Goldman Shopping For Fannie Tax Credits

Ever the savvy financial engineer, Goldman Sachs is seeking to purchase unused tax credits from Fannie Mae. It's a simple idea really. Fannie, the former mortgage giant now 80% owned and controlled by the US government, has punted close to $38 billion in the first half of the year. Meanwhile, the folks at Goldman are swimming in dough thanks to ridiculous amounts of easy money tossed their way courtesy of the Fed, FDIC and the Treasury. Goldman is merely being tax efficient and trying to cut its bill a bit with some fancy accounting footwork. Besides, there's no way Fannie is ever crawling out of the hole and has no use for the mounting tax credits sitting on its books.

The only small problem with the plan is that it doesn't look or sound quite right to all of those angry plebians carrying pitchforks that are out for Goldman's hide. Why should Goldman be allowed to skip out on paying its tax bill after it's already received so much help from Uncle Sam? So the government is scrutinizing the deal and trying to determine whether it is worth the political furor that is sure to follow if it swaps some of the tax credits with Goldman for cold hard cash to help boost Fannie's bottom line. I personally don't care one way or the other. What difference does it make if Goldman gives money directly to the IRS or to Fannie? It all winds up in the same bucket. If Treasury is smart, it will just price the tax credits so that there is no financial benefit to doing the deal and Goldman will just pay its taxes directly. Problem solved. Given what an incredibly poor job Treasury has done so far negotiating its deals with Wall Street Banks (i.e. handing out 100 cents on the dollar to terminate the AIG swaps and doling out TARP funds without any restrictions, just to name two) it's hard to imagine it will negotiate a savvy deal this time around. After all, if there were no financial benefit, Goldman wouldn't be itching to do a deal. My advice to Goldman? Just pay your damn taxes and try to stay out of the papers.