Fannie, Freddie, EPA and Big Money

If you think reform of the mortgage system which includes ridding the world of Fannie (FNMA) and Freddie (FMCC) is likely you might want to consider this.

Fannie Mae said it will make a $10.2 billion dividend payment in September to the U.S. Treasury for its rescue aid. After that payment, which comes on the heels of nearly $60 billion Fannie sent to the government last quarter, it will have paid about $105 billion in dividends to the Treasury, roughly 90 percent of the $117.1 billion it received in taxpayer assistance.

Meanwhile, Freddie Mac, which on Wednesday reported its second-largest profit ever, $5 billion, will be sending Treasury a $4.4 billion check next month. That will bring its running total to about $41 billion, or close to 60 percent of the $71 billion in bailout funds provided to Freddie.

Under the terms of the bailout agreement, both mortgage companies are only allowed to hold $3 billion in net worth and all profit in excess of that goes back to taxpayers.

Moreover, none of the dividend payments goes toward repaying the $188 billion in rescue funds, which were provided by the government and gave it a controlling stake in the form of preferred shares. Neither company has the option of buying back the stakes, which is one of the big questions regarding their future.

That’s one hell of a big cash cow to legislate out of existence, particularly when you’re scraping around for revenue.

While were talking about D.C. you might want to take a look at Kim Strassel’s piece in the WSJ in which she asks who was the refiner that was exempted from EPA’s ethanol mandates and why were they exempted.

As demand for these credits skyrockets, so has the price—jumping from a few pennies a gallon last year to close to $1 a gallon today. Oil refiner Valero has said the credits could raise its cost by a stunning $750 million this year, a hit that will be passed on to consumers. PBF Energy just told investors that its disappointing second-quarter earnings were rooted in the mandate, noting that the $200 million it expects to fork over for ethanol credits this year will exceed the salaries and wages that it pays to operate all three of its refineries.

Some refineries are lowering production simply to mitigate the credit costs. Others are beginning to export products to avoid the mandate. Both moves could tighten U.S. supplies and lead to higher prices at the pump. Most every refinery is hurt by this rule.

So an exemption from today’s mandate is far more than a perk—it is a lifeline, an outright payday. Making this indulgence even more curious is that it is being issued by the Obama EPA, an agency that isn’t exactly known for doing favors for beastly carbon producers.

So who is the lucky dog? Who could make this happen? That’s the best part. The EPA won’t say. The agency not only refused to name the refinery in its rule, but also obscured certain numbers in the document to hide the beneficiary’s identity. An EPA press officer would not give me the name, citing “confidentiality restrictions.”

I can’t think of any reason that the name of the refiner hasn’t been divulged other than letting the cat of the bag might be embarrassing. I don’t know if the Obama administration is more opaque and more inclined to play these sort of power games than previous administrations or that there is just more scrutiny. Frankly, I’m not interested in the reason, just tired of the bull shit.

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