The government sweep of profits from Fannie Mae and Freddie Mac was defended by the top Treasury Department housing official, who called again for Congress to replace the U.S.-owned mortgage-finance giants, Bloomberg News reported yesterday. Michael Stegman, a senior adviser at Treasury, used his speech yesterday at a Goldman Sachs housing-finance conference in New York to respond to shareholders who have sued to stop the sweep and called for the companies to be allowed to build capital and be freed from U.S. conservatorship. “Simply returning these entities to the way they were before is not practical nor is it a realistic consideration,” Stegman said. Concerns about whether Fannie Mae and Freddie Mac may need more taxpayer support have mounted as their profits and capital cushions have shrunk in recent quarters. Stegman said that taxpayers would face costs either by allowing them to recapitalize or with new draws from the Treasury. The companies, which have been under U.S. control since they were seized in 2008, got $187.5 billion in bailout funds before they became profitable again. The financial arrangement that allows the companies to draw on Treasury funds if they require capital is “necessary to protect financial stability and to ensure the continued flow of mortgage credit,” Stegman said.
