You would think that the U.S. Treasury Department (and FHFA) would be giddy with excitement now that Fannie Mae and Freddie Mac are making money hand-over-fist – and that’s after you take out the 10% ‘tax’ the two pay each quarter to Uncle Sam. But Friday morning let it be known for all to see: Treasury just doesn’t want 10%; it wants EVERY penny the two make going forward. Retained earnings? Treasury wants those too. Of course it can be argued that Treasury has pumped $170 billion into the two and has gotten back $30 billion or so in dividends so the bill is $140 billion. But if both GSEs earn $8 billion per quarter going forward that’s $32 billion a year and the debt will be paid off in a few years. (Do the math yourself.) As an added bonus, both GSEs are still hitting seller/servicers and the mortgage insurance firms over the head, demanding buyback damages and MI coverage. Oh and one last thing: all those billions in loss reserves FanFred have set aside? A bit of that will be recaptured as well. In other words, it’s basically a socialist takeover of a huge profit center. But that’s the cynical viewpoint. Let it also be known: in the mortgage industry, the red ink flows down hill to seller/servicers, MI firms, and Wall Street firms that sold subprime bonds to the GSEs. It’s the law of the financial jungle.