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Treasury Blocks the Sale of Tax Credits by Fannie
WSJ ^ | NICK TIMIRAOS

Posted on 11/07/2009 9:37:39 AM PST by TigerLikesRooster

Treasury Blocks the Sale of Tax Credits by Fannie

By NICK TIMIRAOS

The U.S. Treasury blocked Fannie Mae's proposed sale of nearly $3 billion in low-income housing tax credits to Goldman Sachs Group Inc. and Berkshire Hathaway Inc. on Friday after concluding that the deal was too costly for taxpayers.

The extraordinary move was the latest sign of tensions within the Obama administration over how to balance political and financial pressures resulting from the housing crisis.

Fannie Mae had agreed to sell roughly half of its $5.2 billion tax-credit portfolio and had received approval to proceed with the sale from its federal regulator, the Federal Housing Finance Agency.

Those credits are virtually worthless to Fannie because the company doesn't have any taxable income to offset, and it is forced to write down the value of those credits every quarter as their value declines.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; News/Current Events
KEYWORDS: fanniemae; goldmansachs; taxcredits; treasury

1 posted on 11/07/2009 9:37:40 AM PST by TigerLikesRooster
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To: TigerLikesRooster; PAR35; AndyJackson; Thane_Banquo; nicksaunt; MadLibDisease; happygrl; ...

Ping!


2 posted on 11/07/2009 9:38:11 AM PST by TigerLikesRooster (LUV DIC -- L,U,V-shaped recession, Depression, Inflation, Collapse)
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To: TigerLikesRooster

This is stupid. If they sell them they will get cash if they do not sell them they will expire worthless and the governments loss will be greater. I would love to buy them.


3 posted on 11/07/2009 9:42:14 AM PST by learner
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To: TigerLikesRooster
Hilarious. The trillion dollar foolish are now pretending to be penny wise.


Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

4 posted on 11/07/2009 9:46:10 AM PST by The Comedian (Evil can only succeed if good men don't point at it and laugh.)
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To: TigerLikesRooster

WoW! aint it a good thing the recession is over or this could be much worse? 10.2% unemployment! Just ask yourself what would be happening if there was a Republican in the White House!


5 posted on 11/07/2009 9:46:14 AM PST by jmaroneps37 (Conservatism is truth. Liberalism is lies.)
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To: learner
For taxpaying slumps.... where these investment opportunities offered for sale? If not, why not?

Just more non-transparency giving rise to the notion of thieving rascals screwing the general public.

6 posted on 11/07/2009 10:05:37 AM PST by pointsal
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To: All
Looks like Rahm and Goldman have a bigger, better deal up their sleeves.

How Goldman secretly bet on the U.S. housing crash
McClatchy Newspapers | November 1, 2009 | Greg Gordon
Posted Sunday, November 01, 2009 by crosstimbers

WASHINGTON — In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting. Goldman's sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation's premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies. Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk. Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws. (Excerpt) Read more at mcclatchydc.com ...

============================================

Goldman Sachs Will Be Sitting Pretty With Emanuel in the Obama White House
By Timothy P. Carney, Examiner Columnist, Nov 21, 2008

EXCERPT Today, in these tumultuous times of bailouts and meltdowns when the investment banking leviathan needs Washington more than ever before, Goldman Sachs can leverage its most valuable asset yet White House chief of staff Rahm Emanuel.

Traditionally a Democratic booster, and one of Barack Obama’s top sources of funds in this past election, Goldman has always had particularly strong allies in government.

Rahm Emanuel is one such ally. An interesting early chapter in the Goldman-Emanuel relationship took place in the setting of Bill Clinton’s 1992 campaign for the White House. Clinton hired Emanuel as his chief fundraiser.At the same time, however, Emanuel was on the payroll of Goldman Sachs, receiving $3,000 per month from the firm to “introduce us to people,” in the words of one Goldman partner at the time. This is certainly a noteworthy relationship, but it’s one that has almost entirely escaped scrutiny. (snip)

In his four terms in Congress, Emanuel raised $74,750 from Goldman, making the firm his number four source of funds. Goldman has helped Emanuel. How has Emanuel helped Goldman? The most obvious answer, as mentioned in this column two weeks ago, is in Emanuel’s lead role in shepherding the “$700 billion” bailout—first proposed by former a Goldman CEO, Bush Treasury Secretary Henry Paulson—through the skeptical House.

