Will Fannie and Freddie Turn a Profit? Nahhh…

Next week Fannie Mae and Freddie Mac are expected to report their fourth quarter results – and no one (as might be expected) is looking for a blow-out quarter. Over the past year there's been plenty of chatter concerning when these two might (if) return to profitability. One Freddie official recently cautioned me not to get my hopes up, explaining that the 10% preferred dividend it is forced to pay Treasury swamps whatever "net" profit that might come along. In other words, if the GSEs can eliminate the dividend, they might have a chance of returning to profitability. After all, their 2009 and 2010 book of business (like FHA's) must be stellar in quality. The chance of these mortgages heading south in any significant manner must be close to nil. The same goes for the current year. But will Fannie and Freddie's CEOs have the political guts to push Treasury and FHFA to eliminate the dividend? I mean, after all, they're in charge and still have to answer to the common stockholders. (Okay, the GSE shareholders are really just 'penny stocks' investors and speculators.) In other words, don't hold your breath. Killing the dividend has already been tried by past CEOs – who are no longer in their jobs…