the experts, a depression was averted.