Of course, back in the Clinton days, Goldman benefited from NAFTA and the bailout of the Mexican currency, with Emanuel pushing NAFTA through Congress, and Rubin hammering out the peso bailout.

Did Goldman improperly funnel money to the Clinton campaign by subsidizing Emanuel’s salary in 1992? Did Goldman’s help to Clinton spur the Democratic president to push NAFTA and the Mexican bailout?

The answers to these questions are opaque, and with Emanuel burrowed deep within the Obama White House, the continued relationship between Goldman Sachs and Obama’s right hand man won’t be easy to follow.

Watch which regulations of Wall Street Obama fights for. Watch where the bailout money goes.

SOURCE http://www.washingtonexaminer.com/opinion/columns/TimothyCarney/ Goldman_Sach_Will_Be_Sitting_Pretty_With_Emanuel_in_the_Obama_White_House_112108.html

THINGS WE DO NOT KNOW ABOUT RAHM EMANUEL Did Rahm reveal all of his ties to financial institutions involved in Obama's trillion dollar federal bailout of financials?

7 posted on 11/07/2009 10:47:26 AM PST by Liz (Obama's the best thing that happened to the Republican Party in a long time.)
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To: learner
BS, goldman gives pennies on the dollar, and the bogus credits are worth par value to them. What the tax payer gets is more debt. Fannie should not have any tax credits to begin with it is a quasi governmental entity.
8 posted on 11/07/2009 12:36:37 PM PST by org.whodat (Vote: Chuck De Vore in 2012.)
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To: TigerLikesRooster
"Those credits are virtually worthless to Fannie because the company doesn't have any taxable income to offset,"

Reminds me of Obama's "Buy America Bonds" created to help states and local governments issue federally backed bond debt. Geithner would pick up 35% of the bond interest payments.

The socialist financiers figgered that since these interest payments are taxable, they would recoup it with the 35% income tax.

One small problem, most of the bonds were gobbled up by tax exempt foundations, trusts, and IRA accounts.

No income for Obama and a debt obligation for 20 to 30 years.

yitbos

9 posted on 11/07/2009 2:02:35 PM PST by bruinbirdman ("Those who control language control minds.")
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To: org.whodat

The fact that they have them is a separate issue. For a cash strapped entity to permit an asset to go to waste is foolish and will cost you money. I realize that GS is not loved, but would you rather use their money or yours to offset the disaster at Freddie and Fannie?

These credits expire over time and therefore become worthless.


10 posted on 11/07/2009 3:31:15 PM PST by learner
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To: learner

I am appalled that folks are appalled that GS who is the biggest and baddest beneficiary of the WS bailout, should have to pay taxes while some tax credits held by Freddie and Fannie expire worthless. WTF are folks thinking? The underlying notion is an outrage. This is not “free market” trading. It is a gangster’s market in scams on the public treasury.


11 posted on 11/07/2009 6:41:15 PM PST by AndyJackson
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To: TigerLikesRooster; Jet Jaguar; NorwegianViking; ExTexasRedhead; HollyB; FromLori; ...

The list, ping


12 posted on 11/07/2009 7:37:06 PM PST by Nachum (The complete Obama list at www.nachumlist.com)
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To: AndyJackson

Mr. Jackson,

I read your post three times and still do not understand your point other than to slam GS.

Which “underlying notion is an outrage?”

The truth of the mater is that “free market trading” has just been thwarted by the Treasury, who seems to think that letting the credits expire worthless, and therefore, to the detriment of Fannie and Freddie, i.e. the tax payers, is better than collecting on an asset.

GS is not the “biggest and baddest” it is just the smartest. When this country starts to punish the smartest you get the “Barney Franks.” Is that what you want?


