Fannie Mae Tax Credit Debate Indicative of Tangled Web
November 05, 2009
In one of the more interesting bank stories of the new century, investment bank Goldman Sachs and renowned investor Warren Buffett want to buy $3 billion worth of federal tax credits from Fannie Mae, the government-owned mortgage finance company.
Government regulators are unsure of the fairness of such a deal because the tax credits would reduce the federal income taxes owed by Goldman Sachs and Warren Buffett.
Fannie Mae, however, could use the $3 billion. It is estimated that the government has put more than $100 billion into Fannie Mae with no end in sight as to a return to profitability.
What's more, Fannie Mae cannot use the tax credits because the company already has so many losses that it owes no federal income tax this year, and will likely not owe any federal income tax for many years to come.
Fannie Mae's continuing and widescale purchasing of mortgages from banks has helped to keep mortgage interest rates low, so it is difficult for even the most hardcore libertarian to long for the company's total demise.
The tax credits in questions were originally put into law under President Ronald Reagan, in 1986, as part of an affordable housing program.