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Monday, August 20, 2012

Treasury Accelerates GSE Wind-Down

The Treasury Department on Friday modified its financial support of Fannie Mae and Freddie Mac to accelerate the winding down of the government-sponsored enterprises.

The GSEs will no longer pay a 10 percent annual dividend to Treasury on its preferred stock investments in Freddie and Fannie. Instead, they will give Treasury all of their profits, agency officials said. The GSEs also will reduce their investment portfolios at a 15-percent annual rate, rather than 10 percent per year. As a result, the GSEs’ investment portfolios would reach the $250 billion goal in 2018, four years earlier than originally scheduled.

ABA applauded Treasury’s steps in a statement from Frank Keating:
[The] changes are consistent with [the Federal Housing Finance Agency’s] strategic plan and ABA’s reform priority of a reduced government presence in the housing market.

The taxpayers’ investment in the GSEs was essential to stabilizing the housing market and laying the foundation for recovery,” he said. “Much more work needs to be done to reform the secondary market, but [Treasury’s] announcement helps move this process forward and ensure the taxpayers’ investment is ultimately repaid.

Read Treasury's announcement.
Read Keating's statement.
Read ABA's GSE reform principles.

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