13 posted on 11/07/2009 8:38:44 PM PST by learner
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To: learner
You are an idiot. In order to bail out Freddie and Fannie "we" give them taxpayer funded "tax credits." It turns out they don't have enough income to use those tax credits. So they attempt to sell them to GS who made a mint off of the bailout (a prime beneficiary of the AIG bailout for instance). And so, they have a lot of tax liabilities from their taxpayer funded bailout against which they would have to pay taxes. So, Freddie and Fannie try to sell their fed government created tax credits to GS to get out of paying taxes on taxpayer funded profits. What is free market about any of that. It is a four way screw job on the taxpayer.

Only an idiot could not see that or understand that. Indeed it is SO transparent that even the pet treasury idiot Geitner got a clue.

14 posted on 11/08/2009 4:52:55 AM PST by AndyJackson
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To: AndyJackson

Your discussion of where Freddie and Fannie got the credits in the first instance, indicates you do not know what you are talking about.That always makes it harder to understand what for many would be a fairly simple issue.


15 posted on 11/08/2009 5:24:56 AM PST by learner
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To: learner
Well, smarta$$, why don't you explain to us where Fanny and Freddie got the tax credits from, oh wise superior supertrading genius. A lot of us would really like to know.

Of course, since taxes only come from public law, tax credits only come from public law, and so it is from public law that Fannie and Feddie must have got their tax credits. It is just like the tax credit I get for a SEER whatever air conditioning system. Congress passes a law, the IRS adopts a regulation and I get the tax credit.

Now, what never occurred to me is that the guy down the road who pays no taxes and cannot use his credit could securitize his tax credit and sell it to someone else who doesn't buy an airconditioner, but wants the tax credit, to reduce his taxes. Say Joe pays Jim 50% of the value of the tax credit. They are both ahead 50%? The only hitch is that I the taxpayer am out 100% of the tax credit + the costs of paying the idiot feral bureaucrats who run this scheme.

But please enlighten us all, oh wise Master of the Universe, how Freddie and Fannie got tax credits that they could sell to someone else who needs to reduce his taxes. We are all ears.

16 posted on 11/08/2009 5:23:46 PM PST by AndyJackson
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To: learner
For a cash strapped entity to permit an asset to go to waste is foolish and will cost you money. I realize that GS is not loved, but would you rather use their money or yours to offset the disaster at Freddie and Fannie??

You are an effin idiot. You really are. GS pays 10c on the dollar for tax credits. The tax credit comes off of their taxes. So,the US taxpayer pays $1.00 to GS so that Fannie and Freddie can get 10c from GS. There is only one screwee in this, the US taxpayer.

You sound like some sort of GS shill? Are you? Or are you just the fool you sound like? Wanna buy some bridge futures?

17 posted on 11/08/2009 5:30:51 PM PST by AndyJackson
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To: AndyJackson

The source of these credits is law passed by your congress to help housing.Do not blame me or GS for these laws ask the democrats why they passed them.

You typically do not pay $.10 for a dollar of tax credits it is normally between $.65 and $.85 per dollar depending on the timing.Timing is everything as there is a time value to the credit, but you knew that.

Now lets assume that Frannie and Freddie let all their tax credits expire: that would be an asset expiring that they currently hold on their books at about 7 billion. With the asset gone their net worth declines by 7 billion and their need for equity goes up by 7 billion, which you get to pay, assuming you pay taxes, which given your remarks is in question.
In the last week Freddie and Fannie ask for another 25 billion in federal assistance unrelated to these tax credit items. You may like bleeding from the ears, but I find it painful.


18 posted on 11/10/2009 6:40:25 PM PST by learner
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To: AndyJackson

While your math is off base, I do not disagree that the American tax payer is screwed, but not because of the proposed sale of tax credits.The taxpayer was screwed when these programs were set up in the first place. Why do Freddie and Fannie have all these credits? Because the politicians forced them to finance low income housing. Do not blame those who only live in the real world for the politicians who live in fantasy.

