Fannie Mae will request an infusion of taxpayer money for the first time since 2012 because of an unintended but anticipated side effect of the corporate tax cut signed into law in December.
The mortgage-finance company, which reported fourth-quarter and full-year financial results on Wednesday, said it will need to draw $3.7 billion from the U.S. Treasury in March to keep its net worth from going negative.
The deficit was driven by a $6.5 billion loss in the fourth quarter, which came as a result of a drop in the value of assets Fannie can use to offset taxes. The assets became less valuable when Congress cut the corporate tax rate, resulting in a $9.9 billion hit.
Fannie CEO Timothy J. Mayopoulos said in a statement that the company’s underlying business was strong.
The loss and bailout is not so much a black eye for Fannie as it is for Congress and policy makers who for more than nine years have failed to determine the futures of Fannie and Freddie Mac.
Federal regulators took over the two companies during the 2008 financial crisis, eventually injecting them with $187.5 billion in bailout money. Some members of Congress and other policy makers have said the companies should be replaced with a system that doesn’t leave taxpayers on the hook for losses, but no plan has gained enough traction to be implemented.
In the meantime, Fannie and Freddie returned to profitability. Since 2008, the companies have paid $278.8 billion to the U.S. Treasury. They currently send nearly all of their profits to the government and aren’t required to pay anything when they have losses. In December, the Treasury Department and the Federal Housing Finance Agency, which controls the companies, agreed to allow Fannie and Freddie to hold capital buffers of $3 billion apiece.
Fannie and Freddie don’t make loans themselves. They buy them from lenders, wrap them into securities and make guarantees to make investors whole if the loans default.
For the full year 2017, Fannie said it earned $2.5 billion, compared with $12.3 billion in 2016. Its net interest income in the fourth quarter, which includes fees to guarantee mortgages, was $5.1 billion compared with $5.8 billion in the year before.