Updated to reflect the following correction. The dividend payment to Treasury is $30.4 billion.NEW YORK ( TheStreet) -- Freddie Mac ( FMCC) said it will pay the Treasury $30.4 billion in dividends after posting a profit for the eighth consecutive quarter. The bailed-out housing giant said pre-tax income jumped to $6.5 billion from $4.9 billion a year earlier. The profit was the second largest in history. A loan- repurchase settlement with three banks added $0.9 billion to pre-tax income. Net income came in at $30.5 billion, largely due to a $23.9 billion release in the valuation allowance on deferred tax assets. Freddie Mac finished the quarter with a net worth of $33.4 billion. As per the terms of the revised bailout agreement, the company is required every quarter to pay all of its earnings, less a minimal capital cushion of $3 billion as dividends to the Treasury. The payouts do not constitute a repayment of the government bailout money. The Treasury continues to maintain a liquidation preference of $72.3 billion on senior preferred stock. Including the December payment, the company will have paid $71.345 billion in dividends to the Treasury, slightly higher than the $71.336 billion cumulative draws it has received from the government. Shares of Freddie Mac were rising more than 3% in pre-market trading. Fannie Mae ( FNMA) also reported earnings on Thursday. Third quarter profit jumped to $8.7 billion from $$1.8 billion a year earlier. The company will pay $8.6 billion to the Treasury as dividends. Fannie Mae and Freddie Mac ( FMCC) were taken into conservatorship in 2008. In the wake of the crisis, when private capital disappeared, the agencies stepped in to fill the void. As a result, the companies, along with the Federal Housing Administration, guarantee more than 80% of freshly originated mortgages. Both companies have also returned to profit on the back of improving home prices and declining delinquencies. The pre-crisis loans that were made under lax credit standards now account for a smaller portion of their business. Loans originated after 2009 are considered pristine. Most policymakers are keen on winding down the agencies and are calling for a greater role of private capital in the market. However, there is disagreement on whether the government should continue to maintain some presence in the market in the form of a limited guarantee.
Other market participants are calling for the agencies to be rehabilitated and returned to their private forms, though political analysts say there is little appetite in Washington to keep Fannie and Freddie alive. Meanwhile, shareholders of the agencies have sued the Treasury, arguing that the amended terms of the agreement have violated the original terms of conservatorship. The Treasury maintains that it has acted within the law. -- Written by Shanthi Bharatwaj in New York.