Warren Buffett’s Berkshire Hathaway (BRK.A) has teamed up with Goldman Sachs (GS) in a bid to buy $3 billion in tax credits from mortgage giant Fannie Mae (FNM), the Wall Street Journal’s website reported, citing people familiar with the matter.
A sale of Fannie Mae’s tax credits, which are virtually worthless to the government-owned firm, would bring some needed financial relief to the embattled housing-finance giant. The transaction would also allow companies such as Berkshire Hathaway and Goldman Sachs to use tax credits to offset federal tax expenses. In addition, both firms could rake in large amounts of money from investing in these credits. According to the Journal, one investor who has considered a similar transaction said they promise annualized returns of at least 30%.
However, the sale would come as the public rails against government moves that aid banking giants, which are preparing for record bonuses about a year after receiving billions of dollars in taxpayer rescue funds.
On Monday, the Journal said Goldman was in talks to buy millions of dollars of tax credits from Fannie Mae, but the potential and politically sensitive deal was running into resistance by the Treasury Department.
By joining in the bidding, Berkshire may help deflect some of that public tension against Goldman — whose reputation has been tarnished by the financial crisis — as Buffett is widely respected both in Washington and on Wall Street.
Berkshire Hathaway has been an investor in low-income-housing tax credits in the past. In 1990 Mr. Buffett launched a plan to invest $25 million to create housing in areas ranging from Houston, Los Angeles, Detroit and Chicago. The tax-credit program, which was created in 1986 and is considered a key mechanism for increasing the supply of below-market-rate apartments, has been responsible for the construction of more than a million below-market-rate units.