Letter to Director Edward DeMarco

April 20, 2012

Director Edward DeMarco’s Office
400 7th Street NW
Washington, D.C. 20024

Director Edward DeMarco,

On April 14, the Washington Post published an article titled, “The bailout could turn a profit, but that’s not entirely a good thing.” In the article, it is revealed that the U.S. Treasury has modified its projected cost of the bailout. The expected cost to bailout Fannie Mae and Freddie Mac was projected in 2010 to be about $53 billion by 2020. However, the article says that this estimate has since been reduced to about $28 billion by 2022.

What is the reason that these projections have been reduced? What part of Fannie Mae’s or Freddie Mac’s recovery is expected to perform better than originally expected, and why? And furthermore, what does this mean for common shareholders, which includes the undersigned?

The article also briefly addresses the competing, and often conflicting, goals facing Fannie Mae and Freddie Mac since conservatorship. Though the article does not provide many specifics here, one example of conflicting goals facing the GSEs includes the objective of returning them to profitability while also working to backstop the housing market. How are they expected to impact future bailout cost projections?

Since Fannie and Freddie shareholders serve a useful purpose for the Treasury Department (the 80 % rule), why are they not given comparably fair treatment received by shareholders of bailed out A.I.G. and Citigroup?

I look forward to your responses.


Ralph Nader

P.S. Please also see the enclosed letter that discusses in more detail the treatment of Fannie and Freddie common shareholders, among other things. This letter was sent on April 11, 2011 to the Inspector General of the Treasury, Eric Thorson, Senator Tim Johnson, and Congressman Spencer Bachus.