In 2010, the U.S. government quietly tweaked the rules of bailout agreement for Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA). The new rules directed the earnings of the two housing agencies to the Treasury over repaying taxpayers. Since then, the shareholders of the two government-sponsored entities have been seeking answers over such a sudden change in rules.
Change of heart
But now, it seems that Charles E. Grassley, who os chairman of the Senate Judiciary Committee has pledged to figure out the exact details. The Senator has sent out letters to the Justice Department and the Treasury asking about the details of the decision and questioning the reason of their tight-lipped attitude over the issue. He wrote in his letter that the taxpayers have their rights to know what led to a change in rules pertaining to Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie Mae. Grassley even mentioned that he suspects foul play of executive privilege in concealing the facts related to the matter.
The Justice Department responded that it is reviewing the letter, but Treasury Department said that it has not received the letter so far. It is noteworthy that Federal Home Loan Mortgage Corp (OTCBB:FMCC) and Fannie paid the interest to taxpayers till July 2012, but later, rules were bent to divert all of the earnings to the Treasury. The concern reached the brim, when Treasury recovered as much as $228.3 billion from the two entities, which is $40.8 billion in excess of the amount borrowed from the taxpayers.
The decision has not only prevented the flow of benefit to taxpayers but also building up of a capital cushion to safeguard against future losses for companies. Thus, it will be seen if the government will respond to Grassley this time or not.
The stock of Federal Home Loan Mortgage Corp (OTCBB:FMCC) climbed by 8.05% to $2.55 on Wednesday, when 2.99 million shares changed hands.