WH: Fannie, Freddie Rescue Costs Will Drop
The Wall Street Journal reports:
The cost of rescuing mortgage giants Fannie Mae and Freddie Mac is likely to sink to nearly half of the current cost over the next decade, the Obama administration said Monday.
The White House, in its budget for the 2012 fiscal year, starting in October, said keeping Fannie and Freddie afloat will cost $73 billion by 2021, reflecting dividends paid back to the Treasury Department.
That is 45% lower than the $131 billion cost to date and much lower than outside estimates, which have been as high as $685 billion.
The U.S. government took over the companies in September 2008 and agreed to inject funds to keep them afloat. Fannie and Freddie must pay 10% dividends on the quarterly cash infusions they receive from the Treasury.
The White House estimates that the companies will be paying back more in dividends by 2013 than they receive in cash infusions From 2014 on, the companies are expected to need no more funding.
In November, the companies' chief regulator, the Federal Housing Finance Agency, estimated that propping up Fannie and Freddie would cost taxpayers $154 billion under the most likely scenario for home prices. But the housing agency estimated that the bill could end up as high as $259 billion if the economy slides back into recession and home prices sink substantially.
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