Congress just eked out another month to sort out how to raise the $16.4 trillion debt ceiling. That’s because mortgage giant Fannie Mae, under a taxpayer-funded conservatorship since 2008, announced this morning that it will pay the Treasury $59.4 billion in dividends. The debt ceiling will be reached on May 18, but Treasury will delay the day of reckoning with “extraordinary measures” and Fannie’s payment until October.
The announcement comes after the bailed-out mortgage behemoth reported $58.7 billion in net income during the first quarter of the year. Fannie has received an estimated $116 billion in tax dollars since 2008, when the government rescued the company, along with Freddie Mac.
According to Reuters, by the end of June, Fannie will have paid $95 billion in dividends to Treasury, leaving the net cost of its bailout at about $21 billion. - Read more at Reuters
ECONOMISTS: IMMEDIATE DEFICIT REDUCTION HURTS “After two years in which President Obama and Republicans in Congress have fought to a draw over their clashing approaches to job creation and budget deficits, the consensus about the result is clear: Immediate deficit reduction is a drag on full economic recovery,” The New York Times Jackie Calmes and Jonathan Weisman write.
Private-sector and government economists say the “nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011.” - Read more at the New York Times
HOUSE TO PASS DEBT PRIORITIZATION BILL House Republicans are expected to pass a measure that would give the Treasury authority to “prioritize” debt payments if lawmakers can’t cut a deal to increase the nation’s $16.4 trillion borrowing limit. The bill would allow the U.S. to continue paying creditors like China, even as the government balances on the brink of default. Boehner said it would mean that bondholders get paid before other creditors, which is much like a corporate bankruptcy proceeding. His comments prompted immediate criticism from Democrats who suggested that Republicans wanted to prioritize paying China over funding the U.S. military. Regardless, Democrats are expected to kill it in the Senate. - Read more at The Hill
COLORADO PASSES “RECREATIONAL” MARIJUANA REGS The measure, which will need to be approved by voters in the fall, requires pot buyers to pay a 10 percent state sales tax and a 15 percent excise tax in addition to local sales taxes. All new revenue would be used to build schools and fund the agency that will regulate marijuana. Medical marijuana is already legal in Colorado, but the acceptance of recreational use is expected to triple sales to at least $700 million, according to the Medical Marijuana Business Daily, a trade publication. Read more at the Wall Street Journal
CFPB PROPOSES TO EASE STUDENT BORROWING The Consumer Financial Protection Bureau on Wednesday proposed new ways to make private student loan payments more flexible. CFPB said that those who make their loan payments on time should be able to refinance their debt at lower interest rates. Meanwhile, borrowers who fall behind on payments should have access to income-based repayment plans. The CFPB’s proposals came from input gathered from nearly 30,000 borrowers, lenders and policy experts. - Read more at The Washington Post