Fannie Mae’s rebound means taxpayers have been repaid in full

By Maria Saporta

The U.S. Congress should use caution if it undertakes housing finance reform because of the complicated nature of the industry and because of the potential risks involved, according to Timothy Mayopoulos, president and CEO of Fannie Mae.

Timothy Mayopoulos

Timothy Mayopoulos

Mayopoulos was the guest presenter at Monday’s Rotary Club of Atlanta where he was interviewed by Rotarian Egbert Perry, founder of the Integral Group who also serves as chairman of Fannie Mae.

Both Mayopoulos and Perry spoke about how Fannie Mae had developed an unfavorable reputation in the country after the 2008 economic crisis and required a federal investment from the U.S. Treasury of $116.1 billion.

As of December, 2014, Fannie Mae is estimated to have paid back dividends of $134.5 billion back to the U.S. Treasury. Perry said that Fannie Mae’s sibling company, Freddy Mac, had gone through a parallel experience.

When asked about the future of housing finance reform by Perry, Mayopoulos said it was hard to predict what could happen during the next Congress. But he did say much would be at stake in how the issue would get resolved.

Although many elected to Congress believe it is best to reduce the role of the federal government in housing finance, Mayopoulos said that nearly every country in the world plays a public role in housing because of the “fundamental societal need.”

Looking back, Fannie Mae, which was placed in conservatorship in 2009 during the financial crisis, ended up providing stability in the U.S. housing market.

“This housing finance system works,” said Mayopoulos, who joined Fannie Mae as general counsel in 2009 before becoming its CEO a couple of years ago – playing a critical role in the recovery of the company.

“Fannie Mae was able to repay the taxpayer within five years. It is sustainable,” Mayopoulos continued. “The system works. Any new system being discussed would involve a lot of change and would have a huge amount of risk. It’s important for policymakers to consider how much change do you want to introduce after the crisis when things have stabilized.”

Perry said that since 2009. Fannie Mae has provided $4.3 trillion in liquidity in the mortgage market. Fannie Mae currently has a $3.1 trillion book of business – primarily in providing secondary mortgage financing.

The operating capital that it has to manage that book of business is $2.4 billion, and Perry said that amount is scheduled to be reduced by $600 million every year until it is down to zero.

When asked how the agency would function without that capital, Mayopoulos said those were decisions that had been made when the agency was placed in conservatorship.

The luncheon did serve as an opportunity for Perry to thank local Fannie Mae employees for their service. There was a time when employees didn’t even want to acknowledge they worked for the company. Now that public sentiment is beginning to change, Perry and Mayopoulos said.

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

7 replies
  1. Brian says:

    It’s time to release and let FNMA/FMCC run again as private companies that they are. They will raise the capital to provide insulation for losses when released. That will only make them stronger than they were when used by the Treasury to bailout TBTF banks. The liquidity they provide during recessions has been missing to ignite the dismal housing industry this time around.Report

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  2. Bryndon Fisher says:

    For the record, Fannie Mae and Freddie Mac are not “agencies” of the Federal government.  They are for-profit, privately-held corporations currently under government conservatorship by the FHFA.  And since they have implemented the FHFA’s reforms, and have fully repaid their loans back to the U.S. Treasury they should be 1) allowed to recapitalize, 2) released from their conservatorships, 3) returned to their shareholders, and 4) relisted on the NYSE.  This isn’t complicated, and Director Watt has the power to do it.Report

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  3. fm33487 says:

    Fannie Mae was nothing more than a scapegoat during the housing crash. Yes, it did buy toxic loans that banks misrepresented with a straight face before dumping them on Fannie.  Banks and Wall St exercised considerable sway (they have the best gov’t that their money could buy), therefore Fannie became the scapegoat.  Why? Because the real culprits (banks/wall st) realized that they have acquired a taste for Filet Mignon, and none are eager to acquire the same for prison bologna sandwiches …and have avoided it at our expense. I’m sure that they not only chuckle over all this privately, but that they also can’t wait to do it all over again, only better.
    Now you can confuse this basic truth with all kinds of psycho-babble and mumbo jumbo, as many have, do and will …but it’s really as simple as i stated above. Crime only pays, and it pays HUGE … for those on Wall St..Report

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  4. Paul says:

    Good article. Fannie and Freddie took the toxic mortgages from the TBTF banks, and kept on going, recovering to repay a healthy premium over what the government put out in support. This crisis happened after Glass-Steagall was repealed in 1999 allowing the banks, insurance companies and brokerage houses to mingle, mix and merge. Deregulation of Wall Street and banks is not in the best interests of our country. Now it’s time to recapitalize, release and relist FnF.Report

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