AT THE HEIGHT OF THE BANKING OF THE BANKING CRISIS OF 2008, mortgage giant Fannie Mae was near collapse. To ensure liquidity in the housing market, the government took over Fannie Mae and over the course of four years injected more than $116 billion into the company.

$116 billion of taxpayer money.

Many, including some members of our government, call this a bailout and clamor for the company to be dissolved to ensure taxpayers will never again be forced to bail out the mortgage giant.

There is only one problem: This so-called bailout, like many of the programs the U.S. Treasury used to support the financial system while in crisis, actually made money for the taxpayers and did not cost the Treasury a dime.

That’s right — as of this month when Fannie makes its next dividend payment, the entire $116 billion will have been paid back.

Ironically, Fannie Mae was borne out of another great financial crisis, the Great Depression. Back in the 1930s folks who needed a mortgage had no reliable source. When the banks collapsed, the money for financing dried up. Our government saw the critical need for a reliable money supply to ensure the health of housing, and Fannie Mae and the Federal Housing Administration were formed to serve that role.

Now, in the wake of another terrible financial crisis, some want to dissolve Fannie Mae and replace it with a privately insured mortgage system.

Prior to being taken over by the government in 2008, Fannie Mae was a quasi private/public entity. Like most large corporations, it was owned by shareholders. They raised capital and loaned the money to folks like you and me who wanted to buy homes. The one unusual part was that the federal government insured them against catastrophic losses. The idea was simple: Fannie would essentially function just like any other company, but in the event of catastrophic losses the government would provide backing to ensure the available money supply for the housing market, a key and important driver to the overall economy.

When the economy hit the skids and the banking system neared collapse in 2008, the system worked exactly the way it was supposed to. The government stepped up and provided support to many of the nation’s banks, as well as Fannie Mae. This support ensured the stability of the banking system and essential liquidity to the nation’s capital markets, including the mortgage market.

To realize the importance of this support, you only have to look at the “credit freeze” of 2008, the devastating effect it had on the markets and the great recession that resulted. How much worse would it have been without the liquidity and support of the federal government?

Taxpayers in total provided $431 billion in support through the Troubled Asset Relief Program. Presently all but $24 billion has been returned to the Treasury.

The true cost of the banking system meltdown to the taxpayer cannot be monetized. It lies in the shattered lives of the many who lost their jobs, homes and, in many cases, families.

Guy Benjamin (CA BRE License #01014834) writes a weekly column for The Herald. Readers may contact him at 707-246-0949 or gbenjamin@rpm-mtg.com.

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