Fannie Mae has tax credits that are worthless to them.\u00a0 As the value of these credits have declined, Fannie has had to write them down, hurting its earnings.\u00a0 The government created these tax credits to spur the creation of low-income housing, so it has a public policy interest in seeing these credits utilized.\u00a0 Along comes Goldman Sachs with an valuable offer to buy these credits.\u00a0 Fannie is willing, but their government masters say “No, thanks,” and veto the deal.<\/p>\n
Why would the government stop a transaction that would be good for Fannie and for low-income families?\u00a0 Because it would also be good for Goldman Sachs.\u00a0 And, the logic goes, it might be bad for the government because it would reduce the taxes that Goldman pays to the government over time, which is of course what the government intended when it created the tax credit.\u00a0 The government wields this veto in its capacity as Fannie’s conservator, which appoints the board members.<\/p>\n
One of the fundamental tenets of corporate governance is the duty of loyalty.\u00a0 This duty states that a member of the board must place the interests of the company ahead of his or her personal interests.\u00a0 In Fannie’s case, selling these tax credits to a willing buyer would be good for the company.\u00a0 The fact that the board, at the behest of a politically-motivated conservator, is blocking this transaction suggests that the interests of the conservator are being placed ahead of the interests of the company.\u00a0 In other words, Fannie’s government masters would rather avoid a deal with Goldman in which the bank might (gasp) make a profit, than to actually do what is best for the company they are overseeing, one they presumably wish to see back on its own feet some day.\u00a0 This move makes the government as lousy fiduciary.\u00a0 But we knew<\/a> that already<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" Fannie Mae has tax credits that are worthless to them.\u00a0 As the value of these credits have declined, Fannie has had to write them down, hurting its earnings.\u00a0 The government created these tax credits to spur the creation of low-income housing, so it has a public policy interest in seeing these credits utilized.\u00a0 Along comes […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[],"class_list":["post-1988","post","type-post","status-publish","format-standard","hentry","category-governance"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1988","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1988"}],"version-history":[{"count":11,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1988\/revisions"}],"predecessor-version":[{"id":1999,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1988\/revisions\/1999"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1988"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1988"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1988"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}