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Newly unsealed documents reveal real reason for Fannie, Freddie profit sweep

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In 2012, the government changed the terms of the bailout for Fannie Mae and Freddie Mac, sweeping all the profits from the GSEs to the U.S. Treasury, citing a need to protect taxpayers from the fallout of any future losses from the GSEs. This rationale was repeated by the Justice Department when shareholders sued the government over the sweep.

But recently unsealed documents show that protecting taxpayers was not the real reason the government took this action. In fact, the documents show that Treasury officials knew back in 2011 that Fannie and Freddie would soon become profitable again, according to an article by Gretchen Morgenson for The New York Times.

What’s more, the documents show that high-level Treasury officials involved in the decision to sweep the GSEs’ profits predicted the sweep would generate greater profits than the original terms, which required Fannie and Freddie to pay 10% annually of the bailout assistance they received, the article states.

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