We own apartments that were built in the 60’s or before and they are in fine shape and well occupied. All the subsidized government buildings of that era have been torn down.

I rest my case.


19 posted on 11/10/2009 6:50:28 PM PST by learner
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To: learner; org.whodat
For a cash strapped entity to permit an asset to go to waste is foolish and will cost you money.

That cash trapped entity (Fanny Mae) is owned lock stock and barrel by the USG
The USG will get less taxes from Goldman Sachs if they let GS buy them and deploy them

When Goldman Sachs is denied these tax offsets the USG has a net gain
I don't get your logic

20 posted on 11/10/2009 6:57:19 PM PST by dennisw (Obama -- our very own loopy, leftist god-thing.)
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To: dennisw
Goldman needs to be under anti-trust investigation, not trying to make more money off my money from my money.
21 posted on 11/10/2009 7:00:41 PM PST by org.whodat (Vote: Chuck De Vore in 2012.)
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To: org.whodat

GS is the lowest scum on scum laden Wall Street. We all know that....

Check out the comments here
http://seekingalpha.com/article/171978-fannie-s-tax-credit-sale-to-goldman-no-deal

These guys know what they are talking about and this was a case of more highway robbery by Wall Street. Fortunately it got denied. One guy is guessing GS offered 20 cents on the dollar for fanny mae tax credits


22 posted on 11/10/2009 7:07:41 PM PST by dennisw (Obama -- our very own loopy, leftist god-thing.)
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To: dennisw
Interesting article, but this is beyond belief:

In it’s November 5, 2009 10-Q Fannie Mae discusses the proposal. The cost to them of not disposing of the tax assets? $5.2 billion.

That's like saying those IOU's in the Social security fund are really money.

23 posted on 11/10/2009 7:15:53 PM PST by org.whodat (Vote: Chuck De Vore in 2012.)
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To: org.whodat

They are referring to imaginary book keeping of immaginnary money. You gots to read the comments which are much better than the article

(I think you read both)


24 posted on 11/10/2009 7:27:06 PM PST by dennisw (Obama -- our very own loopy, leftist god-thing.)
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To: dennisw

LOL, fund accounting.


25 posted on 11/10/2009 7:33:12 PM PST by org.whodat (Vote: Chuck De Vore in 2012.)
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To: learner
My math is off how? If the tax credits are worthless to Fannie and Freddie then what is GS going to pay. Any theory of negotiating would suggest that the settled figure would be far less than 50%. Perhaps 20%, but little higher.

The taxpayer is screwed because of the tax credits. Business subsidized by the taxpayer, further insult the taxpayer by getting a special tax break that has to be made up for by others paying more tax.

These "tax credits" are not instruments created by a free market. They are created by politicians - as they have to be as a matter of law.

In short, idiot shills like you for the financial houses are the one's who are living in a fantasy. The rest of us do not owe your overlords a guaranteed no risk posh lifestyle.

We own apartments that were built in the 60’s or before and they are in fine shape and well occupied. All the subsidized government buildings of that era have been torn down.

Your logic escapes me here. Because some government programs are screwed up, we are not supposed to be angry because GS sought to take advantage of another screwed up government program, got caught and were told no.

26 posted on 11/11/2009 9:44:00 AM PST by AndyJackson
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To: learner
You typically do not pay $.10 for a dollar of tax credits it is normally between $.65 and $.85 per dollar

Why would GS pay Fannie $.65 and $.85 for something that is worthless to them, particularly since the GS folks are the best negotiators in the business and Fannie / Freddie demonstrably the worst?

lets assume that Frannie and Freddie let all their tax credits expire: that would be an asset expiring that they currently hold on their books at about 7 billion.

I guess the problem I have in all of this is the entire notion that a [tax payer funded] tax credit is a tradable asset that can be kept on the books as an asset against liabilities for liquidity purposes.

27 posted on 11/11/2009 10:02:14 AM PST by AndyJackson
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To: dennisw
imaginary book keeping of imaginary money

Which investment bankers can convert into yachts, private get aways, and fractional jet ownership at par value.

