The Treasury Department has finally settled the concerns of shareholders of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Federal Home Loan Mortgage Corp (OTCBB:FMCC) over the change in bailout terms. The Department’s response came after U.S. Senator Charles Grassley sent out a letter asking that what led it change the bailout terms of the two housing companies midway.
Investment and not loan
The Department said that the bailout extended to the housing companies in the middle of the financial crisis was not a loan but investment, for which taxpayers are now being compensated. In his letter, Grassley represented the concerns of shareholders of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac, who wanted to understand as to when they will start getting return from the companies.
The Treasury Department had bailed out the two companies with $187.5 billion during the financial crisis. The housing companies have already repaid $228 billion to the government to date, which is in excess of $40 billion to the bailout amount. The repaid amount convinced the shareholders of Fannie and Freddie to assume that the companies’ have no more liabilities towards the government and that earnings should be retained.
Clearing the air
However, the department has cleared these notions arguing that the repayment of the amount should be considered as compensation to the taxpayers, who assumed enormous risk during the financial crisis. Further, the department explained the rationale for changing the terms of the bailout agreement stating that it was aimed to end the vicious circle of taking funds from Treasury to pay dividends back to the treasury. Also, the department referred Mr. Grassley to seek answers to his remaining queries from the FHFA.
The stock of Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) was marginally down by 0.70% at $2.82 during the last trading session, while the average volume of shares was recorded at 2.38 million.