The Obama administration on Friday rejected a proposal by Goldman Sachs to buy as much as $1 billion in tax credits from Fannie Mae, saying the deal would have amounted to a net loss for taxpayers.
“It is our view that the proposed sale would result in a loss of aggregate tax revenues that would be greater than the savings,” an administration official said on Friday.
Goldman Sachs had proposed to pay cash for Fannie Mae’s tax credits, which are tied to investments in affordable housing but which the government-controlled mortgage-finance company cannot use because its losses have wiped out any tax liability for the foreseeable future.
Goldman executives had argued that the deal would provide much-needed capital to Fannie Mae, which it could use to finance additional low-income housing. Fannie Mae was bailed out by the government and put into a conservatorship in September 2008, and the government has propped it up with nearly $50 billion since then.
On Thursday, the company announced that it lost an additional $19 billion in the third quarter and would seek another $15 billion from the government.
Treasury officials said the Goldman proposal would have reduced the government’s costs on Fannie Mae, but that it would have drained even more revenue as Goldman and perhaps other investors used the tax credits to offset their profits.
“Withholding approval of the proposed sale affords more protection of the taxpayers than does providing approval,” the official said.