28 posted on 11/11/2009 10:04:25 AM PST by AndyJackson
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To: AndyJackson

http://seekingalpha.com/article/171978-fannie-s-tax-credit-sale-to-goldman-no-deal

Comment #4 or #5 says 20 cents on the dollar would have been a likely price for GS to pay-——>>>

Nov 08 08:49 AM
+5 0

treasury made the right move. i am a tax credit developer & for the past 18 months wall st & all the big boys (fannie, freddie, BOA, Wachovia, etc) have walked away from the market, driving down pricing 40%. this has had the effect of increasing the investor yield from 6 - 12+%. it has taken a while, but there are some new players @ the table now (attracted by the bigger return) & there are still lots of new product in need of tax credit equity. The effect of a big goldman/buffet buy would be eliminating their tax liability on old credit deals the govt is in effect holding, driving down appetite (& price) even further, resulting in more govt bailout in the short term.

treasury is saying in effect - go buy the new deals, we will sit on these credits until the mkt stabilizes (around a 9-10% irr i think), then we will release when the demand is back (ie companies making $ again)

a quick sale @ probably a 20% irr would have done nothing but fatten warren & goldman, while costing the taxpayers more to prop up the market even longer.

saying no was a no brainer & im glad to see treasury get this one right.


29 posted on 11/11/2009 12:24:50 PM PST by dennisw (Obama -- our very own loopy, leftist god-thing.)
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To: dennisw

Part of the reason has to do with the time value of money. F & F would get an immediate infusion of cash for an asset they hold, where as if they have to write off the 7 billion they will need an immediate infusion of cash from the USG. The tax credits are over several years, so while GS buys them up front they are not all used in the year of acquisition, which is why the price is discounted.

I am not totally disagreeing with you. I am just pointing out how it works.


30 posted on 11/12/2009 12:33:59 PM PST by learner
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To: AndyJackson

Mr. Jackson,

I have tried to explain, but you just do not get it(”tax credit is a tradable asset that can be kept on the books as an asset against liabilities for liquidity purposes”).


31 posted on 11/12/2009 12:38:10 PM PST by learner
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To: learner
you just do not get it(”tax credit is a tradable asset that can be kept on the books as an asset against liabilities for liquidity purposes

Oh I got it perfectly well. It is a tradable asset only because the idiot lawmakers who created the thing at taxpayer expense allow it to be traded. It ought to be damned illegal, as I see no public purpose in this.

And no the taxpayer is not better off subsidizing Fannie and Freddie by giving GS a $5B tax credit of which some percentage then goes to Freddie and Fannie. If there is a legitimate public purpose, it can be much more efficiently achieved by just giving the money directly to Fannie and Freddie.

No it is not that I don't understand. What I understand very well is that this is a fraud on the public and you are a base scoundrel who does not belong on a conservative forum for attempting to defend it.

32 posted on 11/12/2009 3:49:52 PM PST by AndyJackson
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To: learner
F & F would get an immediate infusion of cash for an asset they hold,

We all understand this transparent fraud perfectly well. The only person here who does not get it is you.

33 posted on 11/12/2009 4:05:55 PM PST by AndyJackson
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To: AndyJackson

Hi Mr. Jackson,

You are clueless and this conversation is over. Enjoy your ignorance, you wear it well.


34 posted on 11/12/2009 7:30:05 PM PST by learner
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To: learner
I stand in awe of your exquisite debating technique. A true master. Call your interlocutor names and then run away like a frightened little girl. A genuine laurel adorned champion of the Aereopagus, a hero worthy of an ode by Pindar.

What we really want to know is whether you are a crook yourself or just a vapid shill for your criminal overlords who want us to believe their is something free market and economically healthy about taking a cut for trading government created tax credits.

35 posted on 11/12/2009 8:18:53 PM PST by AndyJackson
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To: AndyJackson

Debating technique? Name calling? Not in my responses but certainly in yours.

I do not have the time to deal with the clueless.

Have a nice day.


36 posted on 11/16/2009 4:20:27 PM PST by learner
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