Fannie Mae (FNM), the US Government-controlled mortgage company, had struck a deal with third-party investors to transfer its Low Income Housing Tax Credits (LIHTC) in September, according to its 10-Q filed with the Securities and Exchange Commission (SEC) today.
"Prior
to September 30, 2009, we entered into a nonbinding letter of intent to
transfer equity interests in our LIHTC investments. Upon
completion of the contemplated transfer, the unrelated third-party
investors would be entitled to receive substantially all of the tax
benefits from our LIHTC investments for a specified period of time." Fannie Tax Deal
Early this week, The Wall Street Journal reported that Goldman Sachs
and billionaire investor Warren Buffett are bidding for $3 billion
worth of federal tax credits from FNM. This had started a public debate on whether the deal is good for the taxpayers or not. The buyers of these credits could have offset their federal tax expenses, while funding FNM. Goldman's attempt
As the Journal report said, what would have been simple deal a couple of years ago is now fraught with political calculations, such as the perception of aiding a Wall Street giant at a time of populist anger against bankers.
Fannie sought additional $15 billion bailout funding from the U.S. Treasury Department after reporting nineteen billion loss in the third quarter 2009, its ninth consecutive quarterly loss. It has already taken $44.9 billion federal aid since April. The stock dropped 10% on Thursday.
Update - Saturday, Nov 7: Treasury Blocks Fannie Tax Credit Sale
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