Goldman Deal May Bail Out Fannie Mae

But letting superbank load up on tax credits could be politically toxic
By Kevin Spak,  Newser Staff
Posted Nov 2, 2009 9:12 AM CST
In this May 2, 2007 file photo, the Fannie Mae building in Washington is seen.   (AP Photo/Manuel Balce Ceneta, File)
camera-icon View 2 more images

(Newser) – Goldman Sachs wants to buy millions in otherwise virtually worthless tax credits from Fannie Mae, but the mega-bank is so politically toxic right now that the Obama administration is considering blocking the deal, the Wall Street Journal reports. “Treasury is reviewing and will not let it proceed unless it is clearly in the taxpayers’ interest,” a department spokesman said.

Fannie picked up the tax credits for financing low-income housing, but because Fannie isn’t currently profitable, they’ve been dead weight on its balance sheet. Some believe Goldman wants to pick up as much as $1 billion worth. But it’s unknown how much Goldman’s willing to pay; if the deal seems too sweet, it could stoke criticisms that the government has given Goldman preferential treatment, allowing them to recover and profit handsomely on the taxpayers’ dime. (Read more Goldman Sachs stories.)