Feds reap $4.4B in Freddie Mac profits

Freddie Mac will pay the government $4.4 billion in September, after reporting its second-largest profits ever in the second quarter of the year.

The windfall for the government comes the day after President Obama called for the mortgage giant to be wound down.

The government-sponsored enterprise reported Wednesday that it made a net income of $5 billion from April to June 2013, making it the seventh quarter in a row the housing giant has turned a profit, and up from $4.6 billion reported in the first quarter of the year.

{mosads}All told, Freddie will have paid the Treasury Department about $41 billion after September’s payment, after the federal government pumped $187 billion into Freddie and its sister enterprise, Fannie Mae, after rescuing the two in 2008.

Under the conditions of that bailout, the enterprises are required to remit all their profits beyond operating expenses to the Treasury, and those payments do not count towards paying down the rescue.

The Obama administration projected in its most recent budget that if the enterprises remain intact for another decade, the government will turn a $51 billion profit from that bailout. Freddie reported a record $11 billion profit in 2012, after suffering billions of dollars in losses in previous years.

Freddie reported its profits one day after Obama turned the spotlight back on housing finance reform. Both parties generally agree that the current system, in which Fannie and Freddie exist on a government lifeline and guarantee the vast majority of mortgages in the market, is unsustainable.

Speaking in Arizona, the president called for Congress to pass a plan winding down the enterprises, as well as adopt other policies to further boost the recovering housing market.

“For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag,” he said. “It was ‘heads we win, tails you lose.’ And it was wrong.”

There are comprehensive bills working their way through both chambers of Congress that would overhaul the housing market, and all major plans are focused on significantly reducing the footprint of the two enterprises, if not eliminating them altogether.