Fannie Mae is losing money, therefore it owes no taxes. However, it does have tax credits on its books. Enter the geniuses at Goldman Sachs. They want to buy the tax breaks from Fannie so that they can put them to good use. The Post mentions this proposal in the context of a report on Fannie's 3rd quarter losses. It notes a Treasury Department analysis showing that any gains to Fannie from the sale will be offset by a loss of tax revenue to the Treasury. Actually, this does not require much analysis and the government will be a guaranteed loser on this deal. Goldman does not pay $1.00 for $1.00 of tax credits. It might pay 95 cents for a dollar of credits, perhaps even 99 cents, but it will pay somewhat less than 100 cents on the dollar. Since Goldman would pay less to Fannie than the value of the lost tax revenue to the Treasury, this sale is a guaranteed loser for the government. There is no reason for it to allow Fannie to make this sale. It is also worth mentioning that some of Fannie's losses are likely attributable to loans made after its government takeover in September of last year. One reason is that it continued to make loans to purchase homes at bubble-inflated prices. It could have avoided these losses by using rent-based appraisals.
--Dean Baker
