Mortgage-finance companies Fannie Mae and Freddie Mac will not be expected to pay back all of the $84.9 billion lent to them in federal aid, says Federal Housing Finance Agency Director James Lockhart.
“Some assets and senior preferreds will have to be left behind as they come out of conservatorship, and that means some of those losses will never be repaid,” Lockhart said, according to Bloomberg.
“Their book is so large, it’s hard for me to see that they will be able to repay all of that,” he said.
The government purchases preferred stock in the two companies when the value of the companies’ assets drop below the amount they owe on their obligations.
Both companies, seized by the government in September, have lost $150 billion since September 2007 and will continue losing money for another year.
Furthermore, they won't report any serious profits for another two to three years, hence the need to recognize that not all money will be repaid, Lockhart said.
The structure of the two companies' ownership is due to change, with Republicans wanting them earning money in two years.
House Financial Services Chairman Barney Frank has defended the Democrats' handling over the two failed companies, arguing his party backed major reforms applied to the lenders from the Bush administration.
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