Fannie Mae Keeps Shoveling Cash to the Government

NEW YORK (TheStreet) -- Fannie Mae (FNMA) on Monday pointed to a pretty stark reality for the government-sponsored mortgage giant's private shareholders.

Fannie announced fourth-quarter earnings of $6.5 billion and said it would pay dividends totaling $7.2 billion to the government in March.

Fannie Mae and its sister company Freddie Mac (FMCC) -- together known as the government sponsored enterprises, or GSEs -- were taken under government conservatorship at the height of the U.S. real estate crisis in September 2008. The government -- that is, the taxpayers -- took huge senior preferred stakes in the GSEs, with Fannie and Freddie initially required to pay annual dividends of 10% on the governments preferred shares.

The U.S. Treasury holds $117.1 billion senior preferred Fannie Mae shares and $72.3 billion in senior preferred Freddie Mac shares, with both GSEs having stopped taking draws from the Treasury during the second quarter of 2012. Under their modified bailout agreements, the GSEs must pay all earnings to the government in excess of minimal capital cushions. Meanwhile, all dividends for junior preferred shareholders have been suspended since September 2008.

Fannie on Monday said that once the March dividend payment is made, it will have paid the government total dividends of $117.2 billion, exceeding the size of the Federal Government's preferred stake. That's a return of over 100%, for an investment of less than five and a half years, but there's still no mechanism in place for either GSE to begin repurchasing government-held preferred shares.

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