GSEs Get Their Capital Cushions Back

Watt: “FHFA considers the $3-billion capital reserve sufficient to cover other fluctuations in income in the normal course” of Fannie and Freddie’s business.

WASHINGTON, DC—As they have every three months of profitability since the fourth quarter of 2008, Fannie Mae and Freddie Mac sent dividend payments to the US Treasury Department this past Friday, with the cumulative total now at slightly less than $279 billion. This quarterly payment was different, though, in that the GSEs didn’t pass all their Q3 profits—totaling $7.7 billion—along to Treasury.

That’s because of a new agreement between the Federal Housing Finance Agency and the GSEs, announced this past Dec. 21. It grants Fannie and Freddie each a capital reserve of $3 billion under the senior Preferred Stock Purchase Agreements that have been in place since the two lenders entered conservatorship following the global financial